ECON exam 2
STATE IF THE FOLLOWING IS INCLUDED OR EXCLUDED WHEN CALCULATING GDP. an electrician's purchase of a used truck for his business.
excluded
a business cycle reflects changes in economic activity, particularly real GDP. the stages of a business cycle are:
expansion, peak, recession, trough
in order to avoid double counting, statisticians just count the ______.
final goods and services
A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:
frictionally unemployed
Some recent economic research has suggested that African countries' economic growth may have been limited by __________________.
geography and climate
final goods or services used to compute GDP refer to:
goods and services purchases by the ultimate users.
the effects of inflation are seen in:
goods, services, wages and income levels
Would the following people be helped, hurt, or would the effects be uncertain by the occurrence of unexpected inflation? a company signs a landscape agreement to keep the business grounds maintained for five years at a fixed rate.
helped
Would the following people be helped, hurt, or would the effects be uncertain by the occurrence of unexpected inflation? you rent an apartment with a four-year lease at the beginning of your college career
helped
In the long run, the most important source of increase in a nation's standard of living is a:
high rate of economic growth.
consumption is the purchase of goods and services by:
households.
Would the following people be helped, hurt, or would the effects be uncertain by the occurrence of unexpected inflation? the local bank lends out $5 million dollars in business loans at a fixed rate of interest
hurt
Would the following people be helped, hurt, or would the effects be uncertain by the occurrence of unexpected inflation? the local city government receives revenue primarily from fixed-rate fees charged to businesses.
hurt
In the early 1990`s extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ____________________.
hyperinflation
STATE IF THE FOLLOWING IS INCLUDED OR EXCLUDED WHEN CALCULATING GDP. a farmer buys a new tractor and combine for her farm.
included
STATE IF THE FOLLOWING IS INCLUDED OR EXCLUDED WHEN CALCULATING GDP. the federal government purchases a new fighter aircraft for the U.S. air force.
included
inflation implies that the level of all prices______.
increases
when a price, wage, or interest rate is adjusted automatically with inflation, it is said to be_____.
indexed
______, is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
industrial revolution
The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.
inflation rate
______ implies that pressure for price increases reaches across _____ markets, not just one.
inflation; most
putting advances in knowledge to use in a new product or service
innovation
advances in knowledge
invention
karen chooses to go to university full-time rather than to work. Karen:
is not part of the labor force
a nation can achieve higher economic growth if:
it devotes more resources to research and development.
The unemployment rate may underestimate the true extent of unemployment if:
many part-time employees would like to work full-time, but are unable to get the additional work
the unemployment rate may underestimate the true extent of unemployment if:
many people become discouraged and cease looking for work
while one occasionally sees references to inflation over short time periods, the term typically implies a(n) ____ in prices.
ongoing rise
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
out of the labor force
once every ______, the census Bureau does a comprehensive survey of housing and residential finance.
10 years
the unemployment rate is 8 percent, this means:
8 percent of the labor force is unemployed
the basket of goods in the consumer price index consists of about ____ products; that is, several hundred specific products in over ____ broad-item categories.
80,000; 200
in macroeconomics, the connection from inputs to outputs for the entire economy is called _______.
an aggregate production function
to compare the GDP of two different countries with different currencies, it is necessary to use _____.
an exchange rate
STATE IF THE FOLLOWING IS INCLUDED OR EXCLUDED WHEN CALCULATING GDP. a social security check paid to a retired public school teacher.
excluded
the labor force consists of:
all adults who are working or actively seeking work.
An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?
GDP deflator
_____ is calculated by taking ______ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year.
NNP; GNP
Adam Smith is a computer programmer earning $40.00 per hour, and he is suddenly laid off. In each of the following scenarios below, state whether Smith would be considered to be unemployed per the BLS guidelines. Adam Smith has been retired for 5 years and has not looked for a job. Is he unemployed during this time?
No
Adam Smith is a computer programmer earning $40.00 per hour, and he is suddenly laid off. In each of the following scenarios below, state whether Smith would be considered to be unemployed per the BLS guidelines. After job hunting for 12 continuous months, Smith gives up and has not looked for a job in over two months. Is he unemployed during this time?
No
which of the following is included in the calculated gross domestic product? a- farmer Freddie sells his second tractor to his son b- a local ice cream store sells $17,000 worth of cones and sundaes on July 1. c- Suzanne buys a love seat and chair for $85 at the yard sale on the corner. d- Mr. Farkle buys a used lawnmower from his neighbor, Mr.sparkle.
a local ice cream store sells $17,000 worth of cones and sundaes on July 1.
if imports exceed exports, as in recent years, then ______ exists.
a trade deficit
which of the following are most likely classified by economists as consumer durable goods? a-automobiles, furniture, CD players b- food, clothing c- stocks, bonds d- drugs, toys, magazines, books
a- automobiles, furniture, CD players
what distinguishes the real value of a statistic from the nominal value of a statistic?
adjusting for inflation
The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay.
adverse selection of wage cuts
which of the following statements is true? a- GDP includes production that is not exchanged in the market b- GDP includes spending on recreation and travel, but it does not cover leisure time. c- GDP does not include production that is exchanged in the market, but it does cover production that is not exchanged in the market. d- GDP does not include newly-produced goods and services, but counts the buying and selling of previously existing assets.
b- GDP includes spending on recreation and travel, but it does not cover leisure time.
Which of the following best describes the relationship between economic growth and literacy? a- Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines. b- Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education. c- as the economy grows, literacy declines because it becomes less and less useful in a developed economy d- there is no correlation between economic growth and literacy
b- Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.
which of the government policies below is most unlikely to encourage per capita economic growth? a- special subsidies for capital-intensive forms of production b- high taxes on companies that spend a lot on capital formation c- the use of tax revenues for investment and capital formation d-promotion of education and training programs for workers
b- high taxes on companies that spend a lot on capital formation
which of the following is correct? a- a decrease in the productivity of labour leads to economic growth b- increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital c- an increase in the quantity of labor always leads to economic growth d- third world countries are rich in human capital
b- increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital
which of the following is included in GDP calculations? a- a crisp $50 bill received on your birthday b-the university tuition paid to enroll in a course c- sales revenue received from a yard sale d- cash income received by a self-employed landscaper that is not reported to the IRS
b- the university tuition paid to enroll in a course
cyclical unemployment arises when:
business activity in the macroeconomy declines.
the rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the _____.
business cycle
Which of the following is most likely to contribute to economic growth as measured by GDP per capita? a-the imposition of tariffs and quotas on imported goods b-an increase in marginal tax rates c-increased capital formation d-rapid population growth
c- increased capital formation
which of the following did not result in economic growth? a-the invention of a threshing machine for harvesting grains b-installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California c- many citizens emigrating from Zimbabwe when a politically repressive regime took office. d- increased government funding of post-secondary education
c- many citizens emigrating from zimbabwe when a politically repressive regime took office.
an increase by society in the average level of physical and/ or human capital per person
capital deepening
when society has a higher level of capital per person, it is called _______.
capital deepening
in the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _____ which guaranteed that their wages would keep up with inflation.
cost of living adjustments
the type of unemployment that occurs because of a recession is called:
cyclical unemployment
A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:
cyclically unemployed
which of the following factors contribute to economic growth? a- an increase in the standard of living b- a decrease in the productivity of labor c- an increase in the average wage rate paid to workers d- an increase in the proportion of the population that is college-educated
d- an increase in the proportion of the population that is college educated
which of the following is true? a- during the contractionary phase of the business cycle, the rate of unemployment is generally quite low. b- the timing of business fluctuations is regular and therefore easily predictable. c- a depression is a recession that is mild and relatively brief d- the expansions and contractions of real-world business cycles last varying lengths of time and often differ in magnitude.
d- the expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.
which of the following is unlikely to affect the rate of economic growth? a- the quality of available recourses b- technological change c- the quantity of available resources d- the level of government spending
d- the level of government spending.
another term used to describe negative inflation is:
deflation
the situation where the buying power of money in terms of goods and services increases is called
deflation
_______, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country.
economic growth
______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.
efficiency wage theory
The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied.
equilibrium wage
STATE IF THE FOLLOWING IS INCLUDED OR EXCLUDED WHEN CALCULATING GDP. the services of a house painter who paints his own home.
excluded
An economy's rate of productivity growth is closely linked to the growth rate of its ______________, although the two aren't identical.
per capita GDP
the producer price index is based on prices paid for supplies and inputs by:
producers of goods and services
the value of what businesses provide to other businesses is captured in the final products at the end of the _______ chain.
production
Over the long run, ____________ per hour is the most important determinant of the average wage level in any economy.
productivity
the value of what is produced per worker, or per hour worked, is called _______.
productivity
to achieve a high standard of living, a nation should:
promote economic growth
the difference between nominal GDP and real GDP is:
real GDP adjusts for inflation
economists typically measure economic growth by tracking:
real GDP per capita
the ______ is the nominal interest rate minus the rate of inflation.
real interest rate
The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation.
real value
which of the following is an example of one of the major categories in the overall CPI?
recreation
two factors that complicate the calculation of the inflation rate are:
substitution and quality/ new product bias
one of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:
substitution bias
a combination of invention - advances in knowledge - and innovation
technological change
Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth.
technology
all the ways in which existing inputs produce more or higher quality, as well as different and altogether new products
technology
investment (I) includes:
the amount spent on new factories and machinery.
inflation can be calculated in terms of how the overall cost of _____ changes over time.
the basket of goods
The most commonly cited measure of inflation in the United States is;
the consumer price index (CPI)
if a nation's labor force receives a significant influx of young workers:
the natural rate of unemployment is likely to increase
the most significant real economic cost of high unemployment is:
the potential goods and services that might have been produced but weren't.
GDP is:
the value of all final goods and services produced domestically.
increased investment alone will guarantee economic growth
this is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.
Insofar as government public policy is concerned, the best way to battle unemployment would be __________________.
to minimize recessions
the gap between exports and imports in a nation's economy is called the _______.
trade balance
Would the following people be helped, hurt, or would the effects be uncertain by the occurrence of unexpected inflation? a retired businessman lives entirely on the income he receives from stock dividends
uncertain
Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be:
unemployed
the unemployment rate measures:
unemployed workers as a percentage of the labor force.
frictional unemployment is:
unemployment that is due to normal turnover in the labor market.
Adam Smith is a computer programmer earning $40.00 per hour, and he is suddenly laid off. In each of the following scenarios below, state whether Smith would be considered to be unemployed per the BLS guidelines. After 3 months of daily searching, Smith becomes discouraged after being turned away from a job he applied for yesterday. He vows that day to never look for another job. Is he unemployed during this time?
yes
Adam Smith is a computer programmer earning $40.00 per hour, and he is suddenly laid off. In each of the following scenarios below, state whether Smith would be considered to be unemployed per the BLS guidelines. Smith frequents employment agencies, reads want ads, and follows up leads on computer programmer jobs for two consecutive weeks. Is he unemployed during this time?
yes
Adam Smith is a computer programmer earning $40.00 per hour, and he is suddenly laid off. In each of the following scenarios below, state whether Smith would be considered to be unemployed per the BLS guidelines. Smith job hunts every day for ten months. Is he unemployed during this time?
yes