Macro Test 2

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

vertical

If an economy experiences deflation, the real interest rate

will be greater than the nominal interest rate

REFER TO THE TABLE ABOVE. Consider the following data for a simple economy. What is the GDP deflator for 2010 using 2009 as a base year?

97.39%

Which of the following is most liquid

A dollar bill

The nominal GDP of the U.S. in 2010 was approximately $14.6 trillion. This means that

all of the above are true

An increase in demand for loanable funds will occur if there is

an increase in expected profits from firm investment projects

Refer to Figure above. Which of the following is consistent with the graph depicted?

an increase in the proportion of income after net taxes used for consumption

When actual inflation is less than expected inflation

borrowers lose and lenders gain

Which of the following would be a consequence of substitution bias in the CPI?

businesses would over compensate employees for inflation when the cost of living increases

The demand for durable goods

declines by a greater percentage than does GDP during a recession

A good measure of standard of living is

Real GDP per capita

T/F If there is public dissaving, investment spending in the economy will decline, holding everything else constant.

T

T/F Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

T

T/F The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is 5% higher in year 2 than in year 1

T

T/F To examine how the total production of an economy has changed over time, it would be better to examine real GDP.

T

there is a government budget surplus if

T - TR = G

which of the following policies would reduce structural unemployment?

a job retaining program

Which of the following will not occur as the result of a decrease in net taxes?

decreased household savings

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

demanders, suppliers

The natural rate of unemployment is the amount of unemployment

equal to frictional plus structural unemployment

If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be

greater than 100

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

household production

Which of the following is true about the consumer price index?

it assumes that customers purchase the same amount of each product in the market basket each month

The resources lost for dealing with inflation:

its called shoeleather cost

Potential GDP refers to

the level of GDP attained when all forms are producing at capacity

Refer to Table above. Assume the market basket for the consumer price index has three products: Cokes, hamburgers, and CDs with the following values in 2006 and 2011 for price and quantity: The Consumer Price Index for 2011 equals

121

the labor force participation rate equals the

- force divided by working age population x 100

Refer to Table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

1,600

Refer to Table above. Consider the following values of the consumer price index for 1996, 1997, and 1998: The inflation rate for 1997 was equal to

2.5%

Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars). The inflation rate in 2010:

2.807%

Suppose the working age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have fulltime employment; 20 have partime employment; 20 do not have employment, but are actively looking for employment; and 10 would like a employment but do not have employment and are not actively looking for employment. the official unemployment rate as calculated by the US bureau of labor would equal

20%

If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from

23.3 years to 17.5 years

According to the economics club at K-State, the prices increased by:

4.7 in Manhattan, and 1.7 Nationwide

In 2011, Kendall Ford, an automobile dealership, spent $20,000 on a new car lift for its repair shop, $2,000 on a new copy machine for its sales division, and $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at $400,000 on January 1, 2011 and unsold cars and trucks were valued at $900,000 on December 31, 2011. What is Kendall Ford's total investment spending in 2011?

522,000

T/F Efficiency wage is another name for the minimum wage.

F

T/F Eliminating frictional unemployment would be good for the economy.

F

T/F Residential investment includes spending by firms on office buildings.

F

T/F The NBER's Business Cycle Dating Committee defines a recession as at least two consecutive quarters of falling real GDP.

F

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

F

T/F The nominal interest rate plus the inflation rate equals the real interest rate.

F

A country in which a significant fraction of domestic production takes place in foreign-owned factories and facilities is most likely a country where

GDP is much larger than GNP

If real GDP in a small country in 2010 is 8 billion and real GDP in the same country in 2011 is 8.3 billion, the growth rate of real GDP between 2010 and 2011

Is 3.75%

in a closed economy, which of the following components of GDP is not included?

Net Exports

The bureau of labor statistics would categorize a retire who is not working as

Out of the labor force

You earned $30,000 in 1990, and your salary rose to $80,000 in 2011. If the CPI rose from 82 to 202 between 1990 and 2011, which of the following is true?

The purchasing power of your salary increased

The period between a business cycle peak and a business cycle trough is called

recession

Human capital refers to which of the following?

the accumulated knowledge and skills that can be by one worker or one hour of work

frictional unemployment is the result of

the search process of matching workers with jobs

GDP is calculated by summing up

the total market value of final goods and services produced in the economy during a period of time

Gross domestic product is calculated by summing up

the total market value of the final goods and services produced in the economy during a period of time

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

Suppose, in 2012, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for 2012?

the value of the services of the real estate agent