Exam 1

If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about

5.56%

Which transaction is included in the nation's gross domestic product?

A college student buys a pizza and has it delivered to her dorm room

Which item would NOT be included in this year's GDP?

the purchase of your neighbor's house, which was built in 2010

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is

14.29%

The price measure MOST widely used to determine the inflation rate in the United States is the _____

consumer price index

Menu costs of inflation are the

costs associated with businesses changing prices

The total income of households after taxes and government transfers is called

disposable income

In general, expansions are characterized by

falling unemployment

GDP is the total dollar value of all

final goods and services produced in the economy in a given period

A nation's exports minus its imports

is net exports

A price index

is used to measure the cost of a market basket across different years

The real interest rate is the nominal interest rate _____

less the rate of inflation

The rate of unemployment is found by dividing the

number of people not working but seeking work by the sum of the number of people not working but seeking work and the number of people employed

The unemployment rate is the

percent of the labor force that is unemployed

The producer price index is often regarded as a warning sign of inflation because

prices of inputs will ultimately be reflected in prices of final products

Which item would NOT be included in GDP for 2019?

your purchase of your neighbor's 2015 Toyota

When the price level increases and incomes remain constant, _____

real income decreases

In the circular-flow model, households

receive transfer payments from the government

Which equation breaks GDP down into the four sources of aggregate spending?

GDP = C + I + G + X - IM

The value of _____ is counted in GDP

a new car sold by a dealer

Income divided by the price level is _____ income

real

If the wage rate is $40 per hour, and the price level is 2, then the real wage is _____ per hour

$20

Consider an economy that produces only smartphones and laptops. Last year, 10 smartphones were sold at $800 each, and 5 laptops were sold at $1,000 each, while this year, 15 smartphones were sold at $900 each, and 10 laptops were sold at $1,100 each. Real GDP this year, using last year as a base year, is

$22,000

If, during 2019, the Republic of Sildavia recorded a GDP of $75 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2019 in Sildavia were

$46 billion

Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be

$630

If 99 million people are working, and 1 million are unemployed but actively seeking work, then the unemployment rate is _____%

1

Suppose that banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____%, and the real interest rate is _____%

9; 6

Which statement about gross domestic product is FALSE

It is the total output of all final and intermediate goods and services

Which statement is TRUE

The labor force is the total number of people working plus those who are unemployed

If the dollar amount of nominal GDP decreases, then it is possible that ____

aggregate output decreases by more than prices

When inflation rises unexpectedly, borrowers will _____, and lenders will _____

benefit; be hurt

Unit-of-account costs of inflation are the

costs associated with money becoming a less reliable unit of measurement

Deflation is a

decreasing aggregate price level

Shoe-leather costs are the

increased cost of transactions due to inflation

An INCREASE in the number of discouraged workers tends to

lower the official unemployment rate

In official unemployment statistics, discouraged workers are

not included in the labor force

The scale MOST often used to compare economic performance in other years is

real GDP

Real per capita GDP is

real GDP divided by the population

If the price level and nominal GDP both doubled, then real GDP would:

remain unchanged

A survey reveals that, on a small island, initially, 1,000 people have jobs, 200 people are unemployed but are looking for jobs, and 200 people are neither working nor looking for work. Suppose that 100 of the 200 people who weren't looking for work now begin looking for work and that half of the new entrants find a job. The unemployment rate

rises to 19.2%

A survey reveals that, on a small island, initially, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for jobs. Suppose that 10 of the 30 people who weren't working or looking for work now begin looking for work. There are now 20 people without jobs but looking for work and 40 people working. The unemployment rate

rises to 33.3%

In the circular-flow diagram, firms

sell goods and services

The inflation or deflation rate is

the change in a price index divided by the initial value of the index

The price index in the current year is the cost of the market basket in ____ year divided by the cost of the market basket in ____ year times 100

the current; the base

The MOST important use of GDP is as a measure of

the size of the economy