Econ Final

If in some year nominal GDP was $18 billion and the GDP deflator was 120, what was real GDP?

$15 Billion

Suppose a country has government expenditures of $3,500, taxes of $2,200, consumption of $9,000, exports of $2,500, imports of $2,700, transfer payments of $750, capital depreciation of $800, and investment of $3,000. GDP equals

$15,300

Most financial assets other than money function as

a store of value, but not a unit of account nor a medium of exchange

Any item that people can use to transfer purchasing power from the present to the future is called

a store of value.

The term economists use to describe a situation in which the economy's overall price level is rising is

inflation

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is

never zero.

For an economy as a whole,

the market value of production must equal expenditure.

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

$1,208,421

If the reserve ratio is 10 percent, $1,000 of additional reserves can create up to

. $10,000 of new money

In the base year, the GDP deflator is always

. 100.

If real GDP is 5,100 and nominal GDP is 4,900, then the GDP deflator is

. 96.1 so prices are lower than in the base year.

Which of the following is an example of barter?

. A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

Which of the following is a function of money?

. All of the above are correct.

Demand deposits are included in

. M1 and M2

Changes in nominal GDP reflect

. both changes in prices and changes in the amounts being produced.

As the reserve ratio increases, the money multiplier a. increases.

. decreases.

Macroeconomists study

. economy-wide phenomena.

If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes

. exactly one-third as much to GDP as does a dress.

Net exports equal

. exports minus imports.

When the Fed conducts open-market purchases

. it buys Treasury securities, which increases the money supply

In a fractional-reserve banking system, a bank

. keeps only a fraction of its deposits in reserve.

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

. medium of exchange

The consumer price index is used to

. monitor changes in the cost of living over time.

Changes in the GDP deflator reflect

. only changes in prices

A recession has traditionally been defined as a period during which

. real GDP declines for two consecutive quarters.

The Federal Reserve

. serves as a lender of last resort

Liquidity refers to

. the ease with which an asset is converted to the medium of exchange.

If net exports is a negative number for a particular year, then

. the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year

GDP is defined as the

. value of all final goods and services produced within a country in a given period of time

Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were unemployed?

1.5 million

The money multiplier equals

1/R, where R represents the reserve ratio for all banks in the economy.

A country's real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country's inflation rate?

10.0%.

Price index was 90 in year 1-

11.1 inflation 5% deflation

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.

Babe ruth -

1208.421

Suppose a typical household $3,500-

122.9

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

122.9

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?

125 in Kansas City and 150 in Dallas

If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

20,000 of new money.

f the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be

2013.

Suppose that some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were employed?

31.74 million

Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were unemployed?

31.74 million

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

5 percent.

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care?

6.0 percent

Table 28-6: What is the U-4 measure of labor underutilization?

6.9%

Table 28 - 6: What is U-5 measure of labor underutilization?

7.9%

If the reserve ratio is 12.5 percent, the money multiplier is

8

GDP is not a perfect measure of well-being; for example,

GDP fails to account for the quality of the environment.

Measuring unemployment is the job of the

Bureau of Labor Statistics.

An increase of price of imported goods-

in the consumer price index, but not the gdp

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

GDP

Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use of her skills.

Jenna and Mary are both frictionally unemployed.

Which of the following pairs of survivors has a double-coincidence of wants?

Rupert with Rob

Tatiana is waiting to be recalled to a job from which she was laid off. Ivan was fired but has not looked for work during the last two months. Who does the Bureau of Labor Statistics count as "unemployed"?

Tatiana but not Ivan

Which of the following is a requirement for the Bureau of Labor Statistics to place someone in the "unemployed" category?

The person must have tried to find employment during the previous four weeks.

Suppose that the Bureau of Labor Statistics reports that the entire adult population of Mankiwland can be categorized as follows: 25 million people employed, 3 million people unemployed, 1 million discouraged workers, and 1 million people who are either students, homemakers, retirees, or other people not seeking employment. Refer to Scenario 28-1. What is the total labor force?

a. 28 million

Job search

a. is one reason economics always experience some unemployment b. is the process of matching workers with appropriate jobs c. would not be a problem if all workers and all jobs were the same all the above are correct

The GDP deflator is the ratio of

a. nominal GDP to real GDP multiplied by 100

In a simple circular-flow diagram, firms use the money they get from a sale to

a. pay wages to workers. b. pay rent to landlords. c. pay profit to the firms' owners. Answer: all of the above

GDP is equal to

a. the market value of all final goods and services produced within a country in a given period of time. b. Y. c. C + I + G + NX. All above are correct

GDP does not reflect

a. the value of leisure. b. the value of goods and services produced at home. c. the quality of the environment. All of the above are correct.

Which of the following is a way to compute GDP?

a. total income earned. b. total expenditures on final goods. c. add up the market values of all final goods and services. All of the above are correct.

Frictional unemployment can be the consequence of

a. workers leaving existing jobs to find ones they like better. b. one industry declining while another is growing. c. changes in the working conditions offered by competing firms. All of the above are correct.

Most goods and services produced at home

and most goods and services produced illegally are excluded from GDP.

The federal funds rate is the interest rate

banks charge each other for short-term loans of reserves

When the Fed decreases the discount rate, banks will

borrow more from the Fed and lend more to the public. The money supply increases.

The inflation rate is calculated

by determining the percentage change in the price index from the preceding period

Policies that reduce the time it takes unemployed workers to find new jobs

can reduce both frictional unemployment and the natural rate of unemployment.

Which of the following is not included in GDP?

carrots grown in your garden and eaten by your family

The deviation of unemployment from its natural rate is called

cyclical unemployment.

To increase the money supply, the Fed could

decrease the reserve requirement.

Credit cards

defer payments.

Some individuals would like to have a job, but they have given up looking for a job after an unsuccessful search. These individuals are called

discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed.

The Federal Open Market Committee meets approximately

every six weeks

A macroeconomist is interested in

explaining why the unemployment rate is higher.

When the consumer price index rises, the typical family

has to spend more dollars to maintain the same standard of living.

Countries with low GDP per person tend to have

higher rates of infant mortality.

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included

in German GDP, but is not included in U.S. GDP.

An increase in the price of imported coffee shows up

in the consumer price index, but not in the GDP deflator.

GDP measures

income and expenditures

For an economy as a whole,

income must equal expenditure.

For the purpose of calculating the consumer price index, the basket of goods

is kept the same from year to year so that the effects of price changes are isolated from the effect of any quantity changes that might be occurring at the same time.

For the purpose of-

is kept the same from year to year so that the efforts

M1 equals currency plus demand deposits plus

traveler's checks plus other checkable deposits.

Which of the following items is included in M2?

money market mutual funds

Anna recently-

must have 4 weeks ago

Anna recently graduated from college with a degree in electrical engineering, but she has not yet started working. To be counted as "unemployed" she

must have looked for work no more than four weeks ago

The amount of unemployment that an economy normally experiences is called the

natural rate of unemployment.

With respect to the consumer-

prices of goods and services

With respect to the consumer price index, the substitution bias arises because

prices of goods and services do not change in the same proportion from year to year.

The Federal Deposit Insurance Corporation

protects depositors in the event of bank failures.

When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study

real GDP.

Unemployment insurance

reduces search effort which raises unemployment.

Wages in excess of their equilibrium level help explain

structural but not frictional unemployment.

Which of the following agencies calculates the CPI?

the Bureau of Labor Statistics

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because

the CPI better reflects the goods and services bought by consumers

The discount rate is the interest rate that

the Fed charges banks for loans.

The agency responsible for regulating the money supply in the United States is

the Federal Reserve.

Economists use the term inflation to describe a situation in which

the economy's overall price level is rising.

What basket of goods and services is used to construct the CPI?

the goods and services that are typically bought by consumers as determined by government surveys

Which of the following-

the person must have tried to find employmet