Econ 2301 midterm
If the population growth rate is 2 percent, real GDP per person will double in 7 years if real GDP grows by ______ percent per year.
12
If the current price of a market basket of goods is $850 and the base year price for the same market basket is $500, what is the value of the price index?
170
When the price level is rising at _______ and the real interest rate is 1 percent a year, the nominal interest rate is 3 percent a year.
2 percent a yea
The BLS reported that in August 2019August 2019, the labor force wasnbsp 163.9 163.9 million, employment wasnbsp 157.9 157.9 million, and the working-age population wasnbsp 259.4 259.4 million. The BLS also reported thatnbsp 16.5 16.5 percent of all employment in August 2019August 2019 was part time and thatnbsp 4.4 4.4 million people worked part time for economic reasons. How many people worked part time for noneconomic reasons?
21.7 million people worked part time for noneconomic reasons.
Which of the following transactions is not counted in GDP?
A consumer prepares meals for his family.
Which of the following statements is an example of a minimum wage law?
A government regulation makes it illegal to hire a worker for less than $10 an hour.
What are the four major categories of expenditure?
Consumption, investment, government purchases, and net exports.
Which of the following statements illustrates frictional unemployment?
Robin is quitting his current job to find another that has better prospects.
Market price is determined by
both supply and demand
The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70 _____ by the annual percentage _____.
divided; growth rate of the variable
Much of Africa experiences slow economic growth because it lacks ______.
economic freedom, private property rights that are enforced, and markets that function well
The preconditions for economic growth are ______.
economic freedom, private property rights, and markets
The United Nations Human Development Report gives the following data for real GDP per person in 2014: China, $12,547; Russia, $22,352; Canada, $42,155; United States, $52,947. Other information suggests that household production is similar in Canada and the United States and smaller than in China and Russia. The underground economy is larger in Russia and China and a similar proportion of each of these economies. Canadians and Americans enjoy more leisure hours than do the Chinese and Russians. Canada and the United States spend significantly more on the environment than do China and Russia. In which pair (or pairs) of countries is it easiest to compare the standard of living? And in which pair (or pairs) is it most difficult? Explain why. The standard of living cannot be easily compared in ______ and ______ because ______.
either China or Russia; either Canada or the United States; in each pair household production, the underground economy, leisure hours, and the environment are different
When the unemployment rate_______ the natural unemployment rate, real GDP is _______ potential GDP and the output gap is _______.
exceeds; below; negative
Gross domestic product is the market value of all the ______ in a given time period.
final goods and services produced by all firms located in the United States
Inventories are part of investment and therefore included in GDP because
firms produce goods, however sometimes the goods may be unsold at the time GDP is computed.
The BLS counts Jody as being unemployed if she _______.
wants a job and is willing to take a job but after searching last week cannot find a job
The increase in real GDP per hour of labor that results from an advance in technology makes labor ______ productive ______.
more; at all quantities of capital
Which of the following illustrates property rights?
Dave has patented his invention.
Mary makes 10 pies and 20 cakes a day and her opportunity cost of producing a cake is 2 pies. Tim makes 20 pies and 10 cakes a day and his opportunity cost of producing a cake is 4 pies. If Mary and Tim specialize in the good in which they have a comparative advantage, ______.
Mary produces only cakes while Tim produces only pies
Which of the following statements is an example of a union wage?
Members of the Air Line Pilots Association earn 25 percent more than other pilots.
The productivity curve is the relationship that shows how _____ changes as the quantity of _____ changes.
real GDP per hour of labor; capital per hour of labor
Keynesian macroeconomics is the view that the market economy _____ and needs _____ to achieve full employment and sustained economic growth.
is inherently unstable; active government intervention
The increase in real GDP per hour of labor that results from an increase in capital per hour of labor ______.
is larger at a small quantity of capital than at a large quantity of capital
The formula for computing a basic price index is
(cost of market basket today/cost of market basket in base year) x 100
If nominal GDP increases by 5 percent a year and the GDP price index rises by 2 percent a year, then real GDP increases by _______.
3 percent a year
If real GDP increases from $5 billion to $5.25 billion and the population increases from 2 million to 2.02 million, real GDP per person increases by ______ percent.
4.0
Explain why, other things remaining the same, a country with a well-educated population has a faster economic growth rate than a country that has a poorly educated population.
A country with a well-educated population has more human resources to invest in expanding human capital, which can develop new and more productive technologies.
Classify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. A. A computer purchased for a senator's office B. New cars bought by Hertz, the car rental firm C. A DVD bought by a household D. Aluminum sheets bought by Boeing
A is a final good that is government expenditure, B is a final good that is investment, C is a final good that is consumption expenditure, and D is an intermediate good
What does classical growth theory say will eventually end economic growth?
A population explosion that leads to a fall in labor productivity and the return of real GDP per person to the subsistence level
Which of the following statements describes the law of market forces? A. A shortage of cabbage increased the price of cabbage and a surplus of corn lowered its price. B. When the price of corn fell, nothing else changed and farmers planted fewer acres with corn. C. When the price of cabbage increased, nothing else changed and people bought less cabbage. D. A rise in the price of cabbage creates a surplus of cabbage and a fall in the price of corn creates a shortage of corn.
A shortage of cabbage increased the price of cabbage and a surplus of corn lowered its price.
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market?
At a price of $1 per pack, I plan to buy 2 packs of peanuts per week.
Which of the following is an example of capital goods? A. The government will open another public school in the area. B. I enjoy Starbucks' coffee. C. Sam is scared of driving. D. The population of India will overtake China by 2020.
The government will open another public school in the area.
The Bureau of Labor Statistics reported that in August, 2019, the labor force was 163,922,000, employment was 157,878,000, and the working-age population was 259,432,000. Calculate for that month the labor force participation rate and the unemployment rate.
The labor force participation rate was 63.2 percent. The unemployment rate was 3.7 percent.
The Bureau of Labor Statistics reported that in July comma 2019July, 2019, the labor force was163 comma 922 comma 000163,922,000, employment was 157 comma 878 comma 000157,878,000, and the working-age population was 259 comma 432 comma 000259,432,000. Calculate for that month the labor force participation rate and the unemployment rate.
The labor force participation rate was 63.2 percent. The unemployment rate was 3.7 percent.
Suppose the equilibrium price and equilibrium quantity of gold both increase. Which of the following would produce such a change?
The market demand curve for gold could have increased.
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand? A. I can't afford as many textbooks because my rent has increased. B. For me, a good course website is a substitute for a textbook. C. At an average price of $80 per text book, I plan to buy 5 text books per semester. D. The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
In the market for jeans, which of the following events increases the demand for a pair of jeans?
The price of a denim skirt (a substitute for jeans) rises.
In the market for skim milk, the price of a carton of skim milk rises. Explain the effect of this event on the quantity of skim milk supplied and on the supply of skim milk.
The quantity of skim milk supplied increases and the supply of skim milk is unchanged.
Consider the market for smartphones. Suppose the price of the price of a smartphones rises. Explain the effect of this event on the quantity of smartphones demanded and on the demand for smartphones.
The quantity of smartphones demanded decreases and the demand for smartphones is unchanged.
Ford says it cut its labor costs by 35 percent between 2006 and 2011. Ford's wage rate, including benefits, was $80 an hour in 2006 and $58 an hour in 2011. The CPI was 202 in 2006 and 218 in 2011. Did the real wage rate fall by more or less than 35 percent?
The real wage rate in 2006 was $39.60 and the real wage rate in 2011 was $26.61. Between 2006 and 2011, the real wage rate fell by less than 35 percent.
Which of the following statements illustrates diminishing returns?
The second billion hours of labor changes real GDP from $1 to $3 trillion and the third billion hours of labor changes real GDP from $3 to $4 trillion.
The Bureau of Labor Statistics reported that in June 2001, the labor force was 145.1 million, employment was 138.2 million, and the working-age population was 215.2 million. Calculate the unemployment rate and the labor force participation rate for that month.
The unemployment rate was 4.84.8 percent. The labor force participation rate was 67.4 percent.
Which of the following is an example of absolute advantage? A. Charlie enjoys skiing while Ryan enjoys hiking. B. Nick has an advantage over others in the industry because he knows many software programs. C. Amy is smart and performs well in exams. D. Tom does his math homework in 2 hours while Harry takes only 30 minutes to do the same task.
Tom does his math homework in 2 hours while Harry takes only 30 minutes to do the same task.
Which of the following illustrates goods markets? Which of the following illustrates factor markets? A. Walmart sells potatoes at $2.14 a pound. Ann bought a new condo for $200,000. B. Maggie took an educational loan of $10,000. Safeway sells milk at $4.35 a gallon. C. Banks have raised interest rates to 2.5 percent. Ryan enjoys playing chess. D. Anna got a job with a public firm. Smith wants to take a vacation in December.
Walmart sells potatoes at $2.14 a pound. Ann bought a new condo for $200,000.
Economic freedom is crucial for achieving economic growth because ______.
it allows people to make choices and gives the incentive to save, invest, expand human capital, and discover and apply new technologies
The output gap is real GDP minus _____ expressed as a percentage of _____.
potential GDP; potential GDP
Classical growth theory ______
predicts that the clash between an exploding population and limited resources will eventually bring economic growth to an end
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good.
produced in place of; produced together with
A demand schedule is a list of the ______ at each different price when all other influences on buying plans remain the same. A demand curve is a graph of _____ .
quantities demanded; a demand schedule
A supply schedule is a list of the ______ at each different price when all other influences on selling plans remain the same. A supply curve is a graph of _____ .
quantities supplied; a supply schedule
The economic growth rate is the annual percentage change of _____.
real GDP
Job rationing is a situation that arises when the _____ is _____ the full employment equilibrium level.
real wage rate; above
Potential GDP is the value of _____ when all the economy's factors of production - labor, capital, land, and entrepreneurial ability- are _____.
real GDP; fully employed
When the price level _______ the inflation rate _______.
rises rapidly; is high
When floods wiped out the banana crop in Central America, the equilibrium price of bananas ______ and the equilibrium quantity of bananas ______.
rose; decreased
The labor force participation rate is the percentage of the _____ who are members of the labor force.
working-age population
Classical macroeconomics is the view that the market economy _____, that aggregate fluctuations are _____, and that government intervention _____ improve the efficiency of the market economy.
works well; a natural consequence of an expanding economy; cannot
The core inflation rate is the annual percentage change in the_____ price index_____ the prices of food and energy.
PCE; excluding
Which of the following statements about prices and inflation is not correct?
Prices generally increase at the same rate across most periods of time.
Which of the following is an example of consumption expenditure?
Rachel buying a TV.
Suppose the economy's consumer price index (CPI) in 2008 was 189 and the CPI in 2009 was 202. The inflation rate over the period from 2008-2009 was equal to
6.88%
An average of the prices of the goods and services purchased by a typical family is the:
consumer price index (CPI).
The _____ that people devote to produce goods and services is labor.
work time, and work effort
Monetarist macroeconomics is the view that the market economy _____, that aggregate fluctuations are _____, but that fluctuations in the _____ generate the business cycle.
works well; a natural consequence of an expanding economy; the quantity of money
If real GDP is $1,000,000, exports are $200,000, imports are $300,000, and aggregate labor hours are 100,000, labor productivity is _____.
$10 per hour
Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the firm's quantity supplied in the bottled water market?
At a price of $1 gallon, we plan to sell 2,000 gallons per day.
Despite some optimism about the seeds of recovery, the Congressional Budget Office (CBO) sees joblessness rising. The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011. Source: Fortune, August 25, 2009 Why does unemployment continue to rise as an expansion begins?
As an expansion begins, previously marginally attached workers look for jobs, exceeding the number of people hired.
Chained-dollar real GDP is the measure of real GDP calculated by the _____.
Bureau of Economic Analysis
The reference base period is a period for which the _____ is defined to equal _____. Currently, the reference base period is 1982-1984.
CPI; 100
Indicate whether each of the following is a final good, an intermediate good, or neither.
Coffee beans purchased by a coffee shop Intermediate good One share of Google stock Neither A new pick-up truck purchased by a consumer Final good A new home purchased by a family Final good
Which of the following price indexes is designed to measure changes in the prices of goods and services purchased by a typical individual?
Consumer Price Index
When the CPI increases from 200 in 2016 to 210 in 2017 and the nominal wage rate is constant at $10 an hour, the real wage rate _______.
decreases by 5 percent
Which of the following is an example of a final good or service?
Dan bought a Toyota Camry.
Who in the following statements is a discouraged worker?
Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.
Who in the following statements is a full-time worker and who is a part-time worker?
Dan works at Subway for 8 hours each day from Monday through Friday. Mary works at Starbucks' for 4 hours each day on weekends.
Which of the following is an example of comparative advantage? A. The United States produces less textile products and more electronic products. B. Dave makes 4 pizzas giving up 6 jars of milk shakes while Rob makes 2 pizzas giving up 4 jars of milk shakes. Your answer is correct. C. Angela makes better pastries than Sherrie. D. Michael Jordan is an American basketball player.
Dave makes 4 pizzas giving up 6 jars of milk shakes while Rob makes 2 pizzas giving up 4 jars of milk shakes.
Which of the following is considered to be a problem in using GDP as a measure of national well-being?
GDP is not adjusted to account for depletion of natural resources.
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.
I and IV are changes in supply and II and III are changes in the quantity supplied.
Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased.
I is a change in demand and II and III are changes in the quantity demanded.
Which of the following statements is about a normal good, which is about an inferior good, which is about both, and which is about neither? I With incomes falling in the recession, people are buying more chicken. II People are buying more beef now that incomes have increased. III People are buying more chicken because the price of chicken has fallen. IV With higher incomes people are switching from chicken to beef.
I is inferior, II is normal, III is neither, and IV is both
Which of the following illustrates a tradeoff? A. Randy enjoys ski vacations. B. New York is an expensive city. C. I will study for my exam instead of going for the movie tonight. Your answer is correct. D. Tom prefers iPhone while Randy prefers Android.
I will study for my exam instead of going for the movie tonight.
Which of the following statements by Aqua Springs demonstrates that the firm's selling plans obey the law of supply? A. We can easily decrease the production of plain water and increase the production of flavored water. B. We've been hit by a rise in the price of plastic bottles and will lower production. C. At a price of $1 gallon, we plan to sell 2,000 gallons per day. Your answer is not correct. D. If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
India's real GDP was 17,558 billion rupees in 2005 and 18,683 billion rupees in 2006. India's population growth rate in 2006 was 1.6 percent. Calculate IndiaIndia's economic growth rate and growth rate of real GDP per person in 2006.
India's economic growth rate in 2006 was 6.41 percent. The growth rate of real GDP per person in IndiaIndia in 2006 was 4.81 percent.
Calculate the approximate number of years it will take for real GDP per person to double if an economy maintains an economic growth rate of 12 percent a year and a population growth rate of 55 percent a year.
It will take 10 years for real GDP per person to double.
In the market for smartphones, which of the following events increases the supply of smartphones?
New technology that lowers the cost of making a smartphone
Which of the following events in the market for smartphones illustrates the law of demand? 1. The price of a smartphone falls. 2. Producers announce that smartphone prices will fall next month. 3. The price of a call made from a smartphone falls. 4. The price of a call made from a land-line phone increases. 5.An increase in memory makes smartphones more popular.
Only Event #1
Which of the following events in the market for timber beams illustrates the law of supply? 1. The wage rate of sawmill workers rises. 2. The price of sawdust rises. 3. The price of a timber beam rises. 4. The price of a timber beam is expected to rise next year. 5. Environmentalists convince Congress to introduce a new law that reduces the amount of forest that can be cut for timber. 6. A new technology lowers the cost of producing timber beams.
Only Event #3
Which of the following statements illustrates structural unemployment? A. Many women quit jobs to raise their kids. B. Outsourcing resulted in many job losses in the mid 2000s. Your answer is correct. C. Jen quit her current job and found another one with a better pay scale. D. Dell laid off many employees when the company's profits dropped during the recession.
Outsourcing resulted in many job losses in the mid 2000s.
As part of their budget tightening process, many states are cutting aid to colleges and universities, with students being asked to pick up a bigger part of the escalating tab of higher education. Which of the following would do the most to enable you to cope with those higher expenses without impairing your progress toward a degree? A. Taking fewer classes per semester or classes with lower associated expenses. B. Aggressively pursuing loans, grants, and benefactors. C. Reducing your consumption of goods and services not essential to your education. D. Obtaining a part-time job. E. Forming a student lobbying group to protest the budget cuts.
Reducing your consumption of goods and services not essential to your education.
Which of the following is an example of consumption goods and services? A. Ron bought a Nissan Altima last summer. B. Winter has started setting in. C. Unemployment in the Eurozone is rising. D. Real estate markets are improving in many US cities.
Ron bought a Nissan Altima last summer.
Sally worked hard all year and put her savings into a mutual fund that paid a nominal interest rate of 44 percent a year. During the year, the CPI increased from 185 to 190. What was the real interest rate that Sally earned?
Sally earned a real interest rate of 1.3 percent per year.
Which of the following is an example of entrepreneurship? A. Sam Walton created the multinational retail corporation brand Walmart in 1962. B. Industrial output in China is increasing. C. Honda Civic and Toyota Corolla are the best-selling compact cars in North America. D. Facebook is a social networking site.
Sam Walton created the multinational retail corporation brand Walmart in 1962.
Which of the following is an example of an intermediate good or service? A. Sarah bought a Sony HDTV. B. Samsung buys compressors for manufacturing refrigerators. Your answer is correct. C. Mike bought Puma shoes. D. United buys Boeing aircrafts.
Samsung buys compressors for manufacturing refrigerators.
Who in the following statements is a part-time worker for economic reasons?
Sherrie is a graduate who started working at Safeway pharmacy for 4 hours each day, three days a week, as they do not currently have a full-time opening.
A Consumer Expenditure Survey in Sparta shows that people buy only juice and cloth. In 2015, the year of the Consumer Expenditure Survey and also the reference base year, the average household spent $40 on juice and $30 on cloth. The price of juice in 2015 was $44 a bottle, and the price of cloth was $66 a yard. In 2016, juice is $55 a bottle and cloth is $44 a yard. Calculate the CPI in 2016 and the inflation rate between 2015 and 2016.
The CPI in 2016 is 100.0. The inflation rate between 2015 and 2016 is 0.0 percent.
Which of the following is an example of government expenditure on goods and services?
The White House buying internet services.
Choose the correct statement. A. The cost of economic growth is fewer consumption goods in the future. B. With economic growth, production becomes a free lunch. C. There is no tradeoff associated with economic growth. D. Economic growth abolishes scarcity. E. The cost of economic growth is fewer consumption goods today.
The cost of economic growth is fewer consumption goods today.
Calculate the change in the number of years it will take for real GDP per person in India to double if real GDP per person increases from 8 percent a year to 10 percent a year.
When real GDP per person grows at 8 percent a year, real GDP per person in India doubles in 8.75 years. When real GDP per person grows at 10 percent a year, real GDP per person in India doubles in 7.0 years. When the growth rate of real GDP per person increases from 8 percent to 1010 percent a year, real GDP per person will double 1.8 years earlier.
According to the law of demandLOADING..., there is an inverse relationship between price and quantity demanded. That is, the demand curve for goods and services slopes downward. Why?
When the price of a good increases, consumers' purchasing power decreases, and they cannot buy as much of the good as they did prior to the price change.
Which of the following equations sums up the components of Gross Domestic Product (GDP)?
Y = C + I + G + NX
The primary difference between absolute and comparative advantage is
absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.
When using the income approach to measure GDP at market prices, in addition to summing all factor incomes it is necessary to ______.
add indirect taxes less subsidies to convert aggregate income from factor cost to market prices
The expenditure approach to measuring U.S. GDP equals ______.
all expenditure on final goods and services produced in the United States in a given time period
Real GDP per capita is often used as a measure of general well-being. While increases in real GDP often do lead to increases in the well-being of the population, why is real GDP not a perfect measure of well-being? GDP does not include crime rates or income distribution. B. The costs of pollution are not included. C. The value of leisure is not included. D. All of the above.
all of the above
Which of the following causes changes in the CPI to overstate the true inflation rate? A. New product bias B. Substitution bias C. Increase in quality bias
all of the above
The quantity of labor demanded is the total labor hours that _____ during a given time period at a given _____. The demand for labor is the relationship between the _____ and the _____ when all other influences on hiring plans remain the same.
all the firms in the economy plan to hire; real wage rate; quantity of labor demanded; real wage rate
The GDP price index is an average of the current prices of _____ included in the GDP, expressed as a percentage of base year prices.
all the goods and services
The quantity of labor supplied is the total of labor hours that _____ during a given time period at a given _____. The supply of labor is the relationship between the _____ and the _____ when all other influences on work plans remain the same.
all the households in the economy plan to work; real wage rate; quantity of labor supplied; real wage rate
Job search is the activity of looking for _____ job.
an acceptable vacant
Classical growth theory is the theory that the clash between _____ and _____ will _____.
an exploding population; limited resources; eventually bring economic growth to an end
All of the following increase labor productivity except ______. A. the employment of a new technology B. the accumulation of skill and knowledge C. an increase in consumption Your answer is correct. D. an increase in capital per hour of labor
an increase in consumption
An economy can achieve faster economic growth without ______.
an increase in the population growth rate
An efficiency wage results in all of the following situation except _______.
an increase in the full-employment quantity of labor
The natural unemployment rate is the unemployment rate when the economy is _____.
at full employment
Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during _____ and decreases during _____.
a recession; an expansion
The United Nations Human Development Report gives the following data for real GDP per person in 2014: China, $12,547; Russia, $22,352; Canada, $42,155; United States, $52,947. Other information suggests that household production is similar in Canada and the United States and smaller than in China and Russia. The underground economy is larger in Russia and China and a similar proportion of each of these economies. Canadians and Americans enjoy more leisure hours than do the Chinese and Russians. Canada and the United States spend significantly more on the environment than do China and Russia. In which pair (or pairs) of countries is it easiest to compare the standard of living? And in which pair (or pairs) is it most difficult? Explain why. The standard of living can be easily compared ______.
between China and Russia or between Canada and the United States, because household production, the underground economy, leisure hours, and the environment are similar in each pair
A market is an arrangement that brings _____ together and enables them to get information and do business with each other.
buyers and sellers
The production possibilities frontier is the boundary between the combinations of goods and services that _____, given the available factors of production and the state of technology.
can be produced and the combinations that cannot be produced
Production efficiency is a situation in which the economy is getting all that it can from its resources and _____ produce more of one good or service without producing _____ of something else.
cannot; less
Net taxes are taxes paid minus _____.
cash benefits received from governments
A substitute is a good that is _____ another good, and a complement is a good that is _____ another good.
consumed in place of; consumed together with
When the economy goes into recession, the biggest increase in unemployment is _______.
cyclical because jobs are lost in many industries as they cut production
Full employment is when there is no _____ unemployment or, equivalently, when all the unemployment is _____ or _____.
cyclical; frictional; structural
Despite some optimism about the seeds of recovery, the Congressional Budget Office (CBO) sees joblessness rising. The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011. Source: Fortune, August 25, 2009 Before the recession began, the U.S. unemployment rate was about 6 percent. As a recession begins, firms quickly make layoffs. Is this rise in unemployment mostly a rise in frictional, structural, or cyclical unemployment? The resulting rise in unemployment is mostly a rise in ______ unemployment because _______.
cyclical; it is related to the state of the economy
Which of the following events illustrates the law of demand: Other things remaining the same, a rise in the price of a good will ______.
decrease the quantity demanded of that good
Other things remaining the same, a fall in the price of peanuts will ________.
decrease the quantity supplied of peanuts
The United Nations Human Development Report gives the following data for real GDP per person in 2011: China, $4,833; Russia, $13,543; Canada, $50,265; United States, $48,666. Other information suggests that household production is similar in Canada and the United States and smaller than in China and Russia. The underground economy is larger in Russia and China and a similar proportion of each of these economies. Canadians and Americans enjoy more leisure hours than do the Chinese and Russians. Canada and the United States spend significantly more on the environment than do China and Russia. Based on this information, differences in real GDP per person ______ correctly rank the standard of living in these countries because ______.
do; when other factors that influence the standard of living are similar the differences in real GDP per person are small, but when these other factors are not similar, the differences are huge
A model of the economy that shows a circular flow of _____ that result from decision makers' choices and the way these choices interact to determine _____ goods and services are produced is the circular flow model.
expenditures and incomes; what, how, and for whom
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
Land is the _____ that we use to produce goods and services.
gifts of nature or natural resources
According to new growth theory, the driving force of economic growth is ______.
growth results from the choices that people make in the pursuit of profit
Supply is _____, when all other influences on buying plans remain the same.
he relationship between the quantity supplied of a good and the price of the good
Imports of goods and services are items that _____ in the United States _____ the rest of the world.
households, firms, and governments; buy from
Saving equals ______.
income minus consumption expenditure minus net taxes
The full-employment quantity of labor _______.
increases if labor becomes more productive
The natural unemployment rate _______.
increases if unemployment benefits become more generous
Job rationing _______.
increases the natural unemployment rate
Human capital _____ that people obtain from education, on-the-job training, and work experience. _____ that have been produced in the past and that businesses now use to produce goods and services is capital.
is the knowledge and skill; Tools, instruments, machines, buildings, and other items
The following statements about the business cycle are correct except ______. A. from the trough to the peak, the economy is in an expansion B. it is a regular predictable cycle in real GDP around potential GDP Your answer is correct. C. it is a periodic movement in economic activity including employment D. from the peak to the trough, the economy is in a recession
it is a regular predictable cycle in real GDP around potential GDP
The unemployment rate is the percentage of the people in the _____ who are unemployed.
labor force
The productive resources that are used to produce goods and services - _____ are factors of production.
land, labor, capital, and entrepreneurship
Households are individuals or groups of people _____ together. Firms are institutions that organize _____ of goods and services.
living; the production
An economy grows when it does all of the following except _______. A. improves the quality of labor by education B. develops better technologies C. acquires more machines to help it produce D. implements on-the-job training E. lowers prices
lowers prices
The production function is a relationship that shows the _____ quantity of _____ that can be produced as the quantity of _____ employed changes and all other influences on production remain the same.
maximum; real GDP; labor
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
The labor force is the number of people employed plus the _____.
number unemployed
Real GDP per person is not an accurate measure of the standard of living because it ______.
omits the goods and services that people produce for themselves
The classical growth theory is that real GDP per person ______.
only temporarily rises and then returns to the subsistence level
New growth theory predicts that economic growth will never end because _______.
our unlimited wants will lead us to make choices that will bring ever-greater productivity and perpetual economic growth.
New growth theory is the theory that _____ will lead us to _____ and _____.
our unlimited wants; ever greater productivity; perpetual economic growth
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity.
periodic; irregular; production
Economic freedom is a condition in which people are able to make _____ choices, their private property is _____, and they _____ markets.
personal; protected by the rule of law; are free to buy and sell in
U.S. potential GDP is the value of the goods and services produced in the United States _______.
when the U.S. economy is at full employment
During the past 50 years, Singapore has seen huge changes: rapid population growth and the introduction of newer and newer technologies. Singapore has modest unemployment benefits, no minimum wage, and weak labor unions. Does Singapore's unemployment arise mainly from job search or job rationing? Unemployment in Singapore mainly arises from job _______.
search
A cost of living index is a measure of the change in the amount of money that people need to spend to achieve a given _____.
standard of living
Property rights encourage economic growth by ______.
strengthening the incentive to work, save, invest, and accumulate human capital
The economy is at full employment when all unemployment is _______.
structural and frictional
The distinction between substitutes and complements is
substitute goods are used for the same purposes while complementary goods are used together.
Many Americans are selling their used cars and buying new fuel-efficient hybrids. Other things remaining the same, in the market for used cars, ______ and in the market for hybrids ______.
supply increases and the price falls; demand increases and the price rises
A decrease in the demand for chocolate with no change in the supply of chocolate will create a ______ of chocolate at today's price, but gradually the price will ______.
surplus; fall
A ______ is a final good and ______ is an intermediate good.
tank of gasoline bought by you; jet fuel bought by Southwest Airlines
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
The trend in the labor force participation rate of women is due in part to _______. The trend in the labor force participation rate of men is due in part to _______.
the creation of more white-collar jobs with flexible work hours; some men taking early retirement
The CPI bias arises from all of the following items except _______.
the goods and services bought by poor people
The PCE price index is an average of the current prices of _____ included in the consumption expenditure component of GDP, expressed as a percentage of _____ year prices.
the goods and services; base
A freelance singer-songwriter is planning the restoration of a recently purchased civil war-era farmhouse. While he professes an enjoyment of, and talent in the construction trades, the theory of comparative advantage implies that
the income lost while away from music will likely exceed the savings realized by doing the work himself, thus, he should hire professionals to do the restoration work.
The Consumer Price Index attempts to measure
the level of prices with respect to goods and services purchased by a typical consumer in urban areas.
Gross Domestic Product (GDP) is
the market value of all final goods and services produced in a country during a period of time.
Households' labor supply decisions are influenced by all of the following except _______.
the number of full-time jobs available
In new growth theory, the source of economic growth is ______.
the persistent want for a higher standard of living
The BLS reported that the CPI in July 2010 was 226. This news tells you that _______.
the prices of consumption goods and services have risen, on average, by 126 percent since the base year
In market equilibrium, at the equilibrium price and equilibrium quantity, _____ .
the quantity demanded equals the quantity supplied and equals the quantity bought and sold
The demand for labor curve shows the relationship between _______.
the quantity of labor businesses are willing to hire and the real wage rate
The supply of labor is the relationship between _______.
the real wage rate and the quantity of labor supplied
Demand is _____, when all other influences on buying plans remain the same.
the relationship between the quantity demanded of a good and the price of the good
Potential GDP is the value of real GDP when _______.
the unemployment rate equals the natural unemployment rate
The United Nations Human Development Report gives the following data for real GDP per person in 2011: China, $4,833; Russia, $13,543; Canada, $50,265; United States, $48,666. Other information suggests that household production is similar in Canada and the United States and smaller than in China and Russia. The underground economy is larger in Russia and China and a similar proportion of each of these economies. Canadians and Americans enjoy more leisure hours than do the Chinese and Russians. Canada and the United States spend significantly more on the environment than do China and Russia. To accurately assess the relative standard of living in these countries, we need additional information about _____.
the value of household production, the underground economy, leisure, and environment differences
If the BLS included all marginally attached workers as being unemployed, the _______ would be _______.
unemployment rate; higher
The trend in the labor force participation rate of all working-age people is _______.
upward until 2000, and then downward
The CPI measures the average prices paid by _______ for _______.
urban consumers; a fixed basket of consumption goods and services
Which of the following countries is facing a recession? A. India's real GDP of 5.3 percent in the second quarter increased by 0.4 percent in the third quarter of 2012. B. The Bank of England raised the country's interest rate from 0.5 percent in the first quarter to 0.9 percent in the second quarter of 2013. C. Japan's real GDP of 3.8 percent in the first quarter decreased by 0.3 and 0.4 percent respectively in the second and third quarters of 2012. Your answer is correct. D. The United States faced a change in the inflation rate from 2.2 percent in 2012 to 1.7 percent in 2013.
Japan's real GDP of 3.8 percent in the first quarter decreased by 0.3 and 0.4 percent respectively in the second and third quarters of 2012.
Of the alternative measures of the price level, _______ overcomes the bias of the CPI and is a better measure of the cost of living because it _______.
PCEPI; uses a current basket of all consumption goods
An efficiency wage is a real wage rate that is set _____ the full-employment equilibrium wage rate to _____.
above; induce greater work effort
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
available; willing; not made; four
The Consumer Price Index is a measure of the _____ of the prices paid by _____ consumers for a fixed market basket of consumption goods and services.
average; urban
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
decrease; capital
A marginally attached worker is a person who _______.
doesn't work, is available and willing to work, but hasn't looked for a job recently
When the unemployment rate_______ the natural unemployment rate, real GDP is _______ potential GDP and the output gap is _______.
exceeds; below; negative
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; a base; final; that same
Gross domestic product (GDP) is the market value of all the _____ goods and services produced _____ a country in a given time period.
final; within
The nominal wage rate is the average _____ wage rate measured in _____ dollars. The real wage rate is the average _____ wage rate measured in the dollars of _____ year.
hourly; current; hourly; a reference base
The BLS surveys 30,000 households on their spending habits. The results are used to construct a market basket of goods and services purchased by the typical urban family of four. The chart on the right shows these goods and services grouped into eight broad categories for December 2016. The percentages represent the expenditure shares of the categories within the market basket. Which of the following categories make up about three-quarters of the market basket?
housing, transportation, and food
Potential GDP is the value of real GDP when all the economy's factors of production - _____, _____, _____, and _____ - are fully _____.
labor; capital; land; entrepreneurial ability; employed
Rent is the income paid for the use of _____. Wages are income paid for the services of _____. Profit (or loss) is the _____ earned by an entrepreneur for running a business. Interest is the income paid for the use of _____.
land; labor; income; capital
The nominal interest rate is the dollar amount of interest expressed as a percentage of the amount _____. The real interest rate is the goods and services forgone in interest, expressed as a percentage of the amount _____ and calculated as the nominal interest rate minus the _____.
loaned; loaned; inflation rate
The working-age population is the total number of _____ aged _____ years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.
people; 16
During the past 50 years, Singapore has seen huge changes: rapid population growth and the introduction of newer and newer technologies. Singapore has modest unemployment benefits, no minimum wage, and weak labor unions. Does Singapore's unemployment arise mainly from job search or job rationing? But some job ______ might arise from ______.
rationing; efficiency wages
The Great Depression was a period of high _____, low _____, and extreme economic hardship that lasted from _____ to _____.
unemployment; incomes; 1929; 1939
