ECON 102 Midterm 2

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To be counted as unemployed, one must:

be out of work and be actively looking for a job during the past four weeks.

If the United States exports $100 of goods and services and imports $150 of goods and services and there is no other factor income or transfers, the balance on the current account is

-$50

GDP is $12 this year in a closed economy. Consumption is $8 and Govt. spending is $2. Taxes are $0.5. How much is Govt. budget balance?

-1.5 (Deficit)

Net Capital Inflow Equation #2

-GDP + Government Spending + Consumption + Investment Spending

Which asset would NOT be included in the U.S. financial account?

A Chinese video game imported into the United States

Which statement is an example of investment spending in macroeconomics?

A Domino's pizza store has purchased a new pizza oven

The Bureau of Labor Statistics calls a person who is out of work, would like to work, but has given up looking for work

A discouraged worker

A binding minimum wage in a labor market is set ____ the equilibrium wage and causes a ___ of labor

Above; surplus

Which example illustrates cyclical unemployment?

An autoworker is laid off because a recession has caused a decline in sales

Which statement is considered investment spending in macroeconomics?

GM builds a new plant

An example of structural unemployment is a(n)

Geologist who is permanently laid off because of an increase in wages won by labor unions.

GDP counts the dollar value of only final goods and services because

If we counted the value of all goods, we would count inputs, such as the value of steel in a new automobile more than once

Net Capital Inflow Equation

Imports - Exports

Private Savings equals

Income after taxes minus consumption

Generous unemployment benefits are likely to cause a(n)

Increase in the unemployment rate

Suppose that interest rates rise in the US. We expect capital __ to US and the US dollar price of foreign currencies to __, all other things equal

Inflows; fall

The price in the loanable funds market is the

Interest rate

A countries GDP

Is the total factor income earned by residents of a country

Suppose that roughly 8 mil. people in the US were actively seeking jobs but had not found them this month, the same number as last month. Suppose that 2 million of the people who were unemployed last month gave up their search this month and stopped looking for work. What will happen to the official unemployment rate this month, all other things unchanged?

It will fall because 2 mil. people have are not in the labor force this month and are not counted as unemployed

Which scenario is NOT associated with government budget deficits?

The total amount of borrowing decreases

Structural unemployment consists of people who are unemployed because of

There being more job hunters than there are jobs

When the dollar appreciates relative to the Canadian dollar

US goods become more expensive in Canada

Jim has a part time job. He would prefer to have a full time job but has been unable to find one. Jim is classified as:

Underemployed

During a recession:

Unemployment increases and the growth rate of real GDP decreases

Most households derive the bulk of their income from

Wages

The labor force is the total

number of people who are employed or unemployed.

GDP is $12 this year in a closed economy. Consumption is $8 and Govt. spending is $2. Taxes are $0.5. How much is investment spending?

$2

GDP is $12 this year in a closed economy. Consumption is $8 and Govt. spending is $2. Taxes are $0.5. How much is national saving?

$2

GDP is $12 this year in a closed economy. Consumption is $8 and Govt. Spending is $2. Taxes are $0.5. How much is private saving?

$3.5

Suppose that the market basket for the university student price index consists of 5 textbooks and 100 gallons of gasoline. In 2010, the base year for this index, textbooks cost $50 each and gas costs $1 per gallon. In 2011, textbooks cost $80 each and gas costs $3 per gal. The USPI for 2011 is

200

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:

5%

The calculation of GDP does NOT include the value of

Bridgestone tires purchased by Ford Motor Co.

A relatively low saving rate affects productivity by

Causing a shortage of funds for investment in physical capital

A family from Peru eats in a restaurant in Salt Lake City. In the accounting for US international transactions, this transaction would appear in the__, and it would be entered as a payment __ foreigners

Current account; from

National Saving Equation

GDP - Consumption - Government Spending

Private Saving Equation

GDP - Consumption - Taxes

A decrease in the demand for loanable funds would MOST likely be caused by a(n)

Decrease in expected business opportunities

Suppose that the value of the euro fell from $1.32 on April 30, 2012, to $1.23 on July 5, 2012. This implies during this period the euro __ and the dollar __.

Depreciated; appreciated

A country's balance of payments on financial account is the

Difference between the countries sale of assets to foreigners and its purchases of assets from foreigners

The natural rate of unemployment is:

Equal to the sum of frictional and structural unemployment

The Fisher effect states that

Expected real rate of interest is unaffected by the change in expected inflation

Current Account Equation

Exports - Imports

A financial investor from Los Angeles purchases bonds issued by the govt. of Peru. In the accounting for US international transactions, this transaction would appear in the __, and it would be entered as a payment __ foreigners

Financial account; to

Structural unemployment CANNOT be caused by:

Fluctuations in the business cycle

Money flows into the US from other countries as a direct result of

Foreign purchases of US goods and services

People who are changing jobs are counted in _____ unemployment

Frictional

Anna recently moved to Boston with her husband Joe, who has a new job as an econ professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is

Frictionally unemployed

Investment Spending Equation

GDP - Consumption - Government Spending

To help increase investment spending, the government can

Lower taxes on the returns from savings so that total savings increase and the interest rate falls

An increase in the value of nominal GDP over time

May be due to an increase in prices, in the production of goods and services, or both

In an open economy, total investment equals

National savings plus capital inflow.

The GDP deflator for a given year is 100 times __ GDP for that year __ GDP for that year

Nominal; divided by real

You are a college student and NOT working or looking for work. You are

Not part of the labor force

Which example is NOT a government transfer?

Payments by the Defense Department for a new weapons system

Investment spending is spending on

Productive physical capital

Crowding out hampers the economy by

Reducing private investment spending on physical capital

Physical capital is purchased through investment spending, which in turn is MOSTLY financed out of

Savings

Sam, who is 55 years old and has been a steelworker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is ___ unemployed

Structurally

If private savings increase, the __ loanable funds will __, interest rates will __ and the amount of borrowing will __

Supply of; increase; decrease; increase

Government Budget Balance Equation

Taxes - Government Spending

Government borrowing is

The amount of funds raised by government in financial markets

The Venezuela example illustrates

The importance of distinguishing between nominal and real GDP

Which sentence is true?

The labor force is the total number of people working plus those who are unemployed

The rate of unemployment that exists when the economy is at full employment is

The natural rate

Firms pay an efficiency wage because

it reduces the risk of losing the best workers.

A bank makes a loan for one year. The nominal annual interest rate is 7.5%. The real rate is 4%. Over the course of the year, overall prices increase by 4%. This rate of inflation hurt the _____ because the actual rate of inflation was _____ than the anticipated rate.

lender; higher


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