Econ Hw 4

Which of the following most accurately describes how to calculate the unemployment rate

(Unemployed/labor force) × 100

(Figure: Short-Run Equilibrium) The accompanying graph shows the economy in short-run equilibrium. To move the economy to potential GDP, the government should reduce government spending by an amount equal to:

(Y1 - YP)(1 - MPC).

If the marginal propensity to consume is 0.9, then the government spending multiplier is

10

Assuming year 3 is the base year, real output in year

100

(Scenario: Market Basket) What is the value of the price index in 2011

111

(Table: GDP II) Calculate the GDP deflator for 2010.

111

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its labor force is

150 million

If actual unemployment is 6.2% and the natural rate of unemployment is 4%, cyclical unemployment is

2.2%

If the CPI for 2009 was 148.3 and for 2010 was 152.5, what was the inflation rate between the two years

2.83%

Suppose that the market basket for the university student price index (USPI) consists of 4 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas costs $1 per gallon. In 2011, textbooks cost $50 each and gasoline costs $4 per gallon. The USPI for 2011 is:

200

If the marginal propensity to consume is 0.8 and government transfers decrease by $50 million, then equilibrium GDP will decrease by:

200 million

(Scenario: Good A and Good B) With 2009 as the base year, real GDP is greatest in

2011

Suppose that the current real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. The real GDP per capita of China is $4,000, and its annual growth rate is 7%.

28,000

(Table: Peanut Butter and Jelly Economy) Nominal GDP in 2010 was:

400

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is

5%

If the CPI is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about

5.56%

(Scenario: Price Index) The change in prices from the first to the second month is

6.4%

Table: Price Index) Consider the information in table provided. What is the inflation rate between the years 2010 and 2011?

6.8%

(Figure: Technological Progress and Productivity Growth) If there is an increase in physical capital per worker (all other factors remaining unchanged), it will be best indicated by a move from

A to B

(Figure: Technological Progress and Productivity Growth) Which of the following changes in real GDP would have been most likely to result from an increase in domestic savings?

A to B

(Figure: Fiscal Policy II) Suppose that this economy is in equilibrium at E1. If there is a decrease in government transfers:

AD1 will shift to the left, causing a decrease in the price level and a decrease in real GDP.

(Figure: Fiscal Policy I) Suppose that this economy is in equilibrium at E1. If there is an increase in government purchases:

AD1 will shift to the right, causing an increase in the price level and an increase in real GDP

(Figure: Fiscal Policy I) Suppose that this economy is in equilibrium at E2. If there is a decrease in government purchases:

AD2 will shift to the AD2 will shift to the left, causing a decrease in the price level and a decrease in the real GDP.

(Figure: Fiscal Policy II) Suppose that this economy is in equilibrium at E2. If there is a decrease in government transfers:

AD2 will shift to the left, causing a decrease in the price level and a decrease in the real GDP.

Which of the following situations is likely to lead to an increase in discouraged workers

Availability of jobs falls

Where T is the value of tax revenues and G is government purchases of goods and services, in the basic equation of national income accounting, the government directly controls _____ and influences ______.

G; C and I

(Figure: The Effect of a Minimum Wage) Suppose the labor market is in equilibrium at E when the government imposes a minimum wage of WF. Structural unemployment will equal:

QS - QD.

(Figure: Short-Run Equilibrium) The accompanying graph reflects a short-run inflationary gap. According to the labeling on the graph, the size of the inflationary gap is equal to:

Y1 - YP.

If the Fed increases the quantity of money in circulation, interest rates ________, investment ____________, and the aggregate demand curve shifts to the ________.

decrease; increase; right

The Great Depression was caused by _______ shocks, and the recession of 1979-1982 was caused by ______ shocks.

demand; supply

A change in taxes or a change in government transfers affects consumption through a change in:

disposable income

When intermediate goods are included in the GDP calculation, it is

double counting

Figure: Inflationary and Recessionary Gaps) The intersection of the short-run aggregate supply curve with aggregate demand in panel (a) indicates:

economy in a recessionary gap

If nominal GDP increases from one year to the next:

either output or prices or both must have risen from one year to the next

In general, expansions are characterized by

falling unemployment

In the long run, wages and prices are considered to be

flexible

Unemployment that is due to the time workers spend in job search is considered

frictional

An example of structural unemployment is a(n):

geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions

consumer spending will rise if

government transfer rise

(Figure: Aggregate Supply) At point F, potential output is _____ than actual output and unemployment is _____.

greater than; high

(Figure: Inflationary and Recessionary Gaps) At E3, the economy:

has an inflationary gap

(Figure: Inflationary and Recessionary Gaps) A movement from AD3 to AD1 could be caused by

higher tax rates

Which of the following would shift the production function upward

improvement in technology

The long run in macroeconomic analysis is a period:

in which nominal wages are flexible.

a decrease in energy prices will

increase short run aggregate supply

Generous unemployment benefits are likely to

increase the unemployment rate

An increase in aggregate demand will generate _______ in real GDP and _______ in the price level in the short run

increase; increase

An increase in investment leads to _______ in the price level and _______ in real GDP in the short run

increase; increase

According to the wealth effect, when prices decrease, the purchasing power of assets ________ and consumer spending___________.

increases; increases

Stagflation is a combination of _________ unemployment and _________ inflation

increasing; decreasing

Suppose the economy is in long-run macroeconomic equilibrium and aggregate demand increases. As the economy moves to short-run macroeconomic equilibrium, there is:

inflationary gap with low unemployment

If the economy is at equilibrium above potential output, there is a(n) _________ gap, and ______ fiscal policy is appropriate.

inflationary; contractionary

Government purchases of goods and services differ from changes in taxes and transfer payments because government purchasing of goods and services:

influences aggregate demand directly, while changing taxes and transfer payments influence aggregate demand indirectly.

The interest rate effect is the tendency for changes in the price level to affect

interest rates and thus the quantity of investment and consumption demanded

The East Asian countries have exhibited tremendous economic growth during the past 40 years because of all of the following except

intervening governments with lots of regulations

Long-run growth is sustainable if:

it can continue in the face of limited natural resources and the impact of growth on the environment

When inflation rises quickly

lenders will be hurt and borrowers will benefit

If the marginal propensity to consume is 0.9, then the tax multiplier will be:

less than 10

When hyperinflation forces Pedro to change the price stickers on the books in his bookstore very frequently to keep up with the aggregate price level, economists say that Pedro has a:

menu cost

Inflation can be measured by

percentage change in the consumer price index

The federal government's largest source of tax revenue is:

personal income and corporate profit taxes

The largest source of federal tax revenues is:

personal income taxes

Which of the following calculations is used to measure changes in the prices that firms pay for goods and services

producer price index

If money income remains the same while the average price level doubles

real income will fall

(Figure: Short- and Long-Run Equilibrium) If the economy is at equilibrium at E1, it is in a(n):

recessionary gap

If the economy is at equilibrium below potential output, there is a(n) ______ gap, and_______ fiscal policy is appropriate.

recessionary; expansionary

A negative short-run supply shock ___________ aggregate output and _________ the aggregate price level.

reduces; increases

(Figure: Inflationary and Recessionary Gaps) The level of income associated with Y1 in panel (b):

reveals an inflationary gap compared with YP.

In the long run (as the economy self-corrects), an increase in aggregate demand will cause the price level to _______ and potential output to _______ .

rise; remain stable

According to the aggregate demand curve, when the aggregate price level _________, the quantity of aggregate output _________.

rises; demanded falls

A decrease in aggregate demand is seen as a(n) ______________ the aggregate demand curve.

shift to the left in

Diminishing returns to physical capital implies that when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to

smaller increase in productivity

In the short run, wages and some prices are considered to be

sticky

Last month Brent lost his job at the auto parts factory because his factory, like many others, relocated to Asia. Brent has been looking for similar factory jobs in his town but has found no openings. Brent is best classified as

structurally unemployed

For developed countries, which of the following would be considered the most important driver of productivity growth

technological process

Government payments to households for which no good or service is provided in return are called

transfer payments

A person who has no job but is looking for one is

unemployed and part of the labor force

A worker classified as frictionally unemployed is

unemployed while looking for a job that demands his or her skills

GDP measures the

value of the final goods and services produced within the borders of a country during a given period

(Figure: Short-Run Equilibrium) If the economy is at equilibrium at Y1 and P1, the government should use __________ fiscal policy to shift the aggregate demand curve to the ________.

contractionary; left

(Figure: Shift of the Aggregate Demand Curve) A movement from point C on AD2 to point A on AD1 may have been the result of:

decrease in investment due to pessimistic GDP forecasts

(Figure: Short-Run Equilibrium) The accompanying graph shows the current short-run equilibrium in the economy. Appropriate fiscal policy action in this situation would be a(n):

decrease in transfer payments

Which of the following factors cannot shift the aggregate demand curve?

changes in price level

(Figure: Aggregate Supply) If the economy is at point E:

actual output is more than potential output

raising taxes shifts the

aggregate demand curve to the left

(Figure: Macroeconomic Equilibrium) Line 1 refers to _____, line 2 refers to _____, and line 3 refers to _____.

aggregate demand; long-run aggregate supply; short-run aggregate supply

(Figure: Inflationary and Recessionary Gaps) A movement from AD1 to AD3 could be caused by:

all of the answers are correct

Which of the following is an example of someone who is cyclically unemployed

an autoworker who is laid off because of a decline in sales caused by a recession

Ireland's recent economic growth and improving living standard are due primarily to

an excellent physical and human infrastructure, including a good education system, airports, telecommunications, and shipping facilities

(Figure: Shift of the Aggregate Demand Curve) A movement from point B on AD1 to point E on AD2 could have been the result of:

an increase in consumer optimism.

To be counted as unemployed, one must

be out of work and be actively looking for a job

Economists mostly agree that the problem of climate change should involve government action in the form of market-based incentives such as

carbon tax or a cap and trade system

Which of the following is not a method of fiscal policy?

changes in money supply