EXAM 1 ECON 2201
39) To reduce the bias in the consumer price index, the Bureau of Labor Statistics
D) updates the market basket every two years, rather than every 10 years.
51) Which of the following would you expect to result in faster economic growth?
D) the invention of new computers that increase labor productivity
25) The unemployment rate is
D) the percentage of the labor force that is unemployed.
20) If an American firm opens a production facility in India, the total value of the production will be included in the
gross domestic product of India.
3) Gross domestic product is calculated by summing up
the total market value of final goods and services produced in the economy during a period of time.
18) If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator (GDP price index) is:
125
15) Which of the following statements is true? A) GDP accounting rules do not adjust for production that pollutes the economy. B) GDP growth distributes income equally to people in the economy. C) Household production is counted in GDP as it amounts to real production. D) A decrease in the crime rate increases GDP as people will spend more on security.
A
24) Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?
A) discouraged workers
40) The real wage equals the nominal wage ________ the CPI, all times 100.
A) divided by
14) Gross domestic product understates the total production of final goods and services because of the omission of
A) household production.
49) Potential GDP is defined as
A) the level of GDP attained when all firms are producing at capacity.
44) Suppose that in 2016, all prices in the economy double and that all wages and salaries also double. In 2016 you
B) are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same.
50) The period between a business cycle peak and a business cycle trough is called
D) recession.
12) Which of the following would increase gross private domestic investment in an economy? A) an increase in the number of workers Apple hires B) an increase in the number of highway construction projects the government is funding C) an increase in the level of Apple's inventory D) an increase in the shares of Apple stock households own
C) an increase in the level of Apple's inventory
52) Which of the following policies is designed specifically to directly promote technological change in an economy?
C) government subsidization of research and development
30) According to the text, economists consider full employment to occur when
C) the unemployment rate consists of only frictional and structural unemployment.
43) Deflation occurs when
C) there is a decline in the price level.
6) The purchase of a new automobile is included in
consumption expenditures on durable goods.
7) To calculate GDP by the expenditure method, one must add
consumption spending, investment spending, government spending, and net exports.
4) In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services.
equals
11) In the circular flow diagram, ________ supply the factors of production, and ________ goods and services.
households; buy
1) During a business cycle expansion, total production ________ and total employment ________.
increases; increases
8) The purchase of a new house is included in
investment expenditures.
42) The real interest rate equals the nominal interest rate ________ the inflation rate.
minus
19) Gross national product, GNP, of the United States is the market value of all final goods and services
produced by citizens of the United States anywhere in the world.
2) Suppose in 2016, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2016?
the value of the services of the real estate agent
