Macro week 1 -3 Test

True

Example of the resource cost of inflation is when someone must re-tag a store's merchandise with new prices.

True

Goods that are not sold during the year are included as part of that year's investment in calculating GDP.

Business cycle

a period of macroeconomic expansion followed by a period of contraction

economic growth

a steady, long-term increase in real GDP

4 types of unemployment and their definitions

frictional: you chose to be unemployed structural: replaced by technology cyclical: follows the business cycle seasonal: follows seasons

Recipients of social security payments

gain from the overstatement of inflation by the CPI

The consumer price index tracks the average level of prices of all

goods and services purchased by consumers, whether they are produced in the United States or not.

unemployment calculation

unemployed workers actively seeking employment/US labor force Population 100 Hospital 5, jail 5, part time 10, self employed 20 discouraged workers 5 Full time 20 under age 16 Employed Unemployed Do not exist Full time- 20 5-(left after all ded) under 16 - 30 Self Employed -20 Hospital - 5 Part time -10 jail - 5 Total 50 =

Decreases

A recession is a period during which real GDP _____.

Expansion

A period of economic growth as measured by a rise in real GDP

Boom

A period of rapid economic growth

Expansion

A period of rising real GDP is called a(n)_____.

False

Discouraged workers are people who used to work, but no longer want a job

300 million

If Americans buy $500 billion worth of foreign goods and services, and foreigners buy $200 billion worth of American goods and services, then net exports for the United States are equal to _____.

4%

If the nominal interest rate is 7 percent, and the annual inflation rate is 3 percent, then the real interest rate is _____.

False

If the price index rises over the year from 200 to 230, then the rate of inflation for the year is 30%.

Real wage does not change

If your nominal wage rises from $5 to $7.50, while the price level rises from 100 to 150, then your real wage ______.

False

In any period during which real GDP rises, output per person and the average standard of living automatically rise as well.

is embodied in a law that calls for an unemployment rate of 4 percent

In the United States, the goal of high employment:

False

In the expenditure approach to GDP, government purchases include all spending on goods, services and transfer payments by government agencies.

C + I + G + NX (exports-imports)

In the expenditure approach, GDP is equal to _____.

Goals of Macroeconomics

Long Term growth High employment/low unemployment Stable Prices

Inflation

Low unemployment

Why, in the late 1990s, has real GDP in the United States been growing more rapidly than real GDP in England, France or Germany?

Macroeconomic question

Real wage rate equation

Nominal wage rate/ CPI this Year * 100

Problems with job figures

People Lie, Full time= part time employees

False

The United States has never experienced double-digit inflation

the number of employed plus the number of unemployed

The unemployment rate in the United States is defined as the number of unemployed divided by _____.

True

The unemployment rate in the United States never reaches zero, even when the economy is doing well.

To calculate the CPI(Consumer Price Index= price level), the Bureau of Labor Statistics uses

Total value todays Basket/Base year Basket * 100 (true base year) 1983 Price level is 125/100 = 1.25 *100= 125 Price level is 25% inflation since 167/164= 1.01*100= 101.8 = 1.8 % Inflation

If the Economy is good

Unemployment goes down

If the Economy is bad

Unemployment goes up

False

When economists study output, employment, or inflation in small countries like Estonia or the Bahamas, they are practicing microeconomics.

either U.S. output of goods and services or the price level have increased

When nominal GDP has increased in the United States, we know that:

True about inflation

When the inflation rate is positive, the price level must be rising.

The economy is considered at full employment when

cyclical unemployment is zero.

GDP

is the total value of all final goods and services produced for the marketplace during a given year, within the nation's borders.

Zero Cyclical unemployment is

macroeconomic goal

Full employment

the condition in which virtually all who are able and willing to work are employed.

Real GDP

the production of goods and services valued at constant prices

Nominal GDP

the production of goods and services valued at current prices