Econ Final Version 4

many private agreements, such as wage contracts, are liked to CPI

50

suppose that the number of jobs in the fishing industry decreases but the travel increases, initially structural unemployment increases

55

if cpi is 104.7, then this number tells us that the average of the prices paid by urban consumers for a fixed basket of consumer goods and services was 4.7 percent per year

57

an increase in the quanitity of labour and a corresponding decrease in leisure hours bring a movement along the production function

60

growth accounting calculates the quantitative contribution to labour productivity of physical and human capital and technological advance

61

the pace of labour productivity growth is influenced by the discovery of new technologies, saving and investment in physical capital, investmetn in human capital

62

The table gives information about the U.S. labor market in 2002. What is the​ employment-to-population ratio?

62.7 (number employed/working age population * 100)

the real wage influences the quantity of labour supplied because what matters to households is not the number of dollars they earn but what they can buy with those dollars

64

The table gives information about the U.S. labor market in 2009. What is the labor force participation​ rate?

65.4

labour supply growth is one factor that determines real GDP growth

68

During the 81 years from 1926 to 2007, real GDP per person in Canada grew at an average of 2.1 percent a year

69

expenditure approach to calculating GDP

7

When gdp in china is valued at 'the market exchange rate' Chinas income per person in 2008 is less than 4% of the US level

8

The Population Survey in Blogsville for the past month is given in the​ table: In Blogsville last​ month, ______ million people were in the labor force and​ ______ million people were in the​ working-age population.

85​; 106

The following are included in the income approach to calculating GDP: interest and misc investment income; wages, salaries and supplementary labour income; corporate profits

9

The table provides some data on real GDP and the population of Sudico in 2010 and 2011. What is the growth rate of real GDP in Sudico in 2011​? What is the growth rate of real GDP per person in Sudico in 2011​?

9; 5

Choose the statement that is incorrect.

A bias in the CPI gives workers with wage contracts linked to the CPI less real income than the firm intended.

Suppose that the Federal Reserve is expected to expand the quantity of money by 5 percent but ends up expanding by only 2 percent. If the new Keynesian theory is correct, which of the following describes the effect on the economy?

A recession will ensue.

The fundamental precondition for labor productivity growth is the incentive system created by all of the following except ___. A). population growth B). property rights C). money D). firms and markets

A). population growth

The best forecast​ available, which is based on all the relevant information is called​ _______. A. a rational expectation B. a rational forecast C. a correct forecast D. a correct expectation

A. a rational expectation

An economy at a​ full-employment equilibrium experiences an increase in aggregate demand. The unemployment rate​ ______ its natural​ rate, and to return to the​ long-run equilibrium, the money wage rate begins to​ ______. A. falls​ below; rise B. rises​ above; rise C. rises​ above; fall D. falls​ below; fall

A. falls​ below; rise

Along the​ long-run Phillips​ curve, _______. A. the unemployment rate is constant at the natural unemployment rate B. an increase in the unemployment rate brings a lower inflation rate C. a fall in the inflation rate brings a higher unemployment rate D. the inflation rate is constant

A. the unemployment rate is constant at the natural unemployment rate

Choose the statement that is incorrect.

Along the LAS curve the money wage rate is constant and the real wage rate rises as the price level rises.

Using PPP prices, China's standard of living in 2010 is ___.

$11000

CPI = ______.

(Cost of CPI basket at​ current-period prices / Cost of CPI basket at​ base-period ​prices) x 100

The personal consumption expenditure deflator is calculated as​ ______

(Nominal C / Real C​) x 100

The graph shows the private demand for loanable funds curve and the supply of loanable funds curve. Draw a curve that shows the effect on the loanable funds market when the government has a budget deficit. Label it C1. Draw a curve that shows the​ Ricardo-Barro effect on the loanable funds market. Label it C2. Draw a point at the new real interest rate and quantity of loanable funds.

(page 173)

The marginal propensity to consume is​ 0.8, the marginal tax rate is​ 0.25, and the marginal propensity to import is 0.2. The autonomous tax multiplier is​ _______.

-1.33

During the past decade, a nation's average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was _____.

-3.0 percent

Order of events which they occur in the business cycle, using the monetarist model:

1. The Federal Reserve decreases the growth rate of the quantity of money. 2. The AD curve shifts leftward 3. Money wages fall and the SAS curve shifts rightward

Real GDP per person in Canada doubled between 1971 and 2007

10

By measuring the standard of living by using real GDP per person we remove any influence from rising prices

11

real gdp per person does NOT tell us the value of real GDP when all the economy's labour, capital, land and entrepreneurial ability are fully employed

13

If a country's real GDP is growing at a rate of 5 percent per year, how long will it take for the real GDP to double?

14 years

real gdp does not include a measure of household production, underground economic activity, or life expectancy

16

Gdp using income approach $x and net domestic income at factor cost is $y then the diff x-y is the value of depreciation plus indirect taxes less subsidies

17

1. To keep pace with a growing​ population, approximately​ _______ jobs must be created each month.

200,000

the inflastion rate might be higher, lower, or the same as the prior year (is this wrong?)

24

an economy is at full employment when there is no cyclical unemployment

25

In Canada, the CPI basket consists of items that an average urban household buys. Shelter has the greatest weight in the CPI basket.

28

the cpi tells us the price level, in a given period expressed as a percentage of the price level in the base period, which is by definition equal to 100%

29

The higher than normal unemployment that arises at a business cycle trough and the unusually low unemployment that exists at a business cycle peak is cyclical unemployment.

31

today's CPI basket is based on data gathered in the 2005 survey of consumer expenditure

37

27 percent of the total expenditure in the CPI basket is on shelter

38

a slightly larger number of people leave their jobs in good times than in bad times

39

on a typical day, more than one million people in Canada are unemployed

43

people who are laid off, perm or temp, are job losers

45

Choose the statement that is incorrect.

An unexpected inflation or deflation has no effect on the economy

Which of the following correctly describes how price adjustments eliminate a​ shortage?

As the price​ rises, the quantity demanded decreases while the quantity supplied increases.

When inflation is correctly​ anticipated, _______. A. the unemployment rate is zero B. the economy remains at full employment C. potential GDP increases D. the economy moves between recession and expansion

B. the economy remains at full employment

Choose the statement that is incorrect.

Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution.

Choose the statement that is incorrect.

Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely.

If real GDP per person doubles in 20 years, then the annual growth rate of real GDP per person is ____ percent a year. A). 14.3 B). 14.0 C). 28.5 D). 3.5

D). 3.5

The (Economics in the News) news article reports that China is the second largest economy in the world based on ___. A). real GDP converted to U.S. dollars at the current exchange rate B). population C). real GDP in PPP prices D). GDP converted to U.S. dollars at the current exchange rate

D). GDP converted to U.S. dollars at the current exchange rate

Starting at point A, the initial effects of expected inflation is a movement to point

E;I

Choose the statement that is incorrect.

Each additional hour of labor increases real GDP by successively larger amounts.

T or F: Real GDP per person grows whenever real GDP grows.

FALSE

The liabilities of the Fed are​ ______, and these liabilities along with​ ______ make up the monetary base.

Federal Reserve notes held by households and businesses and reserves of depository​ institutions; coins issued by the Treasury

Consider the following statements and decide which​ is\are true I. Global saving glut is an increased saving in​ lower-income countries such as China and other developing countries II. As a result of global saving glut U.S.A became a net lender to many lower countries III. Global saving glut lead to a fall in global​ long-term interest rate IV. As a result of global saving glut China and other developing countries became net borrowers

I and III are true

Choose the statement about fixed exchange rates that is incorrect.

If the Fed wanted to fix the U.S. dollar exchange rate against the Japanese​ yen, the Fed would have to buy U.S. dollars to prevent the exchange rate from rising above the target value.

Starting from a monetary equilibrium​ condition, an increase in money supply

Increases the bond price and decreases the interest rate

In ______ cycle theory, fluctuations in investment driven by fluctuations in business confidence are the main source of fluctuations in aggregate demand.

Keynesian

Suppose that manager forecast a large decline in expected sales and profits and so their confidence plummets. According to _______, this forecast might start a business cycle.

Keynesian cycle theory

Which are business cycle theories that regard fluctuations in aggregate demand as the factor creating business cycles?

Keynesian cycle theory monetarist cycle theory

Read the news​ clip, then answer the following questions. Economists from the​ ______ macroeconomic school of thought would recommend a second spending stimulus. Economists from the​ ______ macroeconomic school of thought would recommend a permanent tax cut.

Keynesian; classical or monetarist

Michael is an Internet service provider. On December​ 31, 2012​, he bought an existing business with servers and a building worth ​$400,000. During his first year of​ operation, his business grew and he bought new servers for ​$500,000. The market value of some of his older servers fell by ​$50,000. Calculate​ Michael's gross​ investment, net​ investment, and depreciation during 2013.

Michael's gross investment during 2013 was ​$500000. ​Michael's depreciation during 2013 was ​$50000. ​Michael's net investment during 2013 was ​$450000

Choose the statement about money that is incorrect.

Money is a completely stable store of value.

People make rational expectations about aggregate demand is one assumption of the __________.

New Classical model

______ sees the economy as a perpetual motion machine.

New growth theory

the process by which competition for profits leads to technological progress and perpetual economic growth best fits which growth theory?

New growth theory

T or F: Real GDP per person equals real GDP divided by the population

TRUE

Choose the statement that is incorrect.

The return to full employment in an expansion phase of the business cycle is economic growth.

The four price indexes that are alternatives to the CPI are​ ______.

chained​ CPI, personal consumption expenditure​ deflator, GDP​ deflator, and core PCE

The marginal propensity to consume is equal to​ ______, and the marginal propensity to save is equal to​ ______.

change in C/change in YD; change in S/ change in YD

The sum of investment, government expenditure, and exports

does not vary with GDP

An increase in labor productivity increases potential GDP because

employment increases and a given amount of employement produces more real GDP

The key idea of classical growth theory that leads to the dismal outcome is that​ ______.

no matter how much technological change​ occurs, real GDP per person is always pushed back toward the subsistence level

If the CPI rises from 120 to​ 126, then​ ______.

on​ average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

To increase the money​ supply, the Fed may conduct

open market purchases or decrease the discount rate

The chained CPI​ ______.

overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities

Real GDP per person grows when ______.

real GDP grows at a FASTER RATE than the population grows.

Over the last several decades, the gap between real GDP per person in the U.S.and Europe Big 4_______. The gap between real GDP per person in the U.S. and Japan ______.

remained nearly constant or widened a small amount; narrowed

The price of a bond​ ______ and the interest rate​ ______.

rises​; falls

If the interest rate is 5​ percent, people will​ ______ bonds. Bond prices will​ ______.

sell; fall

In RBC theory, the lower the real interest rate, other things remaining the same, the ______today.

smaller is the supply of labor.

the foreign exchange market is the market in which

the currency; the currency

In the short​ run, the nominal exchange rate is determined by​ ______. And in the short run​ ______.

the demand for U.S. dollars and the supply of U.S. dollars in the foreign exchange​ market; a change in the nominal exchange rate brings an equivalent change in the real exchange rate

If we count marginally attached workers as unemployed​ ______.

the labor force participation rate rises

The CPI tells us​ ______.

the price level in a given period expressed as a percentage of the price level in the base​ period, which is by definition equal to 100

"Intertemporal substitution" in labor supply describes changes in labor supply in response to changes in

the real interest rate.

All of the following statements are correct except​ _______.

the return to full employment in an expansion phase of the business cycle is economic growth

The two broad sources of potential GDP growth are growth of ______and growth of _____.

the supply of labor; labor productivity

If most prices increase in Japan and other countries but remain constant in the United​ States, ______.

then for purchasing power parity to​ hold, the demand for U.S. dollars increases and the supply of U.S. dollars decreases

If most prices have increased in the United States and not increased in Japan and other​ countries, ______.

then for purchasing power parity to​ hold, the value of the U.S. dollar in the foreign exchange market will fall

An economy is at full employment when​ ______.

there is no cyclical unemployment

according to the theory regarding labor productivity growth, workers will be more productive if ____.

they have more human capital

A government budget deficit​ _______ the real interest​ rate, increases​ ______.

​increases; private saving and decreases investment

If the price level rises and the money wage rate remains​ constant, the quantity of real GDP supplied​ ______ and there is a movement up along the​ ______ aggregate supply curve.

​increases; short-run

Purchasing power parity is equal value of​ _____ - a situation in which​ _____ buys the same amount of goods and services in different currencies.

​money; money

The CPI places more weight on​ _______ than on​ _______.

​transportation; medical care

An economy has a zero marginal tax rate. When real GDP​ increases, the change in consumption expenditure equals​ _______.

the marginal propensity to consume times the increase in real GDP

When real GDP​ increases, the change in imports equals​ _______.

the marginal propensity to import times the increase in real GDP

As we move up along the​ short-run aggregate supply​ curve, ______.

the money wage​ rate, the prices of other​ resources, and potential GDP remain constant

When cyclical unemployment increases and other things remain the​ same, ______

the natural unemployment rate does not change

When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

Based on the Keynesian theory of the business cycle, if the economy is at its full-employment equilibrium and aggregate demand increases then

the price level and real GDP BOTH increase.

The demand for labor is the relationship between the quantity of labor demanded and the ______. The supply of labor is the relationship between the quantity of labor supplied and the ______.

real wage rate; real wage rate

Between 1914 and​ 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this​ period, ______ grew at a faster rate than​ ______.

real​ GDP; the population

The graph gives a long-run aggregate supply curve and a short-run aggregate supply curve. Potential GDP increases and the full-employment price level remains constant

rightward shift in LAS curve and SAS curve , new point is on same line but shifted over long run aggregate supply increases but short run aggregate supply does not change

The Keynesian explanation of the business cycle rests on several concepts, including

rigid money wage rates.

How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very​ popular? The labor force participation will​ _____ Kevin starts creating football apps in his garage and they turn out to be very popular.

rise

According to neoclassical growth theory, the fundamental cause of economic growth is_____.

technological change, which induces saving and investment that make capital per hour of labor grow.

which of these factors contributes to economic growth?

technological progress

The quantity of labor supplied is the number of labor hours __________ during a given period.

that all the households in the economy plan to work

According to the rule of 70, if a nation's per capita real GDP doubled during the past 10 years, then its average annual rate of economic growth over that period was approximately ___.

7 percent

The real interest rate​ ______, household saving​ ______,

falls; decreases and investment increases

In the real business cycle framework, a technology shock that increases investment demand and the demand for loanable funds leads to a _______ level of saving and a ______real interest rate.

higher; higher

which of these factors inhibit economic growth?

discouraging international trade

The Bank of​ America's total assets​ ______ and its total liabilities​ ______.

do not​ change; do not change

A fall in the expected future exchange rate​ ______ the demand for U.S. dollars. An increase in the U.S. demand for imports​ _______ the demand for U.S. dollars.

decreases​; does not change

The required reserve ratio is the minimum percentage of​ _____ that​ _____ are required to hold as reserves.

deposits; depository institutions

If the Fed raised the interest rate while the Brazilian interest rate remained at 8.75​ percent, the Brazilian real would​ ______.

depreciate by a smaller amount than if the Fed left the interest rate unchanged

The Brazilian real is expected to ________ by ______ percent.

depreciate; 8.75

A new Classical view is that business cycle fluctuations are the​ _____ responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of​ _____.

efficient; technological change

An increase in labor productivity increases potential GDP because ______.

employment increases and a given amount of employment produced more real GDP.

An increase in labor productivity increases potential GDP because​ ______.

employment increases and a given amount of employment produces more real GDP

​Long-run macroeconomic equilibrium occurs when real GDP​ _____ potential GDP​ - equivalently, when the economy is on its​ _____ curve.

equals; LAS

The government expenditure multiplier equals the change in​ _____ that results from a change in government expenditure divided by the change in government expenditure.

equilibrium expenditure and real GDP

The supply of loanable funds is influenced by all of the following except ​______.

expected profit

Suppose the exchange rate rises from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to sell in the foreign exchange​ market? The quantity of U.S. dollars that people plan to sell in the foreign exchange market​ _______.

increases and a movement up along the supply curve of U.S. dollars occurs

which of these is most likely to increase productivity?

investments in research and development

When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

is greater than; is less than

The natural unemployment rate​ _______.

is the unemployment rate at full employment

The bias in the CPI is a problem because​ ______ .

it distorts wage agreements linked to the CPI

According to new growth​ theory, ______ experience diminishing returns.

knowledge is capital that does not

Critics of the real business cycle argue that:

labor supply is only weakly related to the real interest rate.

Suppose the Fed increases the quantity of money. In the long​ run, supply and demand in the​ ______ market determines the real interest rate. The​ ______ adjusts to make the quantity of real money supplied equal to the quantity demanded.

loanable​ funds; price level

The three main types of markets for financial capital are​ _______.

loan​ markets, bond​ markets, and stock markets

An increase in income taxes​ _______, everything else remaining the same.

makes the multiplier smaller

The unemployment rate might underestimate the underutilization of labor resources because it does not include​ ______.

marginally attached workers and​ part-time workers who want​ full-time jobs

Money is any commodity or token that is generally acceptable as a​ ______.

means of payment

The inflation rate in 2014 ​______

might be​ higher, lower, or the same as in 2013

The required reserve ratio is the _____.

minimum percentage of deposits that depository institutions are required to hold as reserves

In _____cycle theory, fluctuations in both investment and consumption expenditure, driven by fluctuations in the growth rate of the quantity of money, are the main sources of fluctuations in aggregate demand.

monetarist

Changes in the growth rate of the quantity of money affect aggregate demand.

monetarist theory

Between 1960 and​ 2010, the gap between real GDP per person in the United States and real GDP per person in Japan​ ______.

narrowed

Which of these factors does NOT contribute to economic growth

nationalization of foreign investments

In _____ cycle theory, past relational expectations of the current price level influence the money wage rate and the position of the SAS curve.

new Keynesian

Growth can persist indefinitely, according to the ______theory

new classical

In ____ cycle theory, the rational expectation of the price level, which is determined by potential GDP and expected aggregate demand, determines the money wage rate and the position of the SAS curve.

new classical

The main sources of bias in the CPI are​ ______.

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias

A​ ______ macroeconomist believes that business cycle fluctuations are the efficient responses of a​ well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. A​ ______ macroeconomist believes that the​ short-run aggregate supply curve is horizontal at a fixed price level.

new​ classical; new Keynesian

Which of the people described in the table is unemployed because of labor market​ mismatching? (1. Michael has unemployment benefits of​ $450 a week and he turned down a​ full-time job paying ​$7.75 an hour. 2. Tory used to earn​ $60,000 a year and he turned down a​ low-paid job to search for one that pays at least​ $50,000 a year. 3. David turned down a temporary​ full-time job paying​ $15 an hour because it was an​ hour's drive away and the gas cost would be high.)

only Tory and David

The key difference between the new classical theory of the business cycle and the new Keynesian theory of the business cycle is that the new classical theory believes that ______while the new Keynesian theory believes that ______.

only unexpected changes in aggregate demand will change real GDP; both expected and unexpected changes in aggregate demand will change real GDP

The price level is​ ______.

the average level of​ prices, and the value of money

The quantity of U.S. dollars demanded in the foreign exchange market depends on many​ factors, the main ones being​ ______.

the exchange​ rate, world demand for U.S.​ exports, interest rates in the United States and other​ countries, and the expected future exchange rate

All of the following statements are included in new growth theory except​ ______.

the forces of competition destroy incentives to make new discoveries

The U.S. interest rate differential rises if​ ______, and the larger the U.S. interest rate​ differential, the​ ______ is the demand for U.S. dollars in the foreign exchange market.

the foreign interest rate​ falls; greater

The marginal propensity to save is​ _______.

the fraction of a change in disposable income that is saved

The marginal propensity to consume is​ ______.

the fraction of a change in disposable income that is spent on consumption

Potential GDP is determined by ______

the full-employment quantity of labor.

The velocity of circulation is the average number of times a dollar of money is used annually to buy​ ______. The formula used to measure the velocity of​ circulation, V​, is​ ______, where P is the price​ level, Y is real​ GDP, and M is the quantity of money.

the goods and services that make up​ GDP; V​ = ​(P *Y​) / M

which of these government policies can help economic growth?

promoting higher rates of saving

For monetarists, the main cause of economic fluctuations is changes in:

the growth rate of the quantity of money

The fundamental precondition for labor productivity growth is​ _______.

the incentive system created by​ firms, markets, property​ rights, and money

unemployment results in lost human capital

44

entrants and reentrants

46

entrants are mainly people who have just left school

47

A government budget surplus_____ the supply of loanable funds.

increases

When cyclical unemployment increases and other things remain the same, the natural rate of unemployment does not change

48

full employment is at a time when natural unemployment rate = unemployment rate

49

The graph shows the production function of an economy. ​Currently, the​ full-employment quantity of labor is 200 billion hours a year. Population increases and the new​ full-employment quantity of labor is 300 billion hours. Draw an arrow that shows the effect of this increase in population. Draw a point at the new value of​ full-employment and potential GDP. Label it B.

(pg 141 in book) arrow along function to 300 and new point at 300

If disposable income increases from​ $4 trillion to​ $7 trillion, saving increases from​ $1.5 trillion to​ $2 trillion, and nothing else​ changes, the marginal propensity to save is​ _____.

0.17

Depreciation is reduced from gross investment to achieve net investment

1

Using PPP prices, China's ranks as the world's number _ economy in 2010.

1

The graph shows the loanable funds market when there is neither a government budget surplus nor a government budget deficit. Draw a point at the equilibrium quantity of loanable funds and the equilibrium real interest rate. Label it 1. Now suppose that the government has a budget surplus of​ $1 trillion. Draw a curve that shows the effect of this surplus in the loanable funds market. Label it. Draw a point at the new equilibrium real interest rate and quantity of investment. Label it 2. Draw a point to show private saving when the government budget surplus is​ $1 trillion. Label it 3.

1. where PSLF and DLF intersect new SLF curve to right of PSLF 2. where SLF and DLF intersect 3. at same y value as 2, but on PSLF curve

Real GDP per person is real GDP divided by the population

12

An economy has a consumption function of C​ = 10​ + 0.8Y​, investment of​ 6, government expenditure of​ 10, exports of​ 10, and an import function of M​ = 0.1Y. What is equilibrium real​ GDP?

120

market prices and factor cost diverge because of indirect taxes subsidies

14

The table gives information about the U.S. labor market in 2009. What is the number of people unemployed​?

14.3 (labor force - employed)

FACTOR COST DEFINITION?

15

The people who live on Second Life Island consume only juice and cloth. Last​ year, which was the CPI base​ year, the price of juice was ​$5 a​ bottle, the price of cloth was ​$6 a​ length, and the average urban household spent ​$35 on juice and ​$42 on cloth. This​ year, the price of juice is ​$10 a bottle and the price of cloth is ​$8 a length. What is the CPI in the current​ year?

163.6

potential gdp grows at a steady pace but not at a constant pace

18

real gdp per person is 23230 less than it would be with no growth slowedown in the 70s

19

In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is 2013 and 2013 is also the year of the Consumer Expenditure Survey. The CPI in 2014 is​ ______.

192.9 (disregard current year quantity in table)

Over the past 100 years, the average growth rate of U.S. real GDP per person is ____ percent.

2

Over the past 100 years, the avg. growth rate of U.S. real GDP per person is _____. Growth was most rapid during the _____ and slowest during the ______.

2 percent; 1960s; Great Depression

unemployment results in lost production and lost incomes

42

gdp using income approach

20

hdi combines measures fo real gdp, life expectancy and health , education

22

purchasing power parity of china in 2008 was 12.5% compared to US

23

a discouraged worker is a marginally attached worker

26

how to calculate the cpi

27

If real GDP per person doubles in 20​ years, then the annual growth rate of real GDP per person is​ ______ percent a year.

3.5

The natural unemployment rate is the unemployment rate when there is no cyclical unemployment

30

Main biases for CPI are, new goods bias, quality change bias, commodity substitution bias, and outlet substitution bias

32

Distorts plans tied to the CPI

33

When the unemployment rate equals the natural unemployment rate, real GDP equals potential GDP.

34

Once a month, Statistics Canada calculates the Consumer Price Index, which is a measure of the average of the prices paid by urban consumers for a fixed basket of consumer goods and services.

35

transportation is the second most important item in the CPI basket

36

job losers are the biggest sources of unemployment\

40

On January​ 1, 2014,​ Sophie's Sunlounge owned 4 tanning beds valued at​ $20,000. During​ 2014, Sophie's bought 3 new beds at a total cost of ​$8,000​, and at the end of the year the market value of all of​ Sophie's beds was ​$24,000. What was​ Sophie's net​ investment?

4000

the number of job leavers is relatively constant

41

The table gives information about the U.S. labor market in 2008. What is the unemployment​ rate?

5.8

a bias in the CPI gives workers with wage contracts linked to CP more real income than the firm intended

51

close t a third fo fed govt outlays are linked directly to the CPI

52

Bias I guess is always in the increase price direction

53

if the cpi rises from 120 to 126, then on average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent

54

when the unemployment rate is less than the natural unemployment rate, real GDP is greater than potential GDP and the output gap is positive.

56

the aggregate production function is the relationship that tells us how real GDP changes as the quantitiy of labour changes, when all other influences on production remain the same

58

an increase in the quantity of labour and a corresponding decrease in leisure hours brings an increase in real GDP

59

The table provides some data on real GDP and the population of Atlantis in 2010 and 2011. What was the growth rate of real GDP in Atlantis in 2011​? What was the growth rate of real GDP per person in Atlantis in 2011​?

5; 3

lucas wedge is the dollar value of the accumulated gap between what real GDP per person would have been if the 1960's growth rate had persisted and what real GDP per person turned out to be

6

if there is a shortage of labour, the real wage rate rises to eliminate the shortage

63

the quantity of labour demanded is the number of labour hours hired by all the firms in the economy during a given period

65

labour productivity growth is one factor that determines real GDP growth

66

real GDP per person growth depends on real GDP growth

67

The demand for labor is the relationship between the quantity of labor demanded and the _____. The supply of labor is the relationship between the quantity of labor supplied and the ____. A). real wage rate; real wage rate B). money wage rate; money wage rate C). real interest rate; real interest rate D). nominal interest rate, nominal interest rate

A) real wage rate; real wage rate

The article U.S. Workers World's Most Productive defines productivity as _____. and Real GDP per person is _____. A). GDP divided by the number of people employed; real GDP divided by the population B). the quantity of real GDP produced by an hour of labor; real GDP divided by the population C). real GDP divided by the population; GDP divided by the number of people employed D). real GDP divided by the population; the quantity of real GD produced by an hour of labor

A). GDP divided by the number of people employed; real GDP divided by the population

Choose the statement that is incorrect. A). Labor hours are all equally productive B). An increase in the quantity of labor and a corresponding decrease in leisure hours will increase real GDP C). An increase in the quantity of labor and a corresponding decrease in leisure hours create a movement along the production function D). the aggregate production function is the relationship that tells us how real GDP changes as the quantity of labor changes, when all other influences on production remain the same.

A). Labor hours are all equally productive

Choose the statement that is incorrect. A). Comparisons of real GDP between countries are most accurate when we use market prices B). Using market prices calculates real GDP using prices that prevail in each country C). market prices vary between countries D). using PPP prices calculates real GDP using the same prices for all countries

A). comparisons of real GDP between countries are most accurate when we use market prices

Potential GDP is ____. A). determined by full-employment quantity of labor B). the value of the final goods and services produces in a given year valued at the prices that prevailed in that same year C). a more precise name for GDP D). the value of final goods and services produced in a given year when valued at constant prices

A). determined by the full-employment quantity of labor

Potential GDP ___ and potential GDP per hour of labor ___. A). increases; decreases B). increases; increases C). increases; increases D). decreases; decreases

A). increases; decreases

An increase in labor productivity ___. A). shifts the demand for labor curve rightward and production function upward B). increases potential GDP and decreases potential GDP per hour of labor C). increases the supply of labor, increases potential GDP, and decreases, potential GDP per hour of labor D). decreases the real wage rate, increases potential GDP, and increase potential GDP per hour of labor

A). shifts the demand for labor curve rightward and the production function upward

Economic Growth is ___. A). the expansion of production possibilities B). the return to full employment in an expansion phase of the business cycle C). the annual percentage change in labor productivity D). the annual percentage change in the quantity of money

A). the expansion of production possibilities

The two broad sources of potential GDP growth are growth of ___ and growth of ___. A). the supply of labor; labor productivity B). government; the private sector C). corporations; private firms D). exports; imports

A). the supply of labor; labor productivity

Choose the statement about the​ long-run Phillips curve that is incorrect. A. An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward. B. It is vertical at the natural unemployment rate. C. It shows the relationship between inflation and unemployment when the actual inflation rate equals the expected inflation rate. D. It tells us that any expected inflation rate is possible at the natural unemployment rate.

A. An unexpected increase in aggregate demand shifts the​ long-run Phillips curve rightward.

If the government increases its expenditure on goods and services and as a​ result, the money wage rate​ increases, the economy has experienced​ _______. A. a​ demand-pull rise in the price level B. ​demand-push inflation C. ​cost-push inflation D. ​demand-pull inflation

A. a​ demand-pull rise in the price level

A rise in the price of oil creates​ _______. A. a​ one-time cost-push rise in the price level B. a​ one-time demand-pull rise in the price level C. a persistent increase in the price level D. a recession that can be eliminated only by a decrease in potential GDP

A. a​ one-time cost-push rise in the price level

If the expected inflation rate increases and the natural rate of unemployment remains​ constant, then​ _______. A. the​ short-run Phillips curve shifts upward and the​ long-run Phillips curve does not shift B. the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve does not shift C. the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve shifts rightward D. neither the​ long-run Phillips curve nor the​ short-run Phillips curve shifts

A. the​ short-run Phillips curve shifts upward and the​ long-run Phillips curve does not shift

In​ ______ cycle​ theory, animal spirits are the main source of fluctuations in aggregate demand. In​ ______ cycle​ theory, fluctuations in both investment and consumption​ expenditure, driven by fluctuations in the growth rate of the quantity of​ money, are the main source of fluctuations in aggregate demand. A. ​Keynesian; monetarist B. new​ classical; new Keynesian C. ​monetarist; Keynesian D. new​ Keynesian; new classica

A. ​Keynesian; monetarist

When costs increase and the Fed wants to return the economy to full​ employment, the Fed responds by​ ______ the quantity of money. If the Fed continually responds to successive increases in​ costs, a​ ______ inflation evolves. A. ​increasing; cost-push B. ​decreasing; cost-push C. ​increasing; demand-pull D. ​decreasing; demand-pull

A. ​increasing; cost-push

Over the past 100 years, growth was most rapid during the ____ and slowest during the ______. A). 1960s; 1980s B). 1960s; Great Depression C). 2000s; 1920s D). 1990s; 1970s

B). 1960s; Great Depression

The Rule of 70 states that the number of years it takes for the level of any variable to ____ is approximately ____. A). increase by a factor of 70; 70 divided by the annual percentage growth rate of the variable B). double; 70 divided by the annual percentage growth rate of the variable C). increase by a factor of 70; 1/70 multiplied by the annual percentage growth rate of the variable D). double; 70 multiplied by the annual percentage growth rate of the variable

B). double; 70 divided by the annual percentage growth rate of the variable

The aggregate production function is the relationship that tells us ___, when all other influences on production remain the same. A). how real GDP changes as the quality of leisure changes B). how real GDP changes as the quantity of labor changes C). how potential GDP changes as the labor market moves from surplus or shortage to equilibrium D). how the real wage rate changes as the quantity of labor changes

B). how real GDP changes as the quantity of labor changes

Choose the statement about real business cycle theory that is incorrect. A. The impulse in RBC theory is generated mainly by the process of research and development. B. Economists have not been able to isolate the RBC theory impulse. C. The impulse in RBC theory is the growth rate of productivity that results from technological change. D. Productivity fluctuations are correlated with real GDP fluctuations.

B. Economists have not been able to isolate the RBC theory impulse.

Choose the statement that is incorrect. A. During a period of​ deflation, the inflation rate is negative. B. The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand. C. A​ one-time fall in the price level is not deflation. D. An economy experiences deflation when it has a persistently falling price level.

B. The price level falls if aggregate supply increases at a persistently slower rate than aggregate demand.

Choose the correct statement. A. The​ long-run Phillips curve shifts rightward when the inflation rate rises. B. The​ long-run Phillips curve shifts rightward when the natural unemployment rises and leftward when the natural unemployment rate falls. C. The​ long-run Phillips curve shifts leftward when the expected inflation rate falls. D. The​ long-run Phillips curve shifts rightward when the expected inflation rate rises.

B. The​ long-run Phillips curve shifts rightward when the natural unemployment rises and leftward when the natural unemployment rate falls.

Choose the correct statement about the U.S.​ short-run Phillips curve. A. U.S. inflation and unemployment data cannot be interpreted in terms of the​ short-run Phillips curve. B. We can interpret U.S. inflation and unemployment data in terms of a shifting​ short-run Phillips​ curve, which sometimes shifts upward and sometimes shifts downward. C. The U.S.​ short-run Phillips curve has been shifting steadily downward since 2001. D. The U.S.​ short-run Phillips curve has been shifting steadily upward since 2001.

B. We can interpret U.S. inflation and unemployment data in terms of a shifting​ short-run Phillips​ curve, which sometimes shifts upward and sometimes shifts downward.

In​ ______ cycle​ theory, the rational expectation of the price​ level, which is determined by potential GDP and expected aggregate​ demand, determines the money wage rate and the position of the SAS curve. In​ ______ cycle​ theory, past rational expectations of the current price level influence the money wage rate and the position of the SAS curve. A. ​Keynesian; monetarist B. new​ classical; new Keynesian C. ​monetarist; Keynesian D. new​ Keynesian; new classical

B. new​ classical; new Keynesian

In real business cycle​ theory, _______ are the main source of economic fluctuations. A. unexpected changes in government expenditure B. random fluctuations in productivity C. random fluctuations in investment D. unexpected changes in the​ full-employment quantity of labor

B. random fluctuations in productivity

The impulse in RBC theory is​ _______. A. future sales and profits B. the growth rate of productivity that results from technological change C. unanticipated changes in aggregate demand D. the growth rate of the quantity of money

B. the growth rate of productivity that results from technological change

According to mainstream business cycle​ theory, _______. A. the money wage rate is sticky and consequently if aggregate demand grows faster than potential​ GDP, a recessionary gap emerges B. the money wage rate is sticky and consequently if aggregate demand grows faster than potential​ GDP, an inflationary gap emerges C. the economy is always at full employment D. in a business cycle​ expansion, short-run aggregate supply increases by more than aggregate demand

B. the money wage rate is sticky and consequently if aggregate demand grows faster than potential​ GDP, an inflationary gap emerges

When aggregate demand unexpectedly​ increases, ______. A. the expected inflation rate increases B. the natural unemployment rate does not change C. the natural unemployment rate decreases D. the inflation rate decreases

B. the natural unemployment rate does not change

In an​ expansion, an increase in the rate of technological change​ _______ investment demand. The real interest rate​ _______. A. ​increases; falls B. ​increases; rises C. ​decreases; rises D. ​decreases; falls

B. ​increases; rises

to stop the euro from falling, the European central bank

Bought euros

Choose the statement that is incorrect A). the size of an economy matters when we are interested in diplomatic negotiations B). the size of an economy matters when we are interested in the resources devoted to environmental protection, science, and technology C). the size of an economy is irrelevant D). the size of an economy matters when we are interested in military power

C). the size of an economy is irrelevant

In a standard of living comparison, China ranks ___ in the world. This rank is ____. A). 1st; not changing because it depends on population and China has the world's largest population B). 105th; falling because China's population is growing fast than real GDP is growing C). 105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and China's real GDP is growing D). 2nd; rising because physical capital and human capital growth and technological change are proceeding rapidly and China's real GDP is growing.

C). 105th; rising because physical capital and human capital growth and technological change are proceeding rapidly and China's real GDP is growing

Suppose that in 2014, China's real GDP is growing at 9 percent a year and its population is growing at 2.0 percent a year. If these growth rate continue, then China's real GDP per person in _____ will be twice what it is in 2014. A). 2022 B). 2085 C). 2024 D). 2017

C). 2024

Choose the statement that is incorrect (based off of the Economics in the News article). A). the standard of living in a country is measured by real GDP per person B). the size of the economy is measured by its real GDP C). a country with a large population cannot have a high standard of living D). China, although one of the world's largest economies, is ranked much lower in terms of standard of living because of its very large population

C). a country with a large population cannot have a high standard of living

The effect of the United States returning million of workers to their countries of origin is ___ the U.S. PF and ___ in potential GDP. A). a downward shift of; no change B). a downward shift of; a decrease C). a movement down along; a decrease D). a movement down along; no change

C). a movement down along; a decrease

Real GDP growth rate = [(Real GDP in ____ year - Real GDP in ____ year) / Real GDP in ____ year] x 100 A). previous; current; current B). current; previous; current C). current; previous; previous D). previous; current; previous

C). current; previous; previous

An increase in population ___ the real wage rate and ___ the equilibrium quantity of labor. A). increases; increases B). decreases; decreases C). decreases; increases D). increases; decreases

C). decreases; increases

Choose the statement that is incorrect. A). Real GDP per person equals real GDP divided by the population B). Real GDP per person growth rate is approximately equal to the real GDP growth rate minus the population growth rate C). Real GDP per person grows whenever real GDP grows D. the standard of living depends on real GDP per person

C). real GDP per person grows whenever real GDP grows

An increase in the population ___. A). increases the real wage rate, increases potential GDP, and decreases potential GDP per hour of labor B). increases potential GDP and increases potential GDP per hour of labor C). shifts the supply of labor curve rightward and creates a movement along the production function D). shifts the production function upward

C). shifts the supply of labor curve rightward and creates a movement along the production function

Choose the statement about an increase in the population that is incorrect. A). potential GDP grows B). the real wage rate falls C). the production function shifts upward D). potential GDP per hour of labor decreases

C). the production function shifts upward

In RBC​ theory, the lower the real interest​ rate, other things remaining the​ same, the​ ______ today. A. larger is the demand for labor B. larger is the supply of labor C. smaller is the supply of labor D. higher is the money wage rate

C. smaller is the supply of labor

A​ cost-push rise in the price level can arise from an increase in​ _______. A. government expenditure B. the quantity of money C. the money wage rate or money prices of raw materials D. exports

C. the money wage rate or money prices of raw materials

A stagflation can turn into a​ cost-push inflation process when​ _______. A. the money wage rate decreases B. the quantity of money persistently decreases C. the quantity of money persistently increases D. taxes consistently increase

C. the quantity of money persistently increases

A stagflation can turn into a​ cost-push inflation process when​ _______. A. the quantity of money persistently decreases B. taxes consistently increase C. the quantity of money persistently increases D. the money wage rate decreases

C. the quantity of money persistently increases

If the trend rate of change of velocity is 1 percent a​ year, potential GDP grows by 4 percent a​ year, and the money growth rate is 2 percent a​ year, what is the trend inflation​ rate? A. 1 percent a year B. ​-5 percent a year C. ​-1 percent a year D. 7 percent a year

C. ​-1 percent a year

A movement​ ______ along the​ short-run Phillips curve occurs when there is an​ ______ increase in aggregate demand. A. ​down; expected B. ​up; expected C. ​up; unexpected D. ​down; unexpected

C. ​up; unexpected

If the natural unemployment rate increases and the expected inflation rate remains constant, then _________. A. the​ short-run Phillips curve shifts rightward and the​ long-run Phillips curve does not shift B. neither the​ long-run Phillips curve nor the​ short-run Phillips curve shifts C. the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve shifts rightward D. the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve does not shift

C. the​ long-run Phillips curve shifts rightward and the​ short-run Phillips curve shifts rightward

Once a​ month, the Bureau of​ ______ Statistics calculates the Consumer Price​ Index, which is a measure of the​ ______ consumers for a fixed basket of consumer goods and services.

Labor; average of the prices paid by urban

Along the​ short-run Phillips​ curve, ______. A. the expected inflation rate varies and the natural unemployment rate is constant B. the expected inflation rate and the natural unemployment rate vary C. the expected inflation rate and the natural unemployment rate are constant D. the expected inflation rate is constant and the natural unemployment rate varies

D. the expected inflation rate is constant and the natural unemployment rate varies

When labor productivity increases, there is ___ the production function and ___ in potential GDP. A). an upward shift of; no change B). a movement up along; an increase C).a movement up along; no change D). an upward shift of; an increase

D). an upward shift of; an increase

The figure shows the aggregate​ demand, short-run aggregate​ supply, and​ long-run aggregate supply curves for the economy of Tomorrowland. The economy is currently at point A. A​ demand-pull rise in the price level will initially move the economy to point​ _______ and to point​ _______. A. E​; A when aggregate demand changes B. C when the money wage rate​ rises; D when aggregate demand increases C. B when aggregate demand​ decreases; C when the money wage rate rises D. E when aggregate demand​ increases; D when the money wage rate rises

D. E when aggregate demand​ increases; D when the money wage rate rises

In real business cycle​ theory, all of the following events can be sources of fluctuation in productivity except​ _______. A. the pace of technological change B. climate fluctuations C. natural disasters D. changes in the growth rate of money

D. changes in the growth rate of money

An economy is at potential GDP when it experiences an increase in costs. The economy experiences​ _______. A. a rise in the price level and an increase in real GDP B. a fall in the price level and a decrease in real GDP C. a rise in the price level and a decrease in potential GDP D. stagflation

D. stagflation

A rational expectation​ _______. A. is a correct forecast B. predicts the inflation rate to be lower than it actually turns out to be C. predicts the inflation rate to be higher than it actually turns out to be D. will often turn out to be​ wrong, but no other forecast that could have been made with the information available could do better

D. will often turn out to be​ wrong, but no other forecast that could have been made with the information available could do better

Deflation in Japan arose because​ _______. A. investment decreased and the capital stock increased more slowly than anticipated B. money wage rates decreased C. real wage rates decreased and the​ country's debt increased D. ​Japan's money stock did not grow fast enough to accommodate the growth of potential GDP and a trend rise in velocity.

D. ​Japan's money stock did not grow fast enough to accommodate the growth of potential GDP and a trend rise in velocity.

If inflation is​ expected, _______. A. either a​ cost-push inflation or a​ demand-pull inflation occurs B. a​ demand-pull inflation occurs C. a​ cost-push inflation occurs D. neither a​ cost-push inflation nor a​ demand-pull inflation occur

D. neither a​ cost-push inflation nor a​ demand-pull inflation occur

According to mainstream business cycle​ theory, ______ grows at a steady rate and​ ______ grows at a fluctuating rate. A. aggregate​ demand; long-run aggregate supply B. potential​ GDP; short-run aggregate supply C. short-run aggregate​ supply; long-run aggregate supply D. potential​ GDP; aggregate demand

D. potential​ GDP; aggregate demand

Which of the following fiscal policies combats​ inflation?

Decreasing government spending

Read the news​ clip, then answer the following questions. The article defines productivity as​ ______. Real GDP per person is​ ______.

GDP divided by the number of people​ employed; real GDP divided by the population

Which of these government policies can help economic growth?

Improving the quality of education

According to the RBC theory, a change in the quantity of money leads to

a change in the price level but no change in real GDP

Choose the statement that is incorrect.

In the United States in​ 2009, 22 million fewer people had jobs than in 1989.

Choose the statement that is incorrect.

In the long​ run, China manages its exchange rate to keep its export prices low and to make it easier to compete in world markets

A debtor nation is a country that during its entire history has​ _____ the rest of the world than it has​ _____ the rest of the world.

borrowed more​ from; lent to

The key proposition of new growth theory that makes growth persist is that ______ is not subject to diminishing returns.

Knowledge capital

Choose the statement that is incorrect.

Labor hours are all equally productive.

Which of the following equations is incorrect​?

MPC ​ + MPS​ = change in YD

Assume that the graphs in this figure represent the demand and supply curves for mustard and that bratwurst and mustard are complements. What panel describes what happens in this market when the price of bratwurst​ falls?

Panel (c) (demand curve shifts to right)

In May​ 2012, real personal consumption expenditures​ (PCE) was​ $9,588 billion and the PCE deflator was 115.4. In June​ 2012, real personal consumption expenditure was​ $9,576 billion and personal consumption expenditure was​ $11,062 billion. Calculate personal consumption expenditure in May 2012 and the PCE deflator in June 2012. Was the percentage change in real personal consumption expenditure greater or smaller than that in personal consumption​ expenditure?

Personal consumption expenditure in May 2012 was $11065 billion. The PCE deflator in June 2012 was 115.5. The percentage change in real personal consumption expenditure between May 2012 and June 2012 was -0.13 percent. The percentage change in personal consumption expenditure between May 2012 and June 2012 was -.03 percent. The percentage change in real personal consumption expenditure is greater than the percentage change in personal consumption expenditure.

Choose the statement that is incorrect.

President Roosevelt's "New Deal" minimized the role of government in economic life.

Which of the following pieces of evidence is most consistent with the real business cycle theory?

Productivity and GDP move closely together

The economic growth rate is the annual percentage change of _____.

Real GDP

In developing countries with less developed capital​ markets, which of the following monetary policy rule works the best

Required reserve ratios

Choose the statement about growth in labor productivity that is incorrect.

The demand for labor​ increases, the production function does not​ change, but a movement occurs along the production function.

Choose the correct statements. 1. Gum does not serve as money because it is not a good store of value. 2. Most people know the price of gum, so it could serve as money because it is a unit of account. 3. Because most people buy gum, it can be used as money because it is a useful tool in barter. 4. Gum does not serve as money because it is not generally accepted in exchange for goods and services.

Statements 1 and 4 are correct.

Choose the statements concerning neoclassical growth theory that are true. 1. Neoclassical growth theory was developed in the late 19 th century. nothing 2. Technological change results from the choices people make in the pursuit of profit. nothing 3. The rate of technological change influences the economic growth rate but economic growth does not influence the pace of technological change. 4. Neoclassical growth theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow.

Statements 3 and 4 are correct.

The Bureau of Labor Statistics reports six alternative measures of the unemployment rate. Choose the correct statements. a. U-4 is the official unemployment rate. b. U-2 measures the job losers. c. U-3 is the official unemployment rate. d. U-5 measures the job losers.

Statements b and c are correct.

T or F: The standard of living depends on real GDP per person.

TRUE

Choose the statement about the Consumer Price Index that is incorrect.

The CPI is defined to equal 1.00 for a period called the reference base period.

Rob takes a summer job with a landscaping firm. During the​ summer, he earns an​ after-tax income of ​$4,000 and he spends ​$1,500 on living expenses. Everything else remaining the​ same, what was the change in​ Rob's wealth during the​ summer?

The change in​ Rob's wealth is ​$2500.

Choose the statement that is incorrect.

The demand for labor is the relationship between the quantity of labor demanded and the money wage rate.

Choose the statement that is incorrect.

The greater the default​ risk, the greater is the supply of loanable funds.

The CPI in 2013 is 170 and the CPI in 2014 is 183.6.

The inflation rate in 2014 is 8.0 percent.

Choose the correct statement.

The inflation rate is the annual percentage change in the price level.

The table gives information reported by the Bureau of Labor Statistics for May​, 2014. What is the labor force participation​ rate?

The labor force participation rate is 62.9 percent.

Choose the statement that is incorrect.

The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.

The table gives information about the U.S. labor market in 2008. What is the number of people not in the labor force​?

The number of people not in the labor force is 79.6 million.

Choose the statement that is incorrect.

The presence of a banking system in Britain in the middle 1700s started the Industrial Revolution.

Choose the statement about an increase in the population that is incorrect

The production function shifts upward.

The U.S. price level rises.

The quantity of U.S.real GDP demanded decreases.

Choose the correct statement.

The quantity of real GDP demanded is the sum of the real consumption​ expenditure, investment, government​ expenditure, and exports minus imports.

NOT one of the criticisms of real business cycle theory:

The theory is built on weak microeconomic foundations

Choose the statement that is incorrect.

The unemployment rate includes all underutilized labor.

The table gives information reported by the Bureau of Labor Statistics for 2010. What is the unemployment​ rate, the labor force participation​ rate, and the​ employment-to-population ratio?

The unemployment rate is 9.5 percent. The labor force participation rate is 64.6 percent. The​ employment-to-population ratio is 58.5 percent.

The table gives information reported by the Bureau of Labor Statistics for February​, 2014. What is the unemployment​ rate?

The unemployment rate is 7.1 percent.

The bank plans to hold ​$4 for every​ $100 in deposits. The bank holds actual reserves of ​$15,000 and desired reserves of ​$11,000. What is the​ bank's desired reserve ratio and its excess reserves​?

The​ bank's desired reserve ratio is 4 percent. The banks excess reserves are ​$4000.

Explain for each event whether it changes the quantity of real GDP demanded or aggregate demand in the United States. U.S. exports in the European Union boom.

U.S. aggregate demand increases.

The U.S. inflation rate is expected to rise next year.

U.S. aggregate demand increases.

U.S. firms build new​ gas-fuel utilities.

U.S. aggregate demand increases.

The quantity of U.S. dollars demanded in the foreign exchange market depends on all of the following except​ ______.

U.S. demand for imports

in July and august 2014, the us dollar

appreciated against the euro, pound and yen

​______ is an example of U.S. consumption expenditure.

Your purchase of a coffee from Starbucks

Evidence indicates that a recession occurs about the same time as a decrease in investment. According to the monetarist theory, the decrease in investment is attributable to:

a decline in the growth rate of the quantity of money.

An increase in labor productivity results in all of the following except ​______.

a decrease in potential GDP per hour of labor because of diminishing returns

In RBC theory, a decrease in productivity leads to all of the following events EXCEPT:

a rise in the real wage rate

which of these will cause the quantity of goods and services that can be produced by one worker, or in one hour of work, to increase?

a technological change

The​ bank's total assets​ ______, its reserves​ ______.

are the​ same; decrease

During the 100 years from 1914 to​ 2014, real GDP per person in the United States grew at​ ______.

an average of 2 percent a year

In the United​ States, the CPI basket consists of items that​ ______ . ______ has the greatest weight in the CPI basket.

an average urban household​ buys; Housing

You observe that unplanned inventories are decreasing. You predict that there will be​ _______.

an expansion

The economy starts out on the curves AD0 and SAS0. Some events occur that generate an expected inflation. Which of the following events would not cause an expected inflation?

an expected increase in taxes

Consider the figure showing supply curves for soft drinks. Suppose the economy is at point a. A movement to point d would be the result of

an increase in the relative price of a soft drink.

The reference base period for the CPI is​ 1982-1984. In March ​2014, the CPI was 236.3. This number tells us that the​ ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was​ ______ .

average; 136.3 percent higher in March 2014 than the average of​ 1982-1984

In the short​ run, when the Fed increases the quantity of​ money, people enter the loanable funds market and _____ bonds.

buy

An increase in investment shifts the AE curve upward by an amount equal to the​ ______, and shifts the AD curve rightward by an amount equal to the​ ______.

change in​ investment; change in investment times the multiplier

Labor supply growth is influenced by all of the following except​_______.

changes in labor productivity

In RBC theory, all of the following events can be sources of fluctuation in productivity EXCEPT:

changes in the growth rate of money

As a result of financial​ innovation, ______ have become​ ______.

checking deposits at thrift​ institutions; an increasing percentage of M1

The components of aggregate expenditure that are influenced by real GDP are​ ______.

consumption expenditure and imports

Real GDP growth rate = [Real GDP in _______ - Real GDP in _______year) / Real GDP in _____] x 100

current year; previous year; previous year

An electrician who is laid off because the economy is in a recession experiences ​______.

cyclical unemployment

Suppose the Fed sells​ $50 million of government securities to the Bank of America. The​ Fed's total assets​ ______ and its total liabilities​ ______.

decrease by​ $50 million; decrease by​ $50 million

The tables describe an​ economy's labor market and its production function in 2014. In​ 2015, the population increases and labor hours supplied increase by 150 at each real wage rate. The​ economy's standard of living​ ______ in 2015 because​ ______.

decreased; real GDP per person is smaller in 2015 than in 2014

The gap between real GDP per person in the United States and Hong Kong has​ ______ since 1960. During this​ period, the growth rate of real GDP per person in the United States has been​ ______ than in Hong Kong.

decreased; slower

The Fed cuts the quantity of money and all other things remain the same. In the short​ run, aggregate demand​ _______.

decreases

An increase in the population ______the real wage rate and _____the equilibrium quantity of labor. Potential GDP ______ and potential GDP per hour of labor _______.

decreases; increases; increases; decreases

A government budget surplus​ _______ the real interest​ rate, decreases​ ______.

decreases; private saving and increases investment

The Fed makes an open market sale of securities to a bank. The monetary base​ ______ and the​ Fed's assets​ ______.

decreases​; decrease

Brazil's Overvalued Real The Brazilian real has appreciated 33 percent against the U.S. dollar and has pushed up the price of a Big Mac in Sao Paulo to​ $US4.60, higher than the New York price of​ $US3.99. Despite​ Brazil's interest rate being at 8.75 percent a year compared to the U.S. interest rate at near​ zero, foreign funds flowing into Brazil surged in October. Interest rate parity ______ hold between Brazil and the United States.

does

The table provides some data on real GDP and the population of Eastiana in 2009 and 2010. If the growth rates of 2010 are maintained in future​ years, real GDP per person in Eastiana will​ ______.

double by 2020 (calculate real GDP per person growth rate and use rule of 70)

The table provides some data on real GDP and the population of Asiana in 2010 and 2011. If the growth rates of 2011 are maintained in future​ years, real GDP per person in Asiana will​ ______.

double by 2023

The Rule of 70 states that the number of years it takes for the level of any variable to​ ______ is approximately​ ______.

double; 70 divided by the annual percentage growth rate of the variable

Bonds issued by​ _____ are traded in the bond market.

firms and governments

Keynes used the term "animal spirits" to represent

fluctuations in business confidence

According to RBC theory, the sources of the business cycle is _____, which result mainly from _____.

fluctuations in productivity; fluctuations in the pace of technological change

When the unemployment rate is less than the natural unemployment​ rate, real GDP is​ ______ than potential GDP and the output gap is​ ______.

greater; positive

According to new growth​ theory, ______.

growth can persist indefinitely

In neoclassical growth​ theory, ______.

growth will stop if technology stops advancing

In neoclassical growth theory, _______.

growth will stop if technology stops advancing.

The quantity of labor demanded is the number of labor hours ________ during a given period.

hired by all the firms in the economy

The quantity of labor DEMANDED is the number of labor hours _____during a given period. The quantity of labor SUPPLIED is the number of labor hours ______during a given period. The _____ adjusts to bring the labor market equilibrium.

hired by all the firms in the economy; that all the households in the economy plan to work; money wage rate

The aggregate production function is the relationship that tells us _______, when all other influences on production remain the same.

how real GDP changes as the quantity of labor changes

The aggregate production function is the relationship that tells us​ ______, when all other influences on production remain the same.

how real GDP changes as the quantity of labor changes

In 2013 and in​ 2014, consumers in Dexter consumed only books and pens. The prices and quantities for 2013 and 2014 are listed in the table. The reference base period for​ Dexter's CPI is​ 2013, and 2013 is also the year of the Consumer Expenditure Survey. The inflation rate in 2014 is​ ______ percent.

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The fundamental source of labor productivity growth is​ ______.

human capital

which of these terms refers to the accumulated knowledge and skills workers acquire from education and training, or with life experiences?

human capital

The Fed is the lender of last​ resort, which means​ _______.

if depository institutions are short of​ reserves, they can borrow from the Fed

A problem with neoclassical growth theory is its

inability to explain persistent differences between countries' GDP growth rates.

4. We would expect the labor force participation rate to​ _______ in response to job creation in excess of population growth.

increase

A government budget ______ deficit the demand for loanable funds.

increases

An increase in labor productivity _____ the real wage rate and ______the equilibrium quantity of labor. Potential GDP_____ and potential GDP per hour of labor _____.

increases: increases; increases; increases

An increase in the population ______aggregate labor hours, ______ potential GDP, and ______the real wage rate.

increases; increases; lowers

how does this increase in expected profit influence First Call's demand for loanable funds?

increases; a rightward shift of

An increase in the population​ ______ potential GDP and​ ______ potential GDP per hour of labor.

increases; decreases

An increase in the population​ ______ the equilibrium quantity of​ labor, ______ and potential GDP.

increases; increases

In an expansion, an increase in the rate of technological change _____investment demand, ______ the demand for labor, and ______ the supply of labor. The real interest rate _______.

increases; increases; increases rises

An increase in world demand for U.S. exports​ ______ the demand for U.S. dollars. A fall in the U.S. interest rate differential​ ______ the demand for U.S. dollars.

increases​; decreases

The only way that the standard of living of the average person in a country can increase is by

increasing production faster than population growth

When the Federal Reserve Bank increases the federal funds​ rate, other

interest rates​ rise, and​ consumption, firms' private investment and net exports decrease

Some unemployment is unavoidable because​ ______.

people are making transitions through the stages of life and businesses are making transitions

Unemployment arises for all of the following reasons except​ ______.

people leave the labor force

the role of technological progress in determining economic growth can be described by which statement?

per capita output will rise when we discover new and more effective uses of capital and labor

Depository institutions balance risk and return by​ _______.

placing some funds into safe low​ interest-earning assets and other funds into​ high-interest risky assets

Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except​ ______.

population growth

Draw a short-run aggregate supply curve. Label it.

positive slope like this /

Convergence between real GDP per person in the United States and Japan was relatively​ ______ during the​ 1960s; convergence has recently been​ ______.

rapid; decreasing

The ____ wage rate adjusts to bring the labor market to equilibrium.

real

Real GDP per person grows when​ ______.

real GDP grows at a faster rate than the population grows

because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of

real GDP per captia

By measuring​ ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United​ States, but that the economies of Central and South America have not.

real GDP per person

Classical growth theory is the view that the growth of​ _____ is temporary and that when it rises above the subsistence​ level, a population explosion​ _____.

real GDP per​ person; eventually brings it back to the subsistence level

Which of the following is NOT an aggregate demand, mainstream theory of the business cycle?

real business cycle theory

Which theory maintains that the money wage rate always adjusts freely?

real business cycle theory

Sarah works 10 hours a week at​ McDonald's. She is available to work more hours but​ hasn't looked for extra work. bullet Kevin spent the first six months of 2014 actively searching for a job but he​ didn't get hired. He believes there are no​ jobs, so he has given up looking. How will the unemployment rate change if Sarah quits and starts to search for a​ full-time job? The unemployment rate will​ _____ if Sarah quits and starts to search for a​ full-time job.

rise

The interest rate will

rise

According to classical growth theory, when real GDP per person ______, the population grows.

rises above the subsistence level

According to classical growth​ theory, when real GDP per person​ ______, the population grows.

rises above the subsistence level

the defining characteristic of long-run economic growth is

rising productivity

An increase in labor productivity​ ______.

shifts the demand for labor curve rightward and the production function upward

An increase in the population​ ______.

shifts the supply of labor curve rightward and creates a movement along the production function

In RBC theory, the lower the real interest rate, other things remaining the same, the ______ today.

smaller is the supply of labor

In June 2011​, the exchange rate was 0.69 euros per U.S. dollar. By June 2012​, the exchange rate had risen to 0.79 euros per U.S. dollar. Given the information​ above, for a given expected future exchange​ rate, the expected profit from holding U.S. dollars is smaller in June 2012 than in June 2011. The quantity of U.S. dollars demanded is​ ______ in June 2012 than in June 2011. And the quantity of U.S. dollars supplied is​ ______ in June 2011 than in June 2012.

smaller; smaller

The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs is ______ unemployment.

structural

A government budget surplus​ occurs, which increases the ____ loanable funds.

supply of

which of these will ensure that an economy experiences labor productivity growth?

technological change

New Keynesian economists believe that _______ is influenced by _______.

today's money wage rate; yesterday's rational expectations of the price level.

The CPI basket consists of items that _______ households buy.

urban

The figure shows the demand for money curve in Epsilon. Draw the supply of money curve if the Fed wants the interest rate to be 6 percent a year. Label it. Draw a point at the equilibrium in the money market.

vertical MS line at 2.9 real money; point at intersection

The graph shows the unemployment rate and the natural unemployment rate from 1980 to 2014. Draw a point on the Unemployment rate curve that shows a year in which the economy experiences full employment.

where the unemployment curve and natural unemployment curve intersect

The new classical cycle theory predicts that an unexpected incease in aggregate demand ______ create a business cycle and an unexpected increase in aggregate demand _____create a business cycle.

will; will not

In an​ economy, there is ​$150 million in currency held outside​ banks, ​$100 million in​ traveler's checks, ​$200 million in currency held inside the​ banks, ​$350 million in checking​ deposits, ​$500 million in savings​ deposits, ​$2,000 million in time​ deposits, and ​$800 million in money market mutual funds and other deposits. The value of M1 is​ ______ and the value of M2 is​ ______.

​$600 ​million; ​$3,900 million

The table provides official estimates of U.S. wealth and U.S. saving in three years. The change in U.S. wealth exceeds U.S. saving in​ ______. U.S. saving exceeds the change in U.S. wealth in​ ______.

​1996 and 1997; none of the years in the table

M2 consists of​ _____ plus​ _____ and​ _____ deposits,​ _____, and other deposits.

​M1; savings​ deposits; small​ time; money market funds

Full employment is when there is no​ _____ unemployment​ or, equivalently, when all the unemployment is​ _____ or​ _____.

​cyclical; frictional; structural