macro econ test 2

The measured unemployment rate is often criticized for understating the level of joblessness because

discouraged workers are not counted in the labor force

During recessions caused by changes in aggregate demand, the economy typically experiences

falling income and falling employment

Which of the following describes a limitation of gross domestic product GDP?

It does not account for the distribution of income in a nation or income inequality.

The nominal gross domestic product of China in 2010 is a measure of the total value of which of the following in 2010 ?

Final goods and services produced within the borders of China

Which of the following groups of people would benefit from unanticipated inflation?

II only (borrowers)

Which of the following will most likely result from deflation?

Increased real value of fixed incomes

Which of the following is the correct calculation of (GDP)?

Real GDP = (Nominal GDP / GDP inflator) x 100

The table above shows the nominal gross domestic product (GDP) and the price index for an economy during the period 2012 and 2013. Which of the following would have occurred from 2012 to 2013?

Real GDP did not change.

Which statement is true about the circular flow diagram of an economy?

The market for factors of production connects spending by firms to household income.

Which of the following is correct according to the circular flow model of an economy?

Total spending equals total income.

As a measure of economic performance, GDPGDP accounts for which of the following?

Souvenir gifts purchased by tourists domestically

Which of the following would most likely benefit from unexpected deflation?

lenders

Which of the following is included in the computation of gross domestic product?

Additions to business inventories

Which of the following is most likely included in gross domestic product?

Ali buys a new bicycle.

Which of the following best explains why transfer payments are not included in the calculation of gross domestic product?

Recipients of transfer payments have not produced or supplied goods and services in exchange for these payments.

An increase in inventories will increase which component of gross domestic product?

Investment expenditures

Which of the following is classified as a discouraged worker?

Sara has been unable to find a job and abandoned her job search.

Suppose the consumer price index (CPI) was 100 on January 1st, 2017 and 110 on January 1st, 2018 with no changes in nominal wages. Which of the following is definitely true about the economy between January of 2017 and January of 2018?

The inflation rate was 10 percent.

Which of the following transactions will be included in the calculation of Country X's GDP in 2020

The purchase of new construction equipment

In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was

$25 billon

Given the labor market data above, what are the labor-force participation rate (LFPR) and the unemployment rate (UR) ?

The LFPR is 60% and the UR is 10.0%.

The consumer price index measures which of the following?

The change over time of the weighted prices of a particular group of goods and services

As a measure of economic performance, the United States gross domestic product accounts for which of the following?

The cleanup of an oil spill

The consumer price index is designed to measure changes in the

cost of a select market basket of goods and services

Which of the following types of unemployment is caused by a recession?

cyclical

An increase in the number of discouraged workers causes the unemployment rate to

decrease along with the labor-force participation rate

Unexpected increases in inventories usually precede

decreases in production

GDP does NOT account for which of the following?

depletion of natural resources

People who have given up looking for jobs are classified as

discouraged workers

A continuous increase in the consumer price index is

inflation

A nation's unemployment rate is the ratio of the number of unemployed seeking employment to the nation's

labor force

What type of unemployment describes the situation of factory workers displaced by automation?

Structural

If nominal gross domestic product fell while real gross domestic product rose, which of the following must be true?

The inflation rate was negative.

According to the data above, in which year was real gross domestic product the largest?

2010

Which of the following is true according to the circular flow model?

Households are demanders in the product markets and suppliers in the factor markets.

When the average price level increases by 10 percent in a given year, which of the following must increase by 10 percent for real output to remain constant?

Nominal national income

The figure above shows data for actual real GDP and potential real GDP from year 11 to year 66 for an economy. Which of the following is true based on this figure?

The economy is in long-run equilibrium in year 2

The term "value added" for a firm is best defined as which of the following?

The firm's sales minus the cost of inputs purchased from other firms

Using 2010 as the base year, the gross domestic product deflator in 2011 was 97. Which of the following must be true?

The inflation rate in 2011 was negative.

Which of the following necessarily occurs during an economic recession?

Real gross domestic product decreases.

Which of the following typically occurs during an expansionary phase of a business cycle?

Employment increases.

Suppose Miguel wants to know the value of real GDP) for 2011 in terms of the base year 1984 dollars. In 1984 nominal GDP was $10 billion. In 2011 nominal GDP was $15 billion and the price deflator was 200. Real GDP in 1984 dollars would be equal to which of the following?

$7.5 billion

The table above gives population and labor-market data for an economy. The unemployment rate in this economy is

10%

Assume that an economy produces just two goods, X and Y, as shown in the table above. If year 1 is the base year, the consumer price index for year 2 in this economy is

175

Calculate Country X's nominal gross domestic product GDP for 2017 using the expenditures approach.

19 billion dollars

If the consumer price index increases from 200 to 240 in a one-year period, then the inflation rate is

20 percent

The economy of Galactica is expanding and the actual unemployment rate exceeds the natural rate of unemployment for which year in the above diagram?

2002

If an automobile was manufactured in 2006 and sold to a consumer in 2007, what was the effect on gross domestic product in 2006 and 2007?

2006 increase 2007 no change

Which of the following is an example of frictional unemployment?

A college graduate interviewing for two available positions

Which of the following household purchases will be counted as part of gross private investment in a country's gross domestic product?

A newly constructed home

Which of the following is true about gross domestic product

Calculations of GDP include the unsold inventories of goods produced within the borders of the country

Jan works a 30-hour week for a minimum wage of $10 per hour. Suppose that last year is the base year for the Consumer Price Index (CPI). Which of the following is true about Jan's real wage if at the end of this year the CPI is 125 ?

Jan's real wage is $8 per hour at the end of the year.

Which of the following describes a difference between nominal gross domestic product (GDP) and real GDP?

Nominal GDP uses current prices to measure the value of final output, while real GDP uses constant prices.

Which of the following can be concluded from the data above?

The economy was experiencing inflation during years 2 and 3.

Labor unions negotiated a 3-year contract with employers in the automobile industry. They agreed to a 3 percent per year increase in pay over the 3 years. How would each group be affected by an actual inflation rate of 4% next year?

Workers would be worse off, and the employers would be better off.

The economy of Fisherland is at full employment for which year in the above diagram?

2015

If in a specified year nominal gross domestic product grew by 11 percent and real gross domestic product grew by 4 percent, inflation for this year would be

7%

Which of the following terms describes a slowdown in the rate of increase in the consumer price index?

Disinflation

Last year, Myron purchased a $10,000 certificate of deposit with a fixed 3% interest rate from his bank. The government reported that prices, on average, have fallen by 5% during the current year. Which of the following can be concluded as a result of this transaction?

Myron gains, while the bank loses.

In an economy, the price index in 2006 was 100 and the real gross domestic product was $1,000. In 20102010, the price index was 110 and the nominal GDP was $2,200. Based on that information, which of the following can be inferred about the economy's nominal GDP in 2006 and real GDP in 2010 ?

Nominal GDP in 2006=$1,000 Real GDP in 2010=$2,000

Assuming year 11 is the base year, what is the nominal and real gross domestic product for year 22 ?

Nominal GDP: $280 Real GDP: $200

Which of the following describes a typical business cycle in the correct sequence?

Peak, recession, trough, and expansion

If an economy is experiencing deflation, which of the following is most likely to happen?

People who took a fixed-rate loan become worse off.

An increase in the number of which of the following will lead to an increase in the unemployment rate?

Persons quitting part-time jobs to look for full-time ones

Suppose that a country's nominal gross domestic product (GDP) was $1,000 in year 1 and $2,000 in year 2. If year 1 is the base year and real (GDP) in year 2 was $1,000, which of the following is true?

Prices doubled between year 1 and year 2.

Which of the following is an example of how the consumer price index exhibits bias in its estimates of changes in the cost of living?

Product improvements are not always fully reflected in the calculation of the CPI

The output gap is measured by which of the following?

The difference between actual and potential GDP

Gross domestic product has been criticized as a measure of well-being because it fails to take into account which of the following?

The distribution of income

Which statement is true about the approaches used to measure the value of a nation's gdp?

The expenditures approach to calculating GDP sums consumption spending, investment spending, government spending, and net exports.

When an economy is at the trough of the business cycle, which of the following is then true about the state of the economy?

There is a recessionary gap.

If an economy is at the peak of the business cycle, then which of the following is true about the state of the economy?

There is an inflationary gap.

Which of the following will happen when the actual inflation rate exceeds the expected inflation rate?

This will harm lenders with fixed-interest rate loans.

Ying has just graduated from college and is now interviewing for jobs. Ying would best be described as

frictionally unemployed

As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in

household production

The consumer price index (CPI) does not measure the true cost of inflation because

improvements in the quality of goods or services are not fully reflected

As an indicator of an impending recession, inventories will most likely

increase as a result of a decrease in consumption

Olivia volunteers full time at an animal shelter and will not accept any offers for a paid job for the next six months. Olivia is

not in the labor force

According to the business cycle represented in the diagram above, the actual rate of unemployment equals the natural rate of unemployment when the economy is

on the potential line

A criticism of the consumer price index as a measure of the cost of living is that it

overstates the rate of inflation because it ignores consumers' ability to substitute among similar items when prices change

The consumer price index (CPI) is criticized for

overstating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change

A country's real gross domestic product is the annual value of all final goods and services that are

produced in that country, adjusted for changes in the price level