Macro

Equilibrium in the loanable funds market determines

the real interest rate.

If consumers decide to be more frugal and save more out of their income, then this will cause

a shift in the supply curve for loanable funds to the right.

Which of the following would increase the unemployment rate?

an increase in unemployment insurance payments

The consumer price index is the

average of the prices of the goods and services purchased by a typical urban family of four.

The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket.

change; overestimates

Investment, as defined by economists, would include the purchase of a

computer by an accounting firm not a stock or bond

Which of the following is not one of the key services provided by the financial system?

decreasing taxes

Gross domestic product in the economy is measured by the

dollar value of all final goods and services produced in the economy.

Eliminating frictional unemployment would be good for the economy.

false

If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years.

false

efficiency wage is another name for minimum wage

false

The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.

firms

A student who just graduated from college but has not found a job would most likely be

frictionally unemployed.

The output of Mexican citizens who work in Texas would be included in the

gross national product of Mexico.

Gross domestic product understates the total production of final goods and services because of the omission of

household production.

During a business cycle expansion, total production ________ and total employment ________.

increases; increases

Which of the following is not directly counted in GDP?

intermediate goods

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey

is based on actual payrolls, rather than on unverified answers.

A firm can fund an expansion of its operations by

issuing bonds.

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

labor force participation rate

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

labor productivity.

Your grandfather tells you that he earned $7,000/year in his first job in 1961. You earn $35,000/year in your first job in 2016. You know that average prices have risen steadily since 1961. You earn

less than 5 times as much as your grandfather in terms of real income.

If firms pay what are called "efficiency wages," they pay wages that

motivate workers to increase their productivity.

The purchase by a foreign government of an airplane produced in the United States is included in U.S.

net exports.

The Bureau of Labor Statistics would categorize a retiree who is not working as

out of the labor force.

The producer price index measures the prices that firms

receive for the goods and services they use at all stages of production.

An increase in the real interest rate does which of the following?

reduces consumption spending

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

remain constant.

The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect

that stock prices are more likely to fall.

What is the name of the organization that defines business cycle peaks and troughs in the United States?

the National Bureau of Economic Research

If cyclical unemployment is eliminated in the economy, then

the economy is considered to be at full employment.

Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that

the price level in 2016 was less than the price level in the base year.

The average price of goods and services in the economy is also known as

the price level.

The nominal interest rate will be less than the real interest rate when

the rate of inflation is negative.

Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions. As a result we would expect

the unemployment rate to rise.

The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that

the value of output in 2015 was around $17.3 trillion. total income in 2015 was around $17.3 trillion. total spending in 2015 was around $17.3 trillion.

The costs to firms of changing prices are called menu costs.

true

The inflation rate measures the average prices of goods and services in the economy.

true

To reduce the bias in the consumer price index, the Bureau of Labor Statistics

updates the market basket every two years, rather than every 10 years.

Real GDP is GDP in a given year

valued in the prices of the base year.

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?

3 percent

If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?

3.5%

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?

475 million

If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge?

5%

If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

80%

Which of the following describes the accuracy of the Consumer Price Index?

Changes in the CPI overstate the true rate of inflation.

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is

125. Nominal/real x100

If inflation is positive and is perfectly anticipated,

those that hold paper money lose.

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

vertical.

Which of the following are not considered part of government purchases?

welfare benefits

If real GDP grows by 3% in 2014, 3.2% in 2015, and 2.5% in 2016, what is the average annual growth rate of real GDP?

2.9%

If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.

False

Residential investment includes spending by firms on office buildings.

False

Transfer payments are subtracted from national income to get to personal income.

False

Taxes are changed so that real interest income is taxed rather than nominal interest income.

Supply curve shifted to the right

If government saving is negative, then

T - TR<G.

You earned $30,000 in 2007, and your salary rose to $80,000 in 2016. If the CPI rose from 82 to 202 between 2007 and 2016, which of the following is true?

The purchasing power of your salary increased between 2007 and 2016.

Developing countries with large informal sectors tend to have firms that invest less in capital equipment.

True

Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948?

Younger men are remaining in school longer as compared to the past.

Which of the following would encourage economic growth through increases in the capital stock?

a change from an income tax to a consumption tax an increase in household saving a decrease in the government deficit