CH 7/8 PRACTICE MACRO ECON
If the consumer price index is 180 in year 1 and 190 in year 2, the inflation rate between year 1 and year 2 is about: a) 5.26% b) 5.56% c) 6.5% d) 10%
5.56%
The value of ____ is counted in GDP a) glass for windshields purchased by a car manufacturer b) a new car sold by a dealer c) a used car sold by a dealer d) a short of stock in a car manufacturer
New car sold by dealer
The unemployment rate is the: a) percent of the labor force that is unemployed b) number of people unemployed c) the labor force minus the number of people unemployed d) average length of time someone is unemployed
Percent of the labor force that is unemployed
The real interest rate is the nominal interest rate ____ a) less the rate of inflation b) divided by the rate of inflation c) multiplied by the rate of inflation d) plus the rate of inflation
less the rate of inflation
When the price level increases and incomes remain constant, _____ a) everyone becomes wealthier b) real income decreases c) real wealth increases d) lenders are better off
real wealth increases
An INCREASE in the number of discouraged workers tends to: a) raise the official unemployment rate b) lower the official unemployment rate c) lower the number of people who are frictionally unemployed d) increase the number of people who are structurally unemployed
Lower the official unemployment rate
According to the information presented in the Table, GDP is: a) $94 billion b) $188 billion c) $168 billion d) $139 billion
$188 billion
The total population is ____ million a) 394 b) 163 c) 232 d) 169
232
Suppose the labor force participation rate is 70%. The number of unemployed adults is _____ million a) 27 b) 95 c) 46.5 d) 105
27
The approximate rate of inflation in year 3 is: (insert photo) a) 5% b) 10% c) 19% d) 20%
5%
If the price level and nominal GDP both doubled, then real GDP would: a) also double b) increase by half c) remain unchanged d) decrease by half
remain unchanged
A survey reveals that, on a small island, initially, 1,000 people have jobs, 200 people are unemployed but are looking for jobs, and 200 people are neither working nor looking for work. Suppose that 100 of the 200 people who weren't looking for work now begin looking for work and that half of the new entrants find a job. The unemployment rate: a) rises to 19.2% b) rises to 21.4% c) rises to 28.6% d) nothing happens to the unemployment rate
Rises to 19.2%
A survey reveals that, on a small island, initially, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for jobs. Suppose that 10 of the 30 people who weren't working or looking for work now begin looking for work. There are now 20 people without jobs but looking for work and 40 people working. The unemployment rate: a) rises to 33.3% b) rises to 50% c) falls to 25% d) nothing happens to the unemployment rate because these people weren't working before, and they aren't working now
Rises to 33.3%
The MOST important use of GDP is a measure of: a) size of the economy b) level of unemployment c) changes in the price level d) rates of return in financial markets
Size of the economy
Suppose a market basket consists of the following goods: 50 pens, 25 notepads, and 25 paperclips. Also assume that the unit prices of these goods are as follows for the years noted and that 2018 is the base year. What is the value of the price index in 2018? a) 100 b) 111 c) 90 d) 0
Value: 100
Which transaction is included in the nation's gross domestic product? a) a college student buys a used textbook from his roommate b) a construction company purchases lumber to build a new house c) a college student buys a pizza and has it delivered to her dorm room d) a group of college students volunteer to rake leaves at an assisted living facility for senior citizens
a college student buys a pizza and has it delivered to her dorm room
What is the total value added of all stages of production of furniture in this production schedule? a) $800 b) $1,200 c) $1,800 d) $2,000
$1,200
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: a) $22,000 b) $24,500 c) $11,000 d) $13,500
$22,000
If the wage rate is $40 per hour, and the price level is 2, then the real wage is _____ per hour a) $20 b) $40 c) $80 d) $2
$40
Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. What is the value of the market basket in 2017? (insert photo) a) $3 b) $40 c) $42 d) $44.50
$40
Assume that an economy produces only lemonade and cookies. If 2019 is the base year, real GDP in 2019 was: a) $400 b) $420 c) $425 d) $445
$445
If, during 2019, the Republic of Sildavia recorded a GDP of $75 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2019 in Sildavia were: a) $46 billion b) $36 billion c) $26 billion d) $16 billion
$46 billion
Total expenditures on GDP by the household sector are: a) $100 billion b) $1,085 billion c) $500 billion d) $600 billion
$600 billion
Enchanté Inc., a designer clothing company, buys $400 worth of silk and $30 worth of accessories to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be: a) $630 b) $230 c) $200 d) $830
$630
Menu costs of inflation are the: a) Costs associated with money becoming a less reliable unit of measurement b) Costs of transactions associated with avoiding the inflation tax c) Costs associated with businesses changing prices d) Revenue the government gets from printing money
Costs associated with businesses changing prices
Unit of account costs of inflation are the: a) costs associated with money become a less reliable unit of measurement b) costs of transactions associated with avoiding the inflation tax c) costs associated with businesses changing prices d) transfers the government gets from printing money
Costs associated with money become a less reliable unit of measurement
Deflation is a; a) decrease in unemployment b) decreasing aggregate price level c) decline in wages d) recession
Decreasing aggregate price level
The total income of households after taxes and government transfers is called: a) disposable income b) private savings c) aggregate spending d) investment
Disposable Income
Which statement about gross domestic product is FALSE? a) It is aggregate output b) It is the total output of final goods and services c) It grows during an expansion d) is the total production of all final and intermediate goods
is the total production of all final and intermediate (true!)
The producer price index is often regarded as a warning sign of inflation because: a) prices of inputs will ultimately be reflected in prices of final products b) producers are likely to have monopoly control over prices c) consumers have to pay the prices charged d) commodity producers can sell whatever they want at higher prices
prices of inputs will ultimately be reflected in prices of final products
In the circular flow diagram, firms: a) sell goods and services b) buy goods outside of investment spending c) sell labor d) buy services outside of investment spending
sell goods and services
Which item would NOT be included in this year's GDP? a) the production of a tv show b) purchases of a new hybrid truck c) the hiring of a new school teacher d) the purchases of your neighbors house, which was built in 2019
the purchases of your neighbors house, which was built in 2019
The rate of unemployment is found by dividing the: a) number of people looking for work by the population b) number of people not working but seeking work by the sum of the number of people not working but seeking work and the number of people employed c) labor force by the number of people seeking work d) Unemployed and discouraged workers by the labor force
*** number of people not working but seeking work by the sum of the number of people not working but seeking work and the number of people employed
Considering 2018 as the base year, real GDP between 2018 and 2019 grew at a rate of: a) 53.19% b) 39.47% c) -39.47% d) -58.67%
-39.47%
If 99 million people are working, and 1 million are unemployed but actively seeking work, then the unemployment rate is _____% a) 1 b) 5 c) 10 d) 100
1%
Calculate the GDp deflation for 2019 a) 111 b) 104 c) 90 d) 96
104
Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: a) 7% b) 10% c) 14.29% d) 4.2%
14.29%
the total population is ______ million a) 486 b) 253 c) 278 d) 283
278 Labor force + Adults + non adults + unemployed adults
Use Table: Population Data for Roanoke County. If marginally attached workers are included in the labor force and counted as unemployed, the unemployment rate is _____%. a) 6.4 b) 4.32 c) 3.85 d) 2.3
3.85
(Table: Labor Force Distribution) The unemployment rate is _____%. a) 3.85% b) 10% c) 4.55% d) 6.75%
3.85%
If marginally attached workers are included, the number of persons in the labor force in Estill County is: a) 7,400 b) 6,500 c) 6,000 d) 5,500
6,500
Employment Data. If marginally attached workers are included in the labor force and counted as unemployed, the unemployment rate is _____%. a) 4.3 b) 19.2 c) 7.2 d) 12.9
7.2
Suppose that banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____%, and the real interest rate is _____% a) 6; 9 b) 9; 6 c) 9; 3 d) 6; 12
9%; 6%
A price index: a) always includes a base year b) is used to measure the cost of a market basket across different years c) is normalized so that it equals 100 in the base year d) all of the above are true
All of the Above
Which equation breaks GDP down into the four sources of aggregate spending? a) GDP = C + I + G + X + IM b) GDP = C + I + G - X - IM c) GDP = C - I - G - X + IM d) GDP = C + I + G + X - IM
C + I + G + X - IM
The price measure MOST widely used to determine the inflation rate in the United States is the _____ a) producer price index b) consumer price index c) GDP deflator d) national income account
CPI (Consumer Price Index)
In general, expansions are characterized by: a) increasing unemployment b) falling unemployment c) decreasing unemployment d) constant employment
Falling unemployment
GDP is the total dollar value of all: a) Intermediate goods and services produced in the economy in a given period b) Wages paid to producing workers in a given period c) Final goods and services produced in the economy in a given period d) Government produced in a given period
Final goods and services produced in the economy in a given period
Shoe leather costs are the: a) effect of inflation on the prices of food, clothing and other necessities b) increase cost of transactions due to inflation c) higher price of leather goods d) effect of inflation on transportation costs
Increased cost of transactions due to inflation
In the circular-flow model, households: a) receive transfer payments from the government b) buy resources in the factor markets c) sell products in the market for goods and services d) issue stocks and bonds to raise capital
Receive transfer payments from the government
A nations exports minus its imports: a) equals its private investment b) is net exports c) is always a positive number d) is equal to net transfer payments
Net Exports
In official unemployment statistics, discourage workers are a) counted as employed b) included in the labor force c) not included in the labor force d) counted as underemployed
Not included in the labor force ***
Income divided by the price level is _____ income a) personal b) real c) disposable d) national
Real
The scale MOST often used to compare economic performance in other years is: a) the circular flow diagram b) real gdp c) business cycle d) fiscal policy
Real GDP
Real per capita GDP is: a) real gdp divided by the population b) real gdp divided by the amount of capital available in the economy c) not a useful measure of human welfare d) rarely used as a tool to compare countries' possible resources
Real GDP divided by the population
If the dollar amount of nominal GDP decreases, then it is possible that ____ a) aggregate output decrease by less than prices increase b) aggregate output decreases by more than prices c) aggregate output increases by more than prices d) aggregate output increases and prices decrease
aggregate output decreases by more than prices
When inflation rises unexpectedly, borrowers will ____ and lenders will ____ a) be hurt; benefit b) benefit; be hurt c) be hurt; benefit d) benefit; benefit
benefit; be hurt
The town of York produces two goods, good A and good B. The following is information regarding York's production of these two goods and their prices over three years. With 2017 as the base year, real GDP in 2017 was _____ GDP in _________ a) equal to real; 2018 b) equal to nominal; 2017 c) greater than real; 2018 d) greater than nominal; 2019
equal to nominal; 2017
The inflation or deflation rate is: a) the change in a price index divided by the initial value of the index b) the change in a price index divided by the next index number c) the difference between the initial price index number d) computed by divided the old price index number by the new price index
the change in a price index divided by the initial value of the index
The price index in the current year is the cost of the market basket in ____ year divided by the cost of the market basket in ____ year times 100 a) the base; the current b) the current; the base c) a past; a future d) a future; a past
the current; the base
Which statement is TRUE? a) the number of people not working but who have looked for work in the past year is equal to the number of unemployed people b) the labor force is the total number of people working + those who are unemployed c) the unemployment rate is the number of people unemployed expressed as a percentage of the population d) the labor force is the same as the population
the labor force is the total number of people working + those who are unemployed
Which item would NOT be included in GDP for 2019? a) the production of a tv show b) the purchases of a new work truck c) the hiring of a new police officer d) your purchases of your neighbors 2015 Toyota
your purchases of your neighbors 2015 Toyota