week 6 quiz

House GOP changes course on infrastructure House Republicans abandoned plans to slash U.S. infrastructure spending and now say they are trying to find ways to pay for a multiyear highway-construction program, which will exceed $300 billion. Source: The Wall Street Journal, September 30, 2011 Explain the effect of the government's increased expenditure on infrastructure on U.S. aggregate demand and aggregate supply. The government's increased expenditure on infrastructure ______ in the short run and ______ in the long run.

increases aggregate demand with no change in aggregatein ​ supply; increases potential GDP and aggregate supply

When an American college student in Davis, California spends $200 on a pair of Louis Vuitton jeans (a famous French brand), U.S. consumption ________, U.S. net exports ________, and U.S. GDP ________.

increases by $200; decreases by $200; does not change

An increase in investment ________ aggregate demand, the aggregate demand curve shifts ________ and the economy is in the ________ phase of the business cycle.

increases; rightward; expansion

Sherri lives in Canada and is considering buying a new sofa. If the price level in Canada falls and the price level in the United States does not change, Canadian manufactured sofas are relatively

less expensive, so Sherri will likely purchase a Canadian manufactured sofa.

The main sources of bias in the CPI are​ ______.

new goods​ bias, quality change​ bias, commodity substitution​ bias, and outlet substitution bias

If average annual tuition at public 4-year colleges was $1,908 in 1990, when the CPI was 130.7, and $8,655 in 2012 when the CPI was 229.6, then the real cost of annual tuition

rose by 158 percent during that period.

Because of the existence of the aggregate demand multiplier, a $10 billion change in expenditure

shifts the aggregate demand curve by more than $10 billion.

Potential GDP is

the amount of real GDP that the economy would produce if it were at full employment of all resources.

The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2010. The real interest rate in Syldavia during 2012 was

0.6

If the GDP price index is 125 and nominal GDP is $130 billion, then real GDP equals ________ billion.

104.00

The tables show the quantities of the goods that Harry bought and the prices he paid during two consecutive weeks. Harry's CPI market basket contains the goods he bought in Week 1. Calculate Harry's CPI in Week 2. What was his inflation rate in Week 2? Harry's CPI in Week 2 is

128.1 28.1

What was Northland's GDP as measured by the income approach in 2016? Northland's GDP as measured by the income approach in 2016 is $

1580

Using the table above, the working-age population is

195 million

The table above gives data for the nation of Pearl, a small island in the South Pacific. The economy is at full employment when real GDP is

25 billion

In 2010, the GDP price index was 101.2 and real GDP was $14.8 trillion. In 2011, nominal GDP was $15.5 trillion and real GDP was $15.0 trillion. Calculate the increase in nominal GDP and the increase in the GDP price index in 2011. >>> Answer to 1 decimal place.

3.3 2.1

The data in the table above shows the consumption by families in an economy. The year 2013 is the reference base period. Based on the table above, the cost of the base period market basket in 2013 is

3300

Using the information in the table above, what does GDP equal?

380 billion

The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2009. What is nominal GDP in 2009?

450

Using the table above, the unemployment rate is

5.71

If the base year is 2015, calculate the economy's nominal GDP and real GDP in 2016.

600 135

The data in the table above shows the consumption by families in an economy. The year 2013 is the reference base period. Based on the table above, the CPI for 2014 is

98.5

A rise in the price level brings a ________ in the buying power of money that ________ consumption expenditures and causes the quantity of real GDP demanded to ________.

Fall decrease decrease

If a wealthy woman marries her butler, quits paying him and does not hire a new butler, then

GDP definitely decreases.

A new technology is discovered which results in all new cars producing 50 percent less pollution. Which of the following is true?

GDP will increase if there is an increase in the production cost and price of the car.

Which of the following is true?

To be classified as employed, you must work at least 1 hour per week at a paid job or 15 hours or more as an unpaid worker in your family business.

If European economies enter a recession,

U.S. aggregate demand decreases and the U.S. AD curve shifts leftward.

Production by Honda, a Japanese firm, in the United States is included in ________ GDP and production by Nike Corporation, a U.S. firm, in Vietnam is included in ________ GDP.

US Vietnam

In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. At this point there is

a recessionary gap.

The change in potential real GDP and aggregate supply shown in the graph above can be a result of

an increase in the quantity of capital.

Based on the figure above, in which quarter or quarters did a recession occur?

between 2013, 2nd quarter to 2014, 2nd quarter

The expenditure approach to measuring GDP is done by using data on only

consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.

John has been laid off from his job because of a general downturn in the economy. John's unemployment is best classified as

cyclical

The government passes a law which doubles the wages of all workers. Aggregate supply will ________, and real GDP will ________, and the price level will ________.

decrease decrease increase

An increase in the price of oil ________ aggregate supply, shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle.

decreases; leftward; recession

Marla is an associate at JCPenney who wants to work 40 hours week but works 25 hours a week because sales at JC Penney are slow. Marla works part time for _______ reasons. Joe is a server at Olive Garden who wants to work 40 hours a week but works 15 hours a week because the number of patrons at Olive Garden has decreased. Joe works part time for _______ reasons.

economic economic

Facebook is the reason for the productivity slowdown, no, really Facebook's WhatsApp is free and it sells no advertising. So WhatsApp's value of production in GDP is zero. Assume that WhatsApp's services are produced by 300 people all of whom earn $100,000 a year. By this measure, WhatsApp's value of production in GDP is $30 million. Source: Forbes, February 13, 2016 What are the two approaches to measuring GDP described in the news clip? Why is one of these measures of the contribution of WhatsApp to GDP wrong? The two approaches to measuring GDP described in the news clip are the​ _______.

expenditure approach and the income approach

Phillip is a 22-year old who has no job and is available for work, but has not actively looked for a job in the last month. The Current Population Survey identifies Phillip as ________, ________ the labor force, and ________ the working-age population.

not unemployed; not part of; part of

Economists look to expand GDP to include the quality of life Robert Kennedy, when seeking the Democratic presidential nomination in 1968, remarked that GDP measures everything except that which makes life worthwhile. Source: The New York Times, September 1, 2008 Which items did Robert Kennedy probably think were missing? Robert Kennedy probably thought that​ _______ were missing from the measure of GDP.

political freedom and social justice

The following are groups of individuals in the population: 1. Individuals who are under 16 2. Individuals in institutional care 3. Individual in the armed forces 4. Individuals working for pay at a fulltime job 5. Individuals who are employed 6. Individuals not employed but were available for work and were looking for work 7. Individuals not employed and looking for work Using the table above, the Current Population Survey classifies the group of individuals obtained by adding groups 5 and 6 as

the labor force.

Negative interest rates The Federal Reserve has held interest rates close to zero percent for the past seven years. Even with low inflation, "real" interest rates have been negative. Source: San Diego Union Tribune, February 5, 2016 Explain why with a zero interest rate, even low inflation makes the real interest rate negative. Can the real interest rate exceed the nominal interest rate? When the nominal interest rate equals zero, the real interest rate equals _______.

the negative of the inflation rate