Econ MT2
the value of investments in the stock and bond markets
Which of the following is NOT a concern regarding GDP as a measure of economic activity?
failure to include exports and imports
Which of the following is NOT a problem in using GDP to measure standard of living?
cultural differences
Which of the following is NOT a reason unemployment rates differ so much within the United States?
desktop computers in the workplace
Which of the following is NOT an example of infrastructure in the United States?
350
(Table) According to the table, what is the labor force of this economy? Population 500 Number employed 300 Number unemployed 50
supply to shift to the right.
A decrease in regulation would cause aggregate:
the depreciation of the dollar
An increase in aggregate demand can be caused by:
U.S. or foreign citizens; U.S. citizens
Gross domestic product measures the output produced by ____________________ using resources in this country, while gross national product measures output produced by resources supplied by ______________.
500,000
If output equals A*(5K + 2L), what is output if A equals 2,000, capital equals 10, and labor equals 100?
The rate of inflation is four times as large in Merryland as in Berryland.
In 2009, a market basket of goods and services cost $100 in Merryland; the same basket cost $200 in Berryland. In 2010, the cost in Merryland was $150 and in Berryland it was $225. Based on that information, which of the following statements is true?
always equal to 100.
The GDP deflator for the base year is:
imports.
The GDP deflator is an index that includes prices of all but:
high in rich countries.
The capital-to-labor ratio is:
A
The following table shows data for four countries. Country Workers Capital Stock A 100 $4,000 B 50 $500 C 200 $1,000 D 150 $150 The table shows that the country with the most productive workers is:
skills, knowledge, and quality of workers.
Human capital refers to:
20 years.
If the growth rate in an economy is 3.5%, then its GDP will double in about:
the Bureau of Economic Analysis.
In the United States, real GDP is measured by:
innovative dynamism of capitalism.
Schumpeter's term creative destruction describes the:
121.4.
Suppose the market basket of goods and services cost $3,500 in 1996 but today costs $4,250. Using 1996 as the base year, the consumer price index for today is:
$55,000.
The U.S. median household income in 2013 was about:
personal consumption expenditures.
The expenditure category that accounts for the largest share of GDP is:
are hurt by inflation because their purchasing power drops.
Retirees and creditors:
Taxes
______ are components of consumer spending that affect aggregate demand.
occurs if cyclical unemployment is zero.
Full employment:
increases; increases
A falling aggregate price level ____ demand for a country's exports and therefore _____ output demanded.
-$35
(Table) According to the table, what is the value of this country's net exports? Personal consumption expenditures $900 Personal taxes $180 Government expenditures $300 Exports $40 Imports $75 Interest income $60 Depreciation $50 Gross private domestic investment $200
purchased by businesses.
A simple circular flow diagram shows that the factors of production are:
0.625%.
If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was:
U.S. imports rise.
If the U.S. aggregate price level rises:
short-run; long-run.
Refer to the production possibilities frontiers below. Panel A illustrates _______ economic growth and Panel B illustrates _______ economic growth.
is upward sloping because some costs are slow to rise as output expands.
The short-run aggregate supply curve:
growing your own food in a vegetable garden
Which of the following activities is an example of a nonmarket transaction?
It is largely unmeasured.
Which of the following describes the informal economy?
an increased money supply
Which of the following does NOT increase productivity?
falling interest rates
Which of the following events causes an increase in aggregate demand?
researching automated production techniques
Which of the following is NOT an investment in human capital?
an increase in business inventories
Which of the following is included in gross private domestic investment?
The CPI quickly includes new products in its baskets.
Which of the following statements does NOT describe a problem in measuring the consumer price index (CPI)?
The natural rate of unemployment is the level at which inflationary pressures in the economy are at their maximum.
Which of the following statements is INCORRECT?
Discouraged workers are considered underemployed.
Which of the following statements is NOT correct?
Payments made by Medicaid and Medicare are not included.
Which of the following statements represents a problem with accurately measuring the price of health care?
Disinflation
Which of the following terms describes a situation in which there is a reduction in the rate of inflation from 4% to 3% per year?
increased investment in human capital
Which of the following will shift the aggregate supply curve to the right?
the value of time spent learning how to prepare your personal income tax return
Which of the following would NOT be included in the GDP accounts?
It does a better job in approximating a cost-of-living index than the CPI.
Which statement about chained consumer price index for urban consumers (C-CPI-U) is TRUE?
It is likely to occur when obstacles preventing resources from being used are put in place.
Which statement about short-run economic growth is NOT true?
50.9
(Table) According to the table, the GDP deflator for 2012 is approximately: 2012 2013 2014 Nominal GDP (billions of $) $2,291 $8,511 Real GDP (billions of $) $4,500 $5,865 GDP Deflator 86.1 112.7
legal protection of ideas and technologies gives people who innovate the ability to protect their work.
A legal system that enforces property rights is important to economic growth because:
spending; income
GDP can be found either by adding up all of the __________ or all of the __________ in the economy.
It is fairly accurate for small growth rates.
Which statement about the Rule of 70 is TRUE?
-$505.4 billion
(Table) According to the table, net exports of goods and services are equal to: (GDP Expenditures for 2010 Expenditure Billions Personal consumption $10,353.5 Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2)
might not fully reflect the standard of living of the typical citizen.
A criticism of GDP per capita is that it:
shows the output that is produced using different combinations of inputs combined with existing technology.
A production function:
enhancing physical and human capital.
Government funding of Los Alamos National Labs is an example of government acting in its role to promote economic growth by:
the improvements to labor capabilities from training, education, and apprenticeship programs.
Human capital includes:
technology
Increases in ___________ often lead to economic growth.
a country's public capital.
Infrastructure is:
it increases labor productivity.
Investment in human capital is important because:
the money supply.
Labor productivity is NOT a major determinant of:
when the economy is in a trough.
The National Bureau of Economic Research determines that a recession is over:
ensuring a stable legal system.
The U.S. Patent Office grants Rene a patent for a new method of waterproofing outdoor gear. It is acting in its role to promote economic growth by:
Great Depression.
The event that stimulated the U.S. government's commitment to tracking the economy's health through a national income accounting system was the:
enhancing physical and human capital.
The government decides to give tax-exempt status to a new organization whose mission is to award college scholarships to members of the armed forces. In doing so, the government is acting in its role to promote economic growth by:
a country's degree of freedom is related to the level of economic growth.
The historical evidence shows that:
track changes in income distribution.
The national income and product accounts do all of the following EXCEPT:
price indexes for approximately 500 mining and manufacturing industries.
The producer price index contains:
household wealth.
When home values collapsed in the period that began in 2008, it reduced many Americans':
cyclical unemployment is zero.
When the economy is operating at full employment:
a change in the price level
Which of the following would NOT cause a shift in the aggregate demand curve?
mowing your own lawn
Which of the following values is an example of a nonmarket transaction NOT included in the national income and product accounts?
a decrease in real interest rates
Which of the following would NOT cause a shift in the short-run aggregate supply curve?
a reduction in the capital-to-labor ratio
Which one of the following is NOT one of the reasons for the phenomenal growth of the U.S. economy over the past century?
peak
Which phase of the business cycle occurs immediately after a recovery?
The producer price index
_____ is a measure of the changes in the average prices received by domestic producers for their output.
Cost-push inflation
_____ occurs when a negative supply shock hits the economy, shifting the short-run aggregate supply curve leftward.
Cyclical
_____ unemployment is the result of changes in the business cycle.
Advances in technology
_____ will most likely increase the economy's long-run aggregate supply.
aggregate demand curve to the right.
A solution to the simultaneous emergence of deflation and unemployment is to use policies that shift the:
waves of innovations
According to Joseph Schumpeter, what is the driving force behind business cycles?
higher interest rate
According to the classical model, which of the following developments does NOT contribute to economic growth?
increase in consumption
According to the text, what brought us out of the Great Depression?
debtors are hurt during inflationary times because the amount they pay creditors back increases.
All of the following are true for inflation EXCEPT that:
equilibrium wages.
All of the following types of wages can cause unemployment EXCEPT:
been cut in half.
Between 1990 and 2010, the number of people in the world living in poverty has:
left of the short-run aggregate supply curve.
Cost-push inflation occurs because of a shift to the:
aggregate price level.
In the aggregate demand/aggregate supply (AD/AS) model, the vertical axis is labeled:
income and expenditures.
In the national income and product accounts system the two main approaches to measuring the size of the economy are:
loans are very difficult to obtain.
One of the reasons that property rights are important for economic development is that without legal ownership:
10
One reasonably objective measure for infrastructure is the Index of Economic Freedom, which incorporates information about freedoms in _____ categories.
frictionally
Unemployed workers who voluntarily quit their job to search for a better position are categorized as _____________ unemployed.
enhancing physical and human capital.
Use of tax receipts to modernize the air traffic control system promotes economic growth by:
net exports
What component of U.S. GDP is usually negative in boom years?
bacon purchased at a grocery store
What is an example of a final good?
a shift to the right of the aggregate demand curve
What would cause the price level to rise and employment to increase?
GDP falls as a result of this change.
When Mr. Wilson worked full time, he paid a cleaning service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP?
Walmart stores
Which is NOT an example of infrastructure?
acquisition of obsolete skills
Which of the following items is NOT an example of investment in human capital?
$50 consultation on the phone with a psychic adviser
Which of the following items would be included in the GDP accounts?
increasing the level of consumption spending
Which of the following occurrences is NOT a source of productivity growth?
Tiffany, who is going on interviews, hoping to get her first job
Which of the following persons is considered to be unemployed?
newly drained swamp
Which of the following resources is an example of infrastructure?
Wealthier countries tend to value environmental quality more than developing countries.
Which of the following statements about environmental quality and economic activity is TRUE?
rowing from foreign governments must take place.
Which of the following statements about stopping hyperinflation is NOT correct?
the economy slows down and workers are laid off.
Cyclical unemployment occurs when:
mistaken. Adjusting for price changes, his salary is less than his dad's salary.
Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 and the year his dad started work it was 110.8, Dave is:
1960s for the United States and from 1985 to 1995 for Japan.
Demand-pull inflation scenarios took place in the:
limited labor supplies but lots of capital.
Developed nations tend to have:
catch-up effect.
Developing countries can achieve higher productivity per unit of capital because they can use technologies developed by other countries. This is known as the:
structural.
During the 1970s, when handheld calculators became popular and replaced slide rules in performing computations, workers in the slide rule industry lost their jobs. These workers' unemployment status is:
real GDP per capita.
Economic growth is most commonly measured by:
personal consumption expenditure.
Expenditures by individuals for durable goods, nondurable goods, and services is known as:
$7,692 billion.
(Table) According to the table, nominal GDP for 2013 is approximately: 2012 2013 2014 Nominal GDP (billions of $) 7,280 8,000 Real GDP (billions of $) 7,280 7,425 GDP deflator 103.6 106.1
expansion
An economy has historically grown at a rate of 2.25%. Currently, this economy is growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, and the monetary authorities are concerned that inflation may increase. This economy is probably in the _____________ stage of the business cycle.
patent laws.
An example of intangible infrastructure is:
fell by about 1%.
Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:
higher; higher
As a rule, the more capital employed with workers, the ________ their productivity and the ________ their earnings.
the periodic emergence of innovation boosts the economy.
Creative destruction occurs when:
the standard of living in the country has declined.
If a country's population increases at a higher rate than the growth in its real GDP:
is at full employment.
If an economy is on the vertical portion of the aggregate supply curve, then it:
4.7%.
If an economy's GDP will double in 15 years, then its growth rate must be about:
GDP rises as a result of this change.
If in the past you have always painted your own house but now you hire a painting contractor to do the work, what is the effect on GDP?
deflation.
If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing:
Jennifer is losing purchasing power by 2%.
Jennifer just got news that she is getting a 5% raise. However, the Bureau of Labor Statistics just reported that prices are rising by 7%.
$44,000.
Jill has an escalator clause in her labor contract that gives her a raise commensurate with the consumer price index (CPI). Last year she earned $40,000 and the CPI was 100. If the CPI this year is 110, her new salary is:
the ability to use physical resources in creative ways to produce goods and services.
Labor includes all of the following factors EXCEPT:
8.7%
Last year the consumer price index (CPI) was 115 and this year's CPI is 125. The rate of inflation is:
$25,000; $23,000; $18,000
Last year, Marian earned $25,000, paid $2,000 in taxes, and saved $5,000. Marian's personal income is ______, disposable personal income is ______, and consumption spending is ______.
employed.
Lexie works Monday to Friday from 4 P.M. to 6 P.M. in the after-school program at a local elementary school. She began looking for a full-time job last week and has already scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is:
$11,512.6 billion
Nominal GDP in 2006 was $13,458.2 billion. The GDP deflator uses 2000 as the base year. In 2006, the GDP deflator was 116.9. What was the real GDP for 2006?
$13,241.7 billion.
Nominal GDP in the first quarter of 2010 was $14,592.3 billion. The GDP deflator was 110.2 in the first quarter of 2010. Real GDP for the first quarter of 2010 was equal to:
facilitates the movement of capital from savings to investment.
One way a stable financial system supports economic growth is that it:
an intangible resource that is part of the infrastructure.
Protection of property rights is:
Robert is not part of the labor force.
Robert lost his job and now takes care of the children while his wife works. Robert has decided he likes his daddy duties. Robert would take a job similar to the one he lost if it was offered, but he is not actively seeking work. How is Robert categorized in the unemployment figures?
a drop in aggregate demand.
Simultaneous recession and deflation can be explained by:
The impact cannot be determined from the information given.
Suppose a booming stock market encourages consumption spending to rise dramatically. What would be the most likely long-run impact?
125.
Suppose the Bureau of Labor Statistics collects the data presented in the following table: Year Cost of Basket 2010 $200 2011 $230 2012 $250 If 2010 is the base year, then the consumer price index for 2012 is:
the economy has probably moved into a recession.
Suppose the Federal Reserve Bank of Chicago's National Activity Index drops to -0.83 this month after being above +0.36 for the previous three months. This movement in the index indicates that:
decrease in aggregate demand.
Suppose the government raises income taxes, so consumers have less take-home pay. This policy action will cause a(n):
short-run fluctuations in macroeconomic activity.
The "business cycle" refers to:
international exchange.
The Index of Economic Freedom uses all of the following categories EXCEPT:
measures the quality of a country's intangible infrastructure.
The Index of Economic Freedom:
Dow Jones Industrial Index
The _____ is a weighted average of 85 indicators of aggregate economic performance, designed to pinpoint signs of a recession in a reasonable time frame.
inhibits investment because it is difficult to use capital as collateral.
The absence of well-defined and enforceable property rights often:
those working part time for economic reasons.
The biggest group missing from the reported unemployment rate is:
slow down over time.
The catch-up effect tends to:
some function of available labor or capital.
The classical form of the production function states that output is determined by:
keeping the economy on a steady, low-inflationary growth path.
The costs of cyclical unemployment can be minimized by:
high; more
The primary reason the U.S. standard of living is relatively _____ is that U.S. workers produce _____ than workers throughout most of the rest of the world.
many input prices are slow to change in the short run.
The short-run aggregate supply curve is positively sloped because:
the government.
The single largest consumer of goods and services in the United States is:
demand-pull
The situation when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises is known as ________ inflation.
cyclical unemployment is zero.
When the economy is operating at the natural rate of unemployment:
ensuring a stable legal system.
When the government enforces contracts between two parties, it is acting in its role to promote economic growth by:
changes in input prices, taxes, and business and inflationary expectations
Which are determinants of short-run aggregate supply?
unanticipated high inflation
Which is NOT a characteristic of a stable financial system?
It is not reported frequently enough to provide a good picture of the state of the economy.
Which is NOT a criticism of the official unemployment rate?
holding job fairs
Which of the following actions would reduce frictional unemployment?
The NBER is sometimes manipulated by the federal government.
Which of the following is NOT a criticism of the dating of business cycles by the National Bureau of Economic Research (NBER)?
The advent of social media raised costs for firms, which now must invest in Web pages and information gathering technology to stay competitive.
Which of the following statements about the role of social media in promoting economic growth is FALSE?
Negative values mean the economy is growing more slowly than its long-term trend.
Which of the following statements is TRUE about the National Activity Index?
Frictional unemployment is generally short-term, whereas structural unemployment is often long-term.
Which of the following statements regarding the types of unemployment is TRUE?