Review homework and tests
Unit-of-account costs refer to the:
decreased reliability of money as a unit of measurement.
Structural unemployment CANNOT be caused by:
fluctuations in the business cycle.
Eric is an experienced project manager who lost his job at a tech start-up because the company's product failed to become popular. He is confident he can get a new job and has already rejected a number of offers.
frictional unemployment
Hamid has just graduated as a lawyer from an esteemed law school. He is confident of getting a job and has already refused a few lower‑paying jobs.
frictional unemployment
The natural rate of unemployment equals
frictional unemployment plus structural unemployment.
An increase in adult literacy affects
human capital
A large number of young people entering the labor force
increase
An increase in union membership
increase
Extra financial benefits for the unemployed
increase
Ocean Spray purchases plastic to make bottles
Not included in U.S. GDP
resale of used textbooks to college students
Not included in U.S. GDP
sale of wheat to Mrs. Baird's Bakery
Not included in U.S. GDP
Changing the amount of money in circulation to pursue economic objectives changes the
monetary policy.
How frequently is the survey that determines unemployment released?
monthly
A dollhouse sold abroad
net exports
discourages people from holding money
shoe leather costs
Altering government spending and/or taxes in an effort to affect overall spending is a use of:
fiscal policy.
If a country has a population of 1,000 people, an area of 100 square miles, and a GDP of $5 million, then its GDP per capita is:
$5,000.
Assume that the consumer price index is 124.0 for 2018 and 130.7 for 2019. What was the inflation rate between these two years?
5.40%
The best available estimates show that even a large reduction in greenhouse gas emissions over the next few decades would _____.
cause only a modest reduction in the long-term rise in real GDP per capita
Which of the four options best represents specialization and its relationship with trade?
comparative advantage
The ____ is used to calculate the official estimate of inflation, which in turn is used to adjust Social Security payments to offset price increases.
consumer price index
A ticket to a local sporting event.
consumption
In India, the standard of living in 1980 was _____ than in 1947.
not much higher
If the government increases the length and amount of unemployment benefits, the unemployment rate will most likely _____.
increase, because the benefits of being unemployed will rise
If more women enter or reenter the labor force, the natural rate of unemployment is likely to:
increase.
Aran expects the inflation rate to be 4%. If Aran borrows money at a nominal interest rate of 5%, Aran expects his real interest rate to be:
less than his nominal interest rate.
If the growth rate of real GDP per capita decelerates (grows at a slower rate), then the _____ of real GDP per capita _____.
level; increases
Determine if the people in the example have benefited - i.e., are winners - or have been harmed - i.e., are losers - by unexpected inflation.
meow
The nominal interest rate equals the real interest rate:
plus the rate of inflation.
When considering economic growth, many policy makers focus on real gross domestic product (GDP) per capita since it takes into account the potentially distorting effects of
population change.
Efficiency wages are:
set above the equilibrium wage to incentivize better performance.
spending time converting money into something that better holds value
shoe leather costs
Aggregate output is _____.
the sum of consumer spending, investment spending, government purchases of goods and services, and net exports
A previously-owned collectors' skateboard
Not included in GDP because of double-counting
A ticket for the X Games bought from a person on a street corner
Not included in GDP because of double-counting
A used copy of the Tony Hawk video game
Not included in GDP because of double-counting
A used skateboard you buy for your brother
Not included in GDP because of double-counting
Wheels used to produce a skateboard that will be sold new
Not included in GDP because of double-counting
GM's assembly and sale of cars in Mexico
Not included in U.S. GDP
A domestically manufactured personal computer
consumption
Linda postpones her wedding even though most food prices and most service prices were dropping this year, which would help keep the cost of the wedding down.
deflation
Individuals who want to work, but have given up searching for a job because of limited prospects, are known as
discouraged workers.
A recession does NOT imply:
employment growth.
The national accounts do NOT keep track of:
exchange rates.
When the government changes either its spending or tax policy to pursue economic objectives, it has changed its
fiscal policy.
A public school teacher's salary
government purchases
Economists use the term long-term growth to indicate:
growth of the economy over several decades.
Households do NOT receive income in the form of:
investment spending.
A country's living standard is BEST measured by:
per capita real GDP.
Melissa decides to start her own personal library by amassing a private collection of books and magazines about world religions, cooking, comics, and economics. As she reads an issue of The Economist, she discovers that overall price levels have changed only 0.01% in the past two years, and decides it does not matter whether she starts the project now or later.
price stability
By excluding the groups identified in the previous questions, the U.S. Bureau of Labor Statistics calculation methods
understate the true level of unemployment.
The Bureau of Labor Services calculates U-6. This statistic measures the:
underuse of labor, including discouraged workers, marginally attached workers, and underemployed workers.
Alex just turned 16 and started applying for jobs. He has not found a company that will hire him yet.
unemployed
Erik volunteers for 10 hours per week at his children's school and does no other work. He sends his resume to 10 potential employers daily.
unemployed
The unemployment rate is the ratio of all people who are:
unemployed to those in the labor force.
GDP calculated via factor payments includes:
wages, interest payments, rent, and profits.
Which item would NOT be included in GDP for 2019?
your purchase of your neighbor's 2015 Toyota
The total value of all final goods and services produced in a given year, calculated using the prices of a selected base year, is:
real GDP.
A new building for Tony Hawk Industries
Included in GDP
A binding minimum wage results in:
an increase in structural unemployment.
A 55- cent taco
consumption
Herb, who keeps his savings in an old coffee can
loser
Macroeconomics focuses on:
the economy as a whole.
In February 2020, the Bureau of Labor Statistics calculated the unemployment rate to be 3.5%. If frictional unemployment was 1% and structural unemployment was 2%, then the cyclical rate of unemployment was:
0.5%.
If instead the growth rate is 7%, the doubling time for the economy is
10 years.
Suppose that real GDP per capita, growing at a constant rate, doubles over 35 years. What must the annual growth rate of real GDP per capita be for this to occur?
2%
In the Republic of Sildavia, a market basket of goods and services cost $130 in 2017, $140 in 2018, and $160 in 2019. Based on this information, and assuming 2017 is the base year, the price index in 2019 was:
123.07.
Suppose the growth rate of the economy is 2%. The size of the economy roughly doubles every
35 years.
Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is _____%.
4
India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000. How long will it take India to double its real GDP per capita?
7.8 years
A fixed nominal interest rate of _____% with _____% inflation will yield the highest real rate of return for a lender.
7; 2
Approximately how many prices are used to calculate the consumer price index each month?
80,000
Which most accurately characterizes the method used to calculate inflation?
Analysts measure the cost of a bundle of goods representative of overall spending at two points in time and compare the difference in cost.
Which statement accurately describes what is happening along a typical aggregate production function?
Because of diminishing returns, increasing the amount of physical capital per worker will eventually bring smaller and smaller increases in productivity.
Why is a hypothetical basket of goods used to measure inflation?
Consumers can see the general increase in price over time by using a basket of goods.
Poorer countries have historically been responsible for the bulk of world carbon emissions because of poor technology and environmental regulations.
False
A new skateboard you buy for your niece
Included in GDP
A domestically manufactured business computer
Investment
A recent graduate with an engineering degree
Is an input
A significant amount of oil discovered in Texas
Is an input
An upgrade of computers for Mikey's Motors
Is an input
Unskilled migrant worker from Latin America
Is an input
A decrease in property taxes
Is not an input
Bonds issued by an automaker
Is not an input
Contributions to Social Security
Is not an input
Profits of a large investment company
Is not an input
Select the best definition of labor productivity
Output per worker
Which statement accurately characterizes the distribution of real GDP per capita internationally?
Real GDP per capita varies greatly across countries.
Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, each successive increase in physical capital leads to _____ productivity (or real GDP per worker).
a smaller increase in
Workers today are more productive than they were in the past because they:
are better educated and so have more human capital.
To convert the money spent on the basket to a useable figure, economists arbitrarily choose the _________ , or starting point from which we measure changes in prices.
base year
Economists use real GDP per capita to measure economic growth:
because it provides an inflation-adjusted measure of a country's production of goods and services, controlled for population.
Andre recently moved to Boston with his partner Deja, who has a new job as an economics professor at Harvard. Andre is an experienced surgeon who is interviewing with several hospitals in Boston. Andre is:
counted as employed, since he is likely to receive a job offer soon.
Unemployment is at the natural rate of unemployment if there is no:
cyclical unemployment.
An increase in information about job opportunities
decrease
More funding for government worker training programs
decrease
Anita Job is the new Treasury Secretary, and she is trying to interpret the inflation measures for two consecutive years. In year one, the aggregate price level increased by 8%8% and, in year two, the aggregate price level increased by 3%3% . Which term describes the change in the price level from year one to year two?
disinflation
A person who spends time looking for work is:
engaged in job search.
Carbon emissions are negatively correlated with economic growth.
false
A doctor's knowledge about a new cancer treatment affects
human capital
An increase in the number of college gradudates impacts
human capital
More people graduating from culinary school affects
human capital
The skills, training, and education possessed by workers that contribute to economic growth are known as:
human capital.
Over the past year, Hakeem has been working very hard. His employer has taken notice and given Hakeem a 6% raise. During this past year, overall prices in the economy have increased by 4%. Hakeem's real wage has:
increased by 2%
To simplify the task of interpreting the price levels for more realistic and complex baskets of goods, economists typically report the price level in each period as an ___________ , rather than as the dollar amount for buying the basket of goods
index number
A market basket _____.
is a hypothetical set of consumer purchases of goods and services
Economic growth is important to understand because
it is closely tied to standard of living.
The natural rate of unemployment changes when:
labor market institutions change.
Any large, sustainable increase in real GDP must be due to steadily increasing
labor productivity.
In a report published in 1972, the Club of Rome argued that:
limited supplies of natural resources made long-run growth unsustainable.
Karen, a retired school teacher who relies upon her fixed pension to pay for her expenses
loser
Third National, a bank that loaned many people money for home purchases
loser
During periods of high inflation, stores that publish catalogs find it necessary to revise prices and publish new catalogs more frequently than normally. This is an example of the _____ costs of inflation.
menu
can lead to stores listing prices in more stable currencies
menu costs
causes costs associated with changing prices in stores
menu costs
Classify each example as either relating to human capital, physical capital, or technology.
ok meow
Indicate whether each of the following items is an input in the aggregate production function for GDP.
okay meow
Indicate whether the given statements about climate change and economic growth are true or false.
okay meow
An increase in the number of company cars impacts
physical capital
An increase in the number of company computers affects
physical capital
The _ ___ is also known as the wholesale price index.
producer price index
The productivity function measures productivity as:
real GDP per worker.
When the price level increases and incomes remain constant, _____.
real income decreases
Which of the choices is most directly related to cyclical unemployment?
recessions
If the population and GDP increase by the same percentage, then real GDP per capita:
stays the same.
A new cancer treatment affects
technology
New distribution techniques affect
technology
Air and water quality in developed countries is generally much better today than it was several decades ago.
true
Tackling climate change issues is likely only to modestly dent long-term economic growth.
true
A group of 10 people includes 3 retirees, 2 part-time workers, 2 discouraged workers, 1 unemployed worker, and 2 full-time workers. If the discouraged workers in this group became active job searchers, the:
unemployment rate and the labor force participation rate would rise.
The most common indicator in the labor market is
unemployment rate.
can cause distortion to the tax system
unit of account costs
can reduce the quality of economic decisions
unit of account costs
causes difficulty in firms and individuals financial planning
unit of account costs
makes money a less reliable source of measurement
unit of account costs
Joy, who borrowed $40,000 to pay for her college education
winner
The United States federal government, which had almost $15 trillion in debt in 2011
winner
The topics studied in macroeconomics include:
inflation. unemployment. economic growth.
When the economy is doing well, a significant share of unemployment is frictional.
true
Individuals who are involuntarily working part‑time are considered
underemployed.
In February 2020, roughly _____% of unemployed individuals had been unemployed for 5 to 14 weeks.
31.4
Expansions are periods when __ __.
both real GDP and employment grow
Recessions typically hurt
firms and individuals
Consider an economy that produces only smartphones and laptops. Last year, 10 smartphones were sold at $800 each, and 5 laptops were sold at $1,000 each, while this year, 15 smartphones were sold at $900 each, and 10 laptops were sold at $1,100 each. Real GDP this year, using last year as a base year, is:
$22,000.
In 2019, consumer spending was $14,000, government purchases of goods and services were $3,700, and net exports were -$500. If GDP in 2019 was $21,000, investment spending was _____.
$3,800
Consider the information about the economy of Pakistan. Note that the currency of Pakistan is the rupee. The government purchases: 3.403.40 trillions of rupees. Individuals consume: 10.9010.90 trillions of rupees. Individuals save: 4.914.91 trillions of rupees. Businesses invest: 1.401.40 trillions of rupees. Foreigners spend: 0.690.69 trillions of rupees to purchase Pakistani firms. Pakistan imports: 1.901.90 trillions of rupees. Pakistan exports: 1.281.28 trillions of rupees. Calculate Pakistan's GDP. Assume that the values are all current and no conversions need to be made. Give your answer in terms of trillions of rupees, and round to two decimals.
15.08
A survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%.
20
Suppose that, in year 1, an economy produces 200 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 210 golf balls that sell for $3.50 each and 80 pizzas that sell for $9 each. Using year 1 as the base year, the growth rate of real GDP from year 1 to year 2 is ____%.
5.83
If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is _____%.
7.7
Unemployment rates are usually HIGHEST for:
African American teenagers.
The commission paid to the seller of a previously-owned collectors' skateboard
Included in GDP
Honda's assembly and sale of cars in the U.S.
Included in U.S. GDP
Old Navy purchases mannequins to display clothes
Included in U.S. GDP
Which individual is out of the labor force?
James is without a job, is able to work, but is not actively looking for work.
The economist of the 1930s who argued that the Great Depression was caused by inadequate spending was:
John Maynard Keynes.
Out of these individuals, whose money gained the most value during their time period?
Linda's money gained the most value.
Which of these organizations officially determines when the economy is experiencing a recession?
National Bureau of Economic Research
The actions of individuals in an economy can compound upon one another, leading to outcomes that magnify the actions of individuals
The whole is greater than the sum of its parts.
Suppose the civilian noninstitutionalized working-age population is 35.935.9 million in in a hypothetical economy. Of these, 4.44.4 million are working part-time and 13.1913.19 million are working full-time. Assume the Bureau of Labor Statistics (BLS) definitions are used for calculating unemployment data. Among those not working, the most recent job-search activity for 3.403.40 million happened less than two weeks ago, while 1.721.72 million most recently looked for work between two and four weeks ago. An additional 0.860.86 million most recently looked for work five weeks ago, and the remaining 12.3312.33 million who do not have jobs have not looked for work in the past six weeks. Round your answers to two decimal places.
What is the size of the total labor force? 22.71 How many people are unemployed? 5.12 What is the labor force participation rate? 63.25 What is the unemployment rate? 22.54
Based on the graph, a major characteristic of a recession is
a decrease in employment.
Select the correct definition of inflation.
a general and ongoing rise in the average level of prices in an economy
Which of the events is likely to occur when the business cycle is in a period of expansion?
an increase in economic growth
Which of the events is likely to occur when the business cycle is in a period of recession (contraction)?
an increase in unemployment
James is an architect who has been laid off owing to a slump in the demand for property. He feels he will have to wait until the economy picks up before he can get a new job.
cyclical unemployment
Sarah is a recent economics graduate who is entering a difficult labor market, due to a severe recession. She is continuing to look for work but is having a hard time getting interviews.
cyclical unemployment
Reducing workers' collective bargaining rights
decrease
Had society known at the time of the selected event what it knows now about the macroeconomy, what course of action might federal policymakers have taken?
decreased taxes, supported decreased interest rates, or both
According to Keynesian economics, economic downturns are caused by
inadequate spending.
Increasing the minimum wage
increase
Peter is a compulsive gamer. He decides to buy World of Warcraft, all of its expansions, Starcraft 2, a PS3, a Wii, and an Xbox 360, since prices in general have been rising at an alarming rate.
inflation
A rise in the price level over time is referred to as:
inflation.
What is the main goal of policymakers in regard to the business cycle?
limit the volatility of the business cycle by reducing the size of both recessions and economic booms
This group, consisting of individuals who would like to work but have not looked for work during the past four weeks, is included among
marginally attached workers.
Identify whether the actions or scenarios would likely increase or decrease the natural rate of unemployment.
meow.
A measure of an economy's output using current prices.
nominal GDP
A measure of output that is not adjusted for inflation.
nominal GDP
James quit his job to stay at home with his children and has not worked in 15 years, nor has he looked for work.
not employed
Underemployed people are counted as employed, even though they are _____.
not fully using their skills
Laura works 20 hours in a paid position for her local animal shelter.
not unemployed
Pete had a knee replacement two weeks ago and will not be available to work at his job as a mechanic for the next three months.
not unemployed
A measure of an economy's output using constant prices.
real GDP
A measure of output that is adjusted for inflation.
real GDP
Craig lost his job several months ago. He is having a hard time finding a job that pays him more than unemployment insurance does.
structural unemployment
Who reports the official U.S. unemployment rate?
the U.S. Bureau of Labor Statistics
Which of the factors would decrease the rate of frictional unemployment?
the advent of the Internet, which makes finding available jobs easier
Suppose a report on CNN says that the United States is heading into a recession. As a result, Bert's family, as well as many other like-minded families and individuals, reduces their spending and instead fills up their savings accounts for potential hard times.
the economy is actually harmed, since there is a sharp decease in consumer spending.
Prior to the Great Depression, most economists believed that
the economy was self regulating
The circular-flow diagram illustrates:
the key concepts in the national accounts.
In macroeconomics, this result is known as
the paradox of thrift.
GDP per capita measures the value of all final goods and services produced within a country divided by ____.
the population
Real GDP per capita is NOT an adequate measure of
the well-being of each person in an economy.