Midterm 2 - Macro Ch. 6, 7, 10

In one day Alpha Cabinet Company made 40 cabinets with 320 hours of labor. What was Alpha Cabinet Company's productivity per hour?

1/8 cabinet

When the relative price of a good increases, consumers respond by buying

a smaller quantity of that good and a larger quantity of substitutes for that good.

The consumer price index is used to

monitor changes in the cost of living over time

Unemployment numbers reported by the Bureau of Labor Statistics are reported based on a

monthly survey of about 60,000 households

Inward-oriented policies

include imposing tariffs and other trade restrictions.

In June 2009 the BLS reported an adult (civilian non-institutional) population of 234.9 million, unemployment of 12.4 million, and employment of 141.6 million. Based on these numbers the labor-force participation rate was

(154/234.9)x100

Suppose some country had an adult (civilian non-institutional) population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?

28.5 Million

Suppose that in some state the civilian, non-institutionalized adult population is 4 million, the labor force participation rate is 75%, and 100,000 people are unemployed. What is the unemployment rate (to the nearest tenth)?

3.33%

Greg is an inmate at a penitentiary facility in Cleveland, Ohio. He is "employed" according to BLS's method of computing the unemployment statistics.

False

Most spells of unemployment are long term.

False

Structural unemployment is often the result of time required in finding a suitable job.

False

The labor force participation rate equals the number of people working divided by the adult population.

False

During the 1990s, France posted an average unemployment rate of 10.9%, compared to the U.S. rate of 5.8% for the same period. What of the following most likely explains this difference?

France has more generous unemployment compensation and stronger unions.

Edgar is working part-time. Diane is on temporary layoff. Who is included in the Bureau of Labor Statistics' "employed" category?

Only Edgar

Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant?

Substitution bias

In 1900, the richest country in the world was

The U.K.

In what way is the figure relevant to the catch-up effect? Explain providing examples.

The catch-up effect is observed when a relatively poor country with little capital and low productivity starts to experience rapid growth. In such a country, small increases in capital substantially raise workers' productivity and make rapid growth possible. In the figure, the production function is relatively steep for small amounts of capital, and that feature is central to the catch-up effect. It happens because of the diminishing returns to capital. Please listen to my lecture video for the example related to the US and China.

Which of the following is not correct?

The consumer price index is used to measure the quantity of goods and services that the economy is producing

A 2% rate of growth in real GDP per person implies that average income quadruples in about every 70 years.

True

Differences in natural resources explain some differences in the standard of living around the world, but abundant natural resources are not necessary for an economy to be highly productive.

True

If an improvement in the quality of a good is not fully measured than the consumer price index will overstate the increase in the cost of living.

True

On the one hand more rapid population growth may lower productivity by stretching the supply of natural resources and reducing the amount of capital available per worker. On the other hand, a large population may enhance the rate of technological progress because there are more scientists and engineers.

True

Which of the following is not one of the categories into which the Bureau of Labor Statistics places each adult of each surveyed household?

Underemployed

Which of the following is an observation made by economist Michael Kremer?

World growth rates increased as the population increased.

Minimum-wage laws

and firms paying wages above equilibrium to reduce worker turnover both create structural unemployment.

When the consumer price index falls, the typical family

can spend fewer dollars to maintain the same standard of living

The curve becomes flatter as the amount of capital per worker increases because of

diminishing returns to capital.

In determining living standards, productivity plays a key role

for both nations and individuals.

Unemployment that exists because it takes time for workers to search for the job that suits them best is called

frictional unemployment, which partly accounts for the natural unemployment rate.

For any given year, the CPI is the price of the basket of goods and services in the

given year divided by the price of the same basket in the base year, then multiplied by 100.

All else equal, by saving more, a country

has more resources for capital goods. The increase in capital raises productivity.

To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant?

introduction of new goods

Consider two labor markets in which jobs are equally attractive in all respects. All workers are equally able to perform either job. Initially, both labor markets have the same wage rate. If a union organizes in one of the markets, then the wage rates will tend to

rise for union jobs and fall for nonunion jobs.

Jai Li just lost her job three months ago, and she hasn't yet started looking for a new one. The Bureau of Labor Statistics counts Jai Li as

neither in the labor force nor unemployed.

Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

neither the number of apples nor the number of pears bought by the typical consumer changes from one year to the next year

Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth?

nutrition

Country A and country B are the same except country A currently has a lower level of capital. Assuming diminishing returns, if both countries increase their capital by 100 units and other factors that determine output are unchanged, then

output in country A increases by more than in country B.

Who would the BLS include in the unemployed category?

people who are not employed but looked for employment in the past four weeks

The economy's inflation rate is the

percentage change in the price level from the previous period.

Investment in

physical capital, like investment in human capital, has an opportunity cost.

Both Arnold and Will work 10 hours a day. Arnold can produce six baskets of goods per hour while Will can produce four baskets of the same goods per hour. It follows that Arnold's

productivity is greater than Will's. output is greater than Will's. standard of living is higher than Will's. All of the above are correct.**

Unemployment insurance

reduces search effort which raises unemployment.

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

shelter. utilities. household furnishings and operation. All of the above are correct.

Efficiency wages contribute to

structural unemployment and the natural rate of unemployment.

Thomas Malthus's predictions turned out to be wrong due to

technological advances such as those during the Industrial Revolution.

A decrease in the price of domestically produced industrial robots will be reflected in

the GDP deflator but not in the consumer price index.

An increase in the price of Irish whiskey imported into the United States will be reflected in

the U.S. CPI, but not the U.S. GDP deflator

All else equal, if there are diminishing returns, then if a country raised its capital by 100 units last year and by 100 units this year,

the increase in output was greater last year than this year.

We would expect that, the more generous unemployment compensation a country has,

the longer the duration of each spell of unemployment, and the higher the unemployment rate.

When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year?

the prices of the goods and services

In which of the following cases do firms deliberately choose to keep wages above the equilibrium level?

when firms want to hire better quality workers