exam 2 study questions calhoun
Suppose Harry's Pizza uses $0.25 worth of pizza flour; $0.01 worth of pizza sauce; $0.80 worth of pepperoni, sausage, and spices; and $0.50 worth of mozzarella cheese to make one pizza. If it sells a pizza for $3, then the total value added for one pizza is:
$1.44
The table below shows the national-income accounts of a country. Using the expenditure approach, the gross domestic product of the country equals:
$10,100 million.
The table below shows the national-income accounts of Berylia. Given the information, the gross domestic product of Berylia equals
$15,350
If the GDP deflator of a country increased from 100 in 2005 to 150 in 2015 and the nominal GDP of the country in 2015 was $7,000, then the country's real GDP for 2015 in terms of 2005 dollars was approximately equal to:
$4,666.70.
Cromption Inc. produces motorbike helmets and is a major supplier of helmets in South Watermala. It uses raw materials worth $48,500 and pays wages and salaries worth $58,800. If the total revenue of the firm is $100,000, then the value added by Cromption Inc. to the gross domestic product (GDP) of South Watermala equals:
$51,500
Identify the correct statement about a country's gross domestic product (GDP).
...
In Radisova, the labor force participation rate is 30 percent. Suppose the total civilian population aged 16 years and above is 100 million and the number of employed workers is 20 million. The number of unemployed people in the country is:
10 million.
The table below shows the national-income accounts of a country. Using the resource cost-income approach, the gross domestic product of the country equals:
10,100 million
In the country of Corinthia, 100 million people aged 16 years and above are either employed or unemployed. The number of people searching for a job is 20 million. The unemployment rate in Corinthia is:
20 percent.
In Marfur, the number of people aged 16 years and above is 25 million. According to a recent survey, 5 million people are unemployed, while 2 million people are retired workers. The unemployment rate in Marfur is approximately:
22 percent.
In Vanadia, 120 million people aged 16 years and above are either employed or unemployed. The number of people working is 90 million. The number of unemployed people is:
30 million.
If the GDP deflator in 2015 was 134.1 and 100 in 2014, the annual rate of inflation in 2015 was:
34.1 percent.
Suppose the labor force participation rate is 20 percent in Cadmia. The total civilian population that is working is 50 million and the number of people who are out of work but are actively looking for work is 20 million. The total population of Cadmia is:
350 million.
Suppose the adult population aged 16 years and above who are either employed or unemployed in a country is 100 million. Of this population, 95 million are working. The unemployment rate of the country is:
5 percent.
In a country, the total population aged 16 years and above is 300 million. The number of people who are working is 120 million, and the number of people who are out of work but are actively looking for work is 30 million. The labor force participation rate is:
50 percent.
Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The number of people in the civilian labor force is
70
Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The number of people in the civilian labor force is
70.
Suppose the population of a hypothetical country is 150 million. Of this population, 120 million people are employed as civilians. The employment/population ratio is:
80 percent.
The table below shows the expenditures of Quorta. Given the information, the gross domestic product of Quorta equals:
8200
Suppose the adult population aged 16 years and above of a hypothetical country is 120 million. Out of 120 million, 75 million people work and 10 million people are looking for work in the country. The total labor force of the country is:
85 million.
Which of the following is most likely to be an effect of a decrease in the price level in the United States?
A Taiwanese citizen buying an American car
Which of the following would increase the GDP of the United States?
A resident of Germany buys a software program from a company in Washington.
Which of the following transactions is most likely to be included in the U.S. gross domestic product (GDP)?
A stock broker's commission on the sale of U.S. securities
Which of the following is an example of frictional unemployment?
A student looking for a job after completing college
During a recession, which of the following will be true?
Actual GDP will be lower than potential GDP.
Which of the following about potential GDP is true?
Actual output may be either above or below potential output depending on how fully resources are utilized.
Which of the following would be the best choice for a government that wishes to reduce the natural rate of unemployment?
Adopting measures that encourage new businesses to start and expand
Which of the following is most likely to increase Japan's gross domestic product (GDP)?
An American firm outsourcing some of its production facilities to Japan
Which of the following is included in the gross national product of the U.S.?
An American photographer receiving a paycheck for exhibiting his photographs in Singapore
Which of the following transactions is most likely to increase the U.S. gross domestic product (GDP)?
An American selling a pizza to a Mexican in the U.S.
Which of the following is true of an economy in the long run?
An increase in demand and higher price level will not expand quantity supplied.
Which of the following is a result of a reduction in interest rates?
An increase in the demand for goods and services available on credit
Which of the following is most likely to be a result of a lower price level in an economy?
An increase in the purchases of automobiles and consumer durables
Which of the following is likely to increase a country's gross domestic product (GDP)?
An individual receiving an annual performance bonus of $5,000
Which of the following is a reason for the short-run aggregate supply curve to be upward sloping?
An unanticipated increase in the price level, increasing the profitability of firms in the short run
In the country of Argonia, the adult (aged 16 and above) population is 200 million. Of this population, 150 million are employed and 30 million are unemployed. Which of the following statements is true?
Argonia's labor force is 180 million.
Which of the following would count as an investment expenditure in national income accounting?
Boeing purchases a new metal stretching machine used to produce airplane wings.
Which of the following is likely to happen when the actual rate of inflation is higher than the expected rate of inflation?
Borrowers will tend to gain at the expense of lenders.
Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?
Both your nominal and real wages increased.
Which of the following is true of a resource market?
Businesses demand labor and other resources for the production of goods and services.
Which of the following is likely to happen in the short run?
Businesses will be unable to adjust some prices when unexpected changes occur in price levels.
The image below shows the fluctuations in the level of economic activity in the fictitious country of Glassen. Glassen experiences an expansionary phase when the economy moves from point:
C to E.
Which of the following is most likely to have added to the U.S. gross domestic product (GDP) in 2015?
Chevrolet's production increasing by 30,000 cars in 2015
Identify the correct statement about net investment.
Countries with a large net investment rate will tend to grow more rapidly than those with a low rate of net investment.
Which of the following is likely to be true when the goods and services market in an economy is in long-run equilibrium?
Decision makers must have correctly anticipated the actual price level.
Which of the following is likely to be true when the price level in an economy increases more than was anticipated?
Employment will increase, and unemployment will decrease.
Which of the following would generate a supply of euros in exchange for dollars?
European demand for U.S. government bonds.
Which of the following is included in the calculation of real gross domestic product of an economy?
Final goods and services
Which of the following is true when an economy is in long-run equilibrium?
Firms must be earning a return equal to the opportunity cost of capital.
Which of the following is true of an economy characterized by full-employment output?
Full-employment output corresponds with the full employment of resources available in the economy.
Which of the following is true of unanticipated inflation?
Funds flow into speculative-type investments instead of more productive ones.
Identify the correct equation for the gross national product (GNP) of a nation.
GNP = National income + Depreciation + Indirect business taxes
A professor of economics gets a $100 a month raise. She figures that even with her new monthly salary she will be unable to buy as many goods and services as she could 12 months ago.
Her real salary has fallen and her nominal salary has risen.
Which of the following about inflation is true?
High and variable rates of inflation will be easy for decision makers to forecast accurately.
Which of the following is likely to increase the nominal value of the gross domestic product (GDP) of a country?
Higher prices
Which of the following is a leakage from the circular flow of income?
Imports
Who among the following is unemployed?
Steve, who is currently not working but has been searching for a job for the past three weeks
Which of the following will most likely occur during the contractionary phase of a business cycle?
The sales of most businesses decline, and the unemployment rate rises.
Which of the following is true of the loanable funds market?
The supply of funds arises from the household sector and the net inflow of capital from foreigners.
Which of the following is likely to happen when the price level is high in an economy?
The wealth of people holding money will be less.
Which of the following will be true when the foreign exchange market is in equilibrium and exports exceed imports?
There will be a net outflow of capital.
Which of the following is true of government purchases?
They are counted at their cost to taxpayers.
Which of the following is true of indirect business taxes?
They are imposed on the sale of a good.
Identify the correct statement about expenditures in the goods and services market.
They include household expenditures on consumption, business investment, government purchases, and net exports.
Identify the correct statement about government expenditures.
They overstate the value derived from an item when the value of the item to citizens is low relative to the tax cost of providing it.
A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,
U.S. investment and GDP increase, but German GDP is unaffected.
Which of the following about unemployment is true?
When actual GDP equals potential GDP, the actual unemployment rate will equal the economy's natural rate of unemployment.
Which of the following is true of high and variable rates of inflation?
When such rates are present, it will be difficult for people to accurately forecast next year's rate of inflation.
Which one of the following would be classified as employed?
a 17-year-old high school student who works a newspaper route six hours per week
Which of the following would be classified as unemployed?
a 20-year old looking for her first job
Suppose most businesses in Erbia are operating at full capacity and the real gross domestic product of the economy is also increasing rapidly. Erbia is experiencing:
a boom.
Which one of the following persons would be considered unemployed?
a construction worker who was laid off due to cold weather
Which of the following is most indicative of a recession?
a decline in real GDP
Since 2001, Bordunia's annual growth rate of real gross domestic product has averaged approximately 0 percent. For the past ten years, Bordunia has also experienced unusually high unemployment with many firms closing down. Therefore, it is likely that Bordunia is experiencing:
a depression.
Unanticipated inflation in an economy causes:
a distortion in relative prices in the economy.
A decrease in price level will raise the aggregate quantity demanded because:
a fall in the demand for money at the lower price level will reduce interest rates, which will encourage current consumption.
The image below shows the fluctuations in the level of economic activity in the fictitious country of Glassen. On the curve shown, Point C represents:
a recessionary trough.
An economic recession is characterized by:
a rise in the level of unemployment and a decline in real gross domestic product.
Which of the following would be classified as employed?
a worker who is in the midst of a two-week vacation from his regular job
When a country experiences recession, the:
actual gross domestic product of the country is less than its potential gross domestic product.
When the actual price level in an economy is lower than the expected price level revealed in long-term agreements, the:
actual rate of unemployment will exceed its natural rate.
The gross domestic product (GDP) measures the market value of:
all final goods and services that flow through a country's factories and shops each year.
Which of the following would be most likely to reduce the rate of unemployment?
an Internet job listing system that makes it easier to get information about job openings and available employees
Unanticipated inflation refers to:
an increase in the general level of prices in an economy that was not expected by most decision-makers.
If the dollar price of the English pound goes from $1.30 to $1.10, the dollar has
appreciated, and the English will find U.S. goods more expensive.
If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has
appreciated. Other things the same, the appreciation would make you more likely to travel to Mexico.
If the expected rate of inflation is zero, the real interest rate must
be equal to the money (nominal) interest rate.
The prices used to weigh the goods and services included in the gross domestic product reflect:
both the market value of the output and the income generated by the resources.
The demand for loanable funds arises from:
businesses financing investment projects and from government financing budget deficits.
Based on the expenditure approach, the major components of gross domestic product (GDP) are:
consumption expenditures, private domestic investment, government consumption and gross investment, and net exports to foreigners.
Recessionary business conditions and inadequate labor demand in an economy lead to:
cyclical unemployment in the economy.
A decrease in aggregate demand and the subsequent cutbacks in production lead to
cyclical unemployment.
Caren, a professional photographer for a magazine, loses her job during a recession in the economy. This is an example of:
cyclical unemployment.
Suppose workers at a local steel factory are laid off because of an economic downturn and, as a result, the demand for products made of steel has decreased. This would be an example of:
cyclical unemployment.
If a used car dealer purchases a used car for $3,000, makes repairs and refurbishes it, then sells it for $8,000, the
dealer contributes value added equal to $5,000, and consequently $5,000 is added to GDP.
The actual rate of unemployment will generally
decrease as an economy enters an economic boom period.
Other things being constant, an increase in the U.S. price level will result in a(n):
decrease in U.S. exports.
A lower price level in the U.S. economy is most likely to result in a(n):
decrease in the demand for money.
Inflation results in a(n):
decrease in the purchasing power of consumers.
The aggregate demand curve for an economy slopes downward because an increase in the price level will:
decrease net exports.
The recessionary phase of the business cycle is characterized by
decreasing real output and increasing unemployment.
At a price lower than the equilibrium price, quantity:
demanded exceeds quantity supplied.
Net investment is the:
difference between gross investment and depreciation.
Structural unemployment is a result of
difficulties in matching qualified workers with available jobs.
The actual rate of unemployment will generally
do both a and c; increase as an economy enters a recession. ; fall below the natural rate of unemployment during a recession.
The aggregate demand curve for an economy is:
downward sloping.
The demand curve for loanable funds is:
downward sloping.
Actual GDP will be below potential GDP
during a recession.
Frictional unemployment occurs in an economy because:
employers are not aware of all available workers and their qualifications.
Cyclical unemployment occurs when a(n):
engineer is laid off from his job because of a recession.
Crime currently affects the measurement of GDP such that
expenditures on police protection and detention centers contribute to GDP.
One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI
fails to account for the introduction of new goods.
People will spend more if the price level
falls because falling prices increase the real value of a dollar.
The use of government taxation and expenditures to achieve macroeconomic goals is called
fiscal policy.
Cyclical unemployment is primarily caused by
fluctuations in aggregate demand.
The business cycle refers to the:
fluctuations in the rate of output of an economy.
Many social networks provide information about job openings for workers with various skill sets and in different occupations. At the same time, employees also provide information about their education, skills, and experience in these social networks. Such interactions are likely to reduce:
frictional unemployment in an economy.
Ashley was being treated unfairly by her boss, so she stormed off the job and two days later found another position. For two days, Ashley experienced
frictional unemployment.
Clark was fired from his job due to a conflict with his boss. He immediately started looking for a job, but could find one only after 6 months. It can be said that Clark was:
frictionally unemployed for six months.
If Trevon voluntarily quits one job, possesses marketable skills, and expects to find a new job in a few weeks, then Trevon is considered
frictionally unemployed.
Which of the following would generally cause firms to expand output in the short run?
higher profit margins as the result of an unexpected increase in the prices of goods and services
The main cause of frictional unemployment in an economy is:
imperfect information between employees and employers.
The actual rate of unemployment will generally
increase as an economy enters a recession.
If Hernandes, a Mexican student, decides to extend his stay in Florida, it will most likely:
increase his demand for U.S. dollars.
An increase in the demand for loanable funds will result in a(n):
increase in real interest rate.
An increase in demand in the goods and services market will result in a(n):
increase in the demand for resources.
When an American buys a sculpture from Nairobi, it will most likely:
increase the demand for the Kenyan shilling.
A decrease in the sales of Lumina Technology's widgets increases its unsold stock of inventory at the end of the year. This is most likely to:
increase the firm's contribution to the gross domestic product of the country.
The aggregate demand curve for an economy slopes downward because a decrease in the price level will:
increase the purchasing power of money.
Other things constant, a decrease in resource prices will lead to
increased profits and an increase in short-run aggregate supply.
The natural rate of unemployment may increase when a country:
increases its unemployment benefits.
Nicole has just finished high school and started looking for her first job, but has not yet found one. As a result, the unemployment rate
increases, and the labor-force participation rate increases.
The expansionary phase of the business cycle is characterized by
increasing real output and declining unemployment.
In the context of aggregate supply, the long run is defined as the period during which
individuals have sufficient time to modify their behavior in response to price changes.
When an economy provides an attractive investment environment, an:
inflow of capital and a trade deficit are likely to occur.
In recent years, people have benefited from greater amounts of leisure time. This trend
is not accounted for in GDP.
The nominal (money) rate of interest
is the real rate of interest plus the inflationary premium.
The natural rate of unemployment
is the unemployment rate accompanying the economy's maximum sustainable output.
One of the factors that determine the sustainable potential output of an economy is:
its quantity of resources.
The resource market involves transactions dealing with
labor services, natural resources, and physical capital.
An increase in the resource prices in an economy will result in a(n):
leftward shift of the short-run aggregate supply curve.
During an economic boom period, the actual rate of unemployment will be
less than the natural rate of unemployment.
Interest rate is the price in the:
loanable funds market.
If the actual price level is lower than the expected price level reflected in long-term contracts,
many firms will find production less profitable than they had expected and will decrease the quantity of output supplied
In computing GDP, market prices are used to value final goods and services because
market prices reflect the values of goods and services to the buyer.
The gross domestic product reflects the:
market value of all final goods and services produced within a country during a specific period.
Potential output is the:
maximum sustainable output level consistent with the full employment of resources currently available in an economy.
The real rate of interest equals the
money rate of interest minus the expected inflation rate.
Current per capita real GDP may be an overstatement of per capita real GDP relative to earlier periods because:
more output is now produced in the market sector and less in the household sector.
Other things the same, a decrease in the price level makes the dollars people hold worth
more, so they are willing to spend more.
The sum of the payments made to households and the suppliers of other resources is equal to:
national income.
If there is surplus of loanable funds, then
neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.
If net exports are negative, then
net capital outflow is negative (indicating an outflow of capital), so American assets bought by foreigners are greater than foreign assets bought by Americans.
Depreciation is:
not a direct payment to a resource owner.
The distinguishing characteristics of business cycles are
periods of growth in real output followed by periods of decline.
The general shape of the aggregate supply curve of an economy is a reflection of changes in the:
price level prevailing in the economy.
Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is
priced at 30 percent more in Year X than in the base year.
If the price level in the current period is lower than what buyers and sellers anticipated,
profit margins will be unattractive, and firms will reduce output.
If resource prices are fixed and the product selling price rises, then
profits will increase.
Real GDP per person
provides more meaningful comparisons across time and countries than real GDP.
Excess supply:
puts a downward pressure on prices.
Excess demand:
puts an upward pressure on prices.
The real gross domestic product of a nation is a measure of the:
rate of output and the year-to-year changes in the output.
The amount of U.S. exports purchased by the rest of the world is primarily determined by
real disposable income in other nations
Which of the following equations is accurate?
real interest rate = money interest rate − inflationary premium
The market that coordinates the exchange of productive inputs between the household and business sectors is the
resource market.
The natural rate of unemployment
results from normal dynamic changes given the institutional arrangements of the economy.
An increase in the net investment in an economy results in a(n):
rightward shift of the economy's production possibility frontier.
In a dynamic economy under ideal conditions,
some unemployment would be present due to workers temporarily being out of work while changing jobs.
Suppose the labor-force participation rate of men is greater in Troy than in Sparta. This could be because the men of Troy
spend less time in school and have later and shorter retirements than men in Sparta.
Corporate profits are earned by:
stockholders.
Last year, a report published by the Environment Protection Committee showed that, across the fictitious country of Palladia, 40,000 deaths a year could be attributed to air pollution. As a result, the government implemented environmental regulations designed to improve air quality. These regulations led to a reduction in the demand for coal, causing many coal miners to lose their jobs. Unfortunately, many people who lost their jobs had skills that were ill-suited for employment in other industries. This implementation of environmental regulations led to:
structural unemployment in Palladia.
In Agraria, employment in corn manufacturing industries had fallen from over 5,000 workers in 1990 to about 1,500 in 1995. This change came about because of the adoption of new technologies, like tractors and ploughing machines, that replaced manual labor. These unemployed workers, whose skills were limited to this industry, found themselves in a position where their unemployment would be permanent unless they could develop new job skills. This is an example of:
structural unemployment.
Suppose a photographic film manufacturing company experiences a decrease in demand after the advent of digital cameras. After incurring a loss for several years, the company decides to shut down. The workers find themselves in a situation where their skills are obsolete in the current market. The only way these workers can find employment is if they develop new skills. This is an example of:
structural unemployment.
The net income of foreigners is equal to:
the income foreigners earn in the United States minus the income that Americans earn abroad.
The actions of borrowers and lenders are coordinated by
the interest rate in the loanable funds market.
The primary cause of frictional unemployment is
the lack of and cost of acquiring information about available job opportunities.
If equilibrium is present in the foreign exchange market and a nation is experiencing a trade surplus,
the nation must be experiencing a net capital outflow.
A decrease in the dollar price of foreign currency would cause
the nation's imports to increase and exports to decline.
The unemployment rate in an economy is:
the percentage of unemployed people in the labor force.
Full employment is defined as the level of employment in an economy that results when:
the rate of unemployment is "normal," considering both frictional and structural factors.
The long-run aggregate supply curve of an economy shows:
the real dollar value of domestic output produced.
A consequence of unanticipated inflation in an economy is that:
the risks of investing in a business increase.
National income is:
the sum of employee compensation, proprietors' income, rents, corporate profits, and interest Income.
In the short run, higher prices enhance producers' profits because:
their cost of production remains relatively constant.
Structural unemployment occurs in an economy because:
there are changes in the demand for certain skills.
GDP is not a perfect measure of welfare because it
treats a dollar spent on candy bars the same as a dollar spent on education
During periods when the inflation rate fluctuates widely,
uncertainty about changes in relative prices causes a decrease in economic efficiency
Xavier is on layoff from his assembly-line job in Detroit, and he expects to return in about four weeks. During this time, he is vacationing in Florida. The Bureau of Labor Statistics would classify Xavier as
unemployed
Isabella is on a temporary layoff from her factory job. If Isabella participates in the BLS survey, she will be classified as
unemployed and in the labor force.
If the labor force grows at a faster rate than the number employed, the
unemployment rate will rise.
The short-run aggregate supply curve of an economy is:
upward sloping.
GDP is a measure of the value of the goods and services that were purchased by households, investors, governments, and foreigners during a year. These goods and services are usually purchased because the buyers:
value the goods and services more than the purchase price.
The long-run aggregate supply curve of an economy is:
vertical.
The natural rate of unemployment is the unemployment rate that occurs:
when an economy is operating at a sustainable rate of output.
Inflation in an economy occurs:
when there is a rapid increase in a nation's stock of money.
Full employment
will always include some unemployment
The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level
will not alter the economy's maximum sustainable rate of output.
Which of the following is not an example of indirect business taxes?
Income tax
Regarding inflation, which of the following is true?
Inflation will tend to increase the nominal values of both prices and wages.
Which of the following is a shortcoming of gThe real gross domestic product of a nation is a measure of the: gross domestic product (GDP) as a measure of current output and income?
It does not count nonmarket productive activities produced by households in an economy.
Which of the following statements is true of a GDP deflator?
It generally provides a slightly lower estimate for the annual rate of inflation than the traditional consumer price index.
Which of the following is true of government's total expenditure?
It is substantially higher than the government's total consumption and investment expenditures.
Which of the following is true of a decline in a firm's inventories?
It occurs when the firm's sales of goods and services exceed its current production.
Which of the following is a positive effect of job search and the unemployment that often accompanies it?
It permits individuals to better match their skills and preferences with the requirements of a job.
Which of the following is true of the consumer price index (CPI)?
It tends to overstate the impact of the increase in the general level of prices in an economy.
An American-owned McDonald's opens in Russia. How would the net revenue earned by this restaurant affect the GDP and GNP of the United States?
It would increase GNP and leave GDP unchanged.
Who among the following would be included in the civilian labor force?
Kate, who works as a librarian in a public library
Which of the following is most likely to be included in the gross domestic product (GDP) calculations of a country?
Kayla buying more grocery items following a declaration by the government of an increase in welfare payments
Which of the following can influence the leakages from and injections to the circular flow of income?
Loanable funds and foreign exchange markets
Who among the following is employed?
Regina, who works as a sales person in a shoe store
Which of the following is included in a government's monetary policy?
Money supply
Which of the following is the most accurate statement about nominal and real interest rates?
Nominal and real interest rates often do not move together.
Identify the correct statement about U.S. exports and imports.
Positive U.S. net exports indicate that foreign consumers spend more on U.S. goods than U.S. consumers spend on foreign goods.
Suppose, in dollar terms, nominal GDP increased approximately 4 percent during a given year, and real GDP decreased 1 percent. Which of the following best explains these events?
Prices increased approximately 5 percent.
Which of the following will most likely occur during the expansionary phase of a business cycle?
Real GDP rises, and unemployment falls.
Identify the formula that gives the relationship between real interest rate and money interest rate.
Real interest rate = money interest rate − inflationary premium
Which of the following is included in fiscal policy?
Taxation and spending policies of the government
Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?
The 2006 sale affected neither 2005 GDP nor 2006 GDP.
Last year the Jones family earned $40,000. This year their income is $42,000. In an economy with an inflation rate of 10 percent, which of the following is correct?
The Jones' nominal income has increased and their real income has fallen.
Which of the following is necessarily true when an economy is in long-run equilibrium?
The actual rate of unemployment equals the natural rate of unemployment.
Which of the following is true of the civilian labor force?
The civilian labor force of an economy includes people aged 16 years and older who are either employed or seeking employment.
Suppose business decision makers become more optimistic about future economic conditions and desire additional funds to expand their plant capacity. What is the likely effect on the loanable funds market?
The demand for loanable funds will increase, and the interest rate will rise.
Identify the correct statement about the circular-flow diagram.
The goods and services market coordinates the demand with the supply of domestically produced goods and services.
Which of the following is included in the national income of the U.S.?
The income earned by an American professional dancer performing in a concert in Toronto
Which of the following is most likely to be included in the U.S. gross domestic product (GDP)?
The income of a Canadian engineer working in the U.S.
Which of the following is likely to cause an increase in structural unemployment in an economy?
The introduction of products using new technology
Which of the following is true of the labor force participation rate?
The labor force participation rate is measured as the number of people aged 16 years or older who are either employed or actively seeking employment as a percentage of the total civilian population 16 years of age and over.
If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?
The lender will receive a lower real interest rate than he expected.
Identify the correct statement about job search.
The marginal benefit derived from a job search declines with the time spent searching for a job.
Which of the following is true of unemployment?
The natural rate of unemployment is present when the economy is operating at full employment.
Which of the following is included in a country's gross domestic product when it is derived using the resource cost-income approach?
The net income earned by foreigners
Which of the following supplies funds to the loanable funds market?
The net saving of the household sector
At a price higher than the equilibrium price, quantity:
supplied exceeds quantity demanded.
When an economy is in long run equilibrium,
the actual and natural rates of unemployment will be equal.
The expenditures of households, business investors, governments, and foreigners determine:
the aggregate demand for domestic output.
Which of the following provides the most accurate description of monetary policy?
the deliberate control of the money supply to achieve macroeconomic goals
Monetary policy can be most accurately described as
the deliberate control of the money supply to achieve macroeconomic goals.
The natural rate of unemployment is affected by:
the demographic composition of the labor force.
Net exports are:
the difference between total exports and total imports.
The natural rate of unemployment in an economy is considered to be the sum of:
the frictional and structural rates of unemployment in the economy.
An increase in investment in an economy is most likely to increase the future income of the economy if:
the funds invested are channeled into wealth-creating projects.
The consumer price index (CPI) is designed to measure:
the impact of price changes on the cost of the typical bundle of goods purchased by households.
