Macro Econ Test 1: Homework Q's (ch. 5-8)

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Causes change in the CPI that overstates the true inflation​ rate

* Increase in Quality Bias * New Product Bias * Substitution Bias

Which is the largest component of GDP?

Consumption

Business cycles were more extreme before World War II than they have been since then.

True

Business cycles were more extreme before World War II than they were after it.

True

Gross domestic product is best defined as the:

market value of all final goods and services produced in a country during a period of time

The classical model is based on the critical assumption that

markets always clear.

Disposable personal income is equal to personal income minus:

personal tax payments

To fund its budget​ deficit, the government can borrow by

selling treasury bills to the public.

If there is an inflation rate of 5​% and nominal wages increase by 2​%,

the purchasing power is redistributed from wage earners to producers-sellers

In macroeconomics we study the interactions of three​ markets:

​goods-and-services market, labor​ market, and money market.

Which of the following is included in the economist's definition of investment?

The purchase of new machines, factories or houses

Macroeconomics is the study of the economy as a​ whole, while microeconomics deals with the individual​ decision-making units.

True

The unemployment rate is usually closely related to the​ economy's aggregate output.

True

Because the consumer price index​ (CPI) is a​ fixed-weight index, it has a tendency to underestimate the rate of inflation.

False

In order to pursue the macroeconomic goal of​ stability, policy makers want to avoid prolonged periods of inflation and instead push for prolonged periods of deflation.

False

If the total dollar value of U.S. imports exceeds U.S. exports it will result in a:

lower GDP

Your college bookstore receives a shipment of new economics texts for​ $60,000. This transaction is

not included in GDP​ calculation, since books bought by the bookstore are intermediate goods.

Per capita output is

output per worker or productivity

The CPI tends to

overestimate the extent of inflation because it uses fixed weights and ignores substitution of lower priced items for higher priced items

The total national income actually received by a country's residents is:

smaller than the value of GDP

GDP is different from final sales since

final sales ignores changes in inventory, which are included in GDP calculation

Which of the following accurately describe the financial flows into and out of​ households?

*Taxes flow out of households and to the government. *Interest flows into households as payment on corporate and government bonds and dividends from firms *Wages flow into households as payment for their labor services.

Since​ 1970, the highest unemployment rate in the United States occurred during the recession that began in

1980

Since​ 1970, the longest recession in the United States began in

1980

To calculate personal income from national income, which of the following must be done by the BEA?

Add government transfer payments

How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?

By adding the value in dollar terms of all the final goods and services produced domestically.

Which of these do we subtract from GNP to obtain NNP?

Depreciation

Which of the following is considered to be a problem in using GDP as a measure of national ​well-being​?

GDP is not adjusted to account for depletion of natural resources.

When a significant fraction of the domestic production takes place in foreign-owned facilities, a country's difference between GDP and GNP is as follows:

GNP will be much larger than GDP

The application of macroeconomic models to​ economy-wide problems began

In the 1930s

The capacity for long-run economic growth for an economy is determined

by the size of its labor​ force, its capital​ stock, and productivity of labor and capital

Imports are subtracted in the expenditure approach to calculating​GDP, because

consumption, investment, and government spending are overstated as these include expenditures on both domestic and foreign goods

Suppose that in one month the number of discouraged workers as classified by the Bureau of Labor Statistics increases by​ 50,000. As a​ result,

the number of unemployed workers declines by​ 50,000; the size of the labor force falls by​ 50,000; unemployment rate falls.

The GDP is a measure of the:

total dollar value of all goods and services produced within the borders of a country

The difference between the value of production inputs and outputs is known as:

value added


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