Macro Test 3

In a small economy, the money supply is $400,000, and the velocity of money is 3. The current average price level in the economy is 1. What is the level of real GDP in this economy? $1.2 million $133,333 $400,000 $1.6 million

$1.2 million

Suppose the nominal GDP of a country is $500 billion. If the velocity of money in the country is 10, then the country's money supply will equal: $50 billion. $510 billion. $490 billion. $5,000 billion.

$50 billion.

If the money supply is $375 million, the velocity of money is 5, and real GDP is $12.5 million, what is the average price level? 150 100 50 12.5

150

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. How many people in this country are in the labor force? 15 million 20 million 25 million 30 million

20 million

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's unemployment rate? 10% 40% 25% 16.7%

25%

Jordan loaned Taylor $1,200 on March 15, 2009. Taylor returned $1,260 on March 14, 2010. Inflation was 2% over the 1-year period. What is the real interest rate that Taylor paid? 7% 3% 2% 5%

3%

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's labor force participation rate? 50% 83.3% 66.7% 75%

66.7%

If the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between years 1 and 2 will be: 10%. 9.23%. 8.33%. 7.69%.

8.33%.

Which of the following is a problem with deflation? It raises the real cost of debt repayment. There is no problem with deflation; falling prices are good for the economy. It causes people to pay more taxes. Stopping it will cause a recession.

It raises the real cost of debt repayment.

Which of the following is NOT true of structural unemployment? It results from industry restructuring. It is persistent over time. It results from scarcity of information. It is long-term in duration.

It results from scarcity of information.

Which of the following is considered unemployed? Jason, a full-time college student, has a part-time job. Julie, a full-time housewife, was searching for a part-time position two months ago, but hasn't since. John, on temporary layoff from his work, awaits recall. Joe, a retired college professor, does community volunteer work.

John, on temporary layoff from his work, awaits recall.

Which of the following would the U.S. Bureau of Labor Statistics define as a discouraged worker? Robert, a retired teacher, who works full time as a greeter at a discount store Quinton, who has a doctorate in chemistry, but works full time as a taxi driver Susan, who has been unemployed for the past three years and is looking for a part-time job Mary, who was laid off last year and who was looking for a full-time job until last month

Mary, who was laid off last year and who was looking for a full-time job until last month

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator? The CPI measures the average prices of all final goods and services purchased by consumers, whereas the GDP deflator measures the average prices of all inputs used in the economy. The CPI measures the average prices of inputs in the production process, whereas the GDP deflator measures the average prices of goods and services purchased by consumers. The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy. The CPI measures the average prices of retail goods and services, whereas the GDP deflator measures the average prices of wholesale goods.

The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all goods and services in the economy.

Which of the following is an example of money illusion assuming that inflation is 5%? You do not receive a raise at your part-time job but cut out some expenses as you notice some prices rising. You receive a 10% raise at your part-time job and start spending extra money on entertainment every weekend. You receive a 5% raise at your part-time job and start spending extra money on entertainment every weekend. You receive a 5% raise at your part-time job but do not increase or decrease your spending.

You receive a 5% raise at your part-time job and start spending extra money on entertainment every weekend.

A real price is: a decrease in the average level of the price of a good. an increase in the average level of the price of a good. the average number of times a dollar is spent on final goods and services in a year. a price that has been corrected for inflation.

a price that has been corrected for inflation.

Inflation is: a decrease in the average level of prices. the average number of times a dollar is spent on final goods and services in a year. when people mistake changes in nominal prices for changes in real prices. an increase in the average level of prices.

an increase in the average level of prices.

Which of the following is NOT part of natural unemployment? structural unemployment cyclical unemployment frictional and structural frictional unemployment

cyclical unemployment

Unemployment correlated with the business cycle is called: cyclical unemployment. seasonal unemployment. frictional unemployment. structural unemployment.

cyclical unemployment.

As the baby boomers retire, the U.S. labor force participation rate will: increase. fluctuate unpredictably. remain the same. decrease.

decrease.

If you earned $10-an-hour in 2005 when the CPI was 100, and you earn $11-an-hour today when the CPI is 120, then your real wage rate has _____ since 2005. decreased remained the same increased 10% increased 20%

decreased

The primary reason we think of inflation as bad even when nominal wages rise with it is that it: distorts the information delivered by prices. increases the velocity of money. makes things more expensive for consumers. leads to lower real wages.

distorts the information delivered by prices.

An unemployed person is one who: is not willing to work even though he or she is able to. stays at home and is not looking for work. works for a job that pays less than he or she expected. does not have a job but is actively looking for one.

does not have a job but is actively looking for one

Someone who recently moved to Florida because of its warmer climate will need to spend some time looking for a new job. This is an example of: cyclical unemployment. structural unemployment. frictional unemployment. underemployment.

frictional unemployment.

When the price of a good in Russia increases from 20 rubles to 20 million rubles in a single year, the nation is experiencing: high disinflation. hyperinflation. falling GDP per capita. deflation.

hyperinflation.

During recessions the unemployment rate: decreases. fluctuates randomly. remains relatively constant. increases.

increases.

Debt monetization means that a government pays off its debt by: lowering inflation. raising tax revenues. borrowing from foreigners. increasing the money supply.

increasing the money supply.

Money illusion is: a decrease in the average level of prices. an increase in the average level of prices. mistaking changes in nominal prices for changes in real prices. the average number of times a dollar is spent on final goods and services in a year.

mistaking changes in nominal prices for changes in real prices.

With respect to real output, in the long run, money is: neutral. expansionary. temporary. velocity.

neutral.

According to the quantity theory of money, an increase in the money supply causes an increase in _____ over the long run. prices production real GDP the velocity of money

prices

Minimum wage laws and unions tend to: lower wages and raise unemployment. raise wages and lower unemployment. raise wages and raise unemployment. lower wages and lower unemployment.

raise wages and raise unemployment.

When the expected rate of inflation is higher than the actual rate of inflation, wealth is: redistributed from borrowers to lenders. redistributed from lenders to borrowers. not redistributed at all.

redistributed from borrowers to lenders.

When workers lose their jobs and become officially unemployed, the labor force participation rate: remains constant. increases. changes unpredictably. decreases.

remains constant.

Frictional unemployment is best defined as: long-term unemployment caused by changing features of an economy. a normal level of unemployment caused by high wages. unemployment caused by cyclical conditions of an economy. short-term unemployment caused by difficulties of matching employees to employers.

short-term unemployment caused by difficulties of matching employees to employers.

The persistent, long-term unemployment caused by long-lasting shocks or permanent features of an economy is called: cyclical unemployment. frictional unemployment. seasonal unemployment. structural unemployment.

structural unemployment.

The quantity theory of money predicts that the main cause of inflation is increases in: prices. consumption. real output. the money supply.

the money supply.

The average number of times a dollar is spent on final goods and services during a year is the: quantity theory of money. money supply. velocity of money. consumption rate.

velocity of money.