ECON HW

Increases in real GDP would overstate the increase in the wellminus−being of a country over time​ if, over that time​ period, the

average hours worked per week increased.

The Consumer Price Index in December 2012 equaled 231. With a base period of​ 1982-84, the CPI of 231 means that the

cost of the market basket in December 2012 was 231 percent of the cost of the market basket in the base period.

The most important determinant of consumption spending is

current personal disposable income.

When a company reduces production and employment during economic​ recessions, those employees who lose their jobs are generally considered to be

cyclically

In the circular flow​ model, the value of total income for an economy​ ________ the value of total production.

equals

Since nominal incomes increase with​ inflation,

expected inflation does not affect the purchasing power of the average consumer.

A person who is in between jobs but actively engaged in a job search is considered to be

frictionally unemployed

An increase in the growth rate of GDP in the BRIC nations​ (Brazil, Russia,​ India, and​ China) will

increase U.S. net exports by increasing exports to these countries.

Government unemployment insurance tends to

increase the unemployment rate by lowering the opportunity cost of job search.

A rise in stock prices and housing prices

increases household wealth which in turn increases consumption and leads to an upward shift of the consumption function.

What is the rule of​ 70?

is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double.

Which of the following is the best measure of the standard of living of the typical person in a​ country?

real GDP per person

Experts in​ hand-drawn animation who remain unemployed due to the film​ industry's switch to​ computer-generated animation are considered to be

structurally

Why might the unemployment rate continue to rise during the early stages of a​ recovery?

Employment growth may be slow relative to the growth in the labor force. Some firms continue to operate well below their capacity even after a recession has ended.

Which of the following is not a main determinant of net​ exports?

Expectations of future profitability in the United States.

What are the four main determinants of​ investment?

Expectations of future​ profitability, interest​ rates, taxes and cash flow.

Which of the following is a true statement about real and nominal​ GDP?

If real GDP increases from one year to the​ next, we know that production of goods and services has risen.

Which of the following is true about the consumer price​ index?

It assumes that consumers purchase the same amount of each product in the market basket each month.

How would an increase in interest rates affect​ investment?

Real investment spending declines.

time student who is not looking for work. What kind of unemployment is Sarah​ experiencing?

Sarah is not experiencing unemployment of any​ kind, because she is not currently part of the labor force.

Which one of the following is not a determinant of consumption​ spending?

The growth rate in the United States relative to the growth rates in other countries.

Which one of the following depicts an accurate description of the household survey and the establishment​ survey?

The household survey interviews households and measures the unemployment rate whereas the establishment survey interviews businesses and measures the employment rate.

Which of the following describes the effect of the business cycle on the inflation rate and the unemployment​ rate?

The unemployment rate increases and the inflation rate falls during recessions.

Which of the following price indices comes closest to measuring the cost of living of the typical​ household?

consumer price index

When an unemployed person drops out of the labor​ force, it

does not affect the​ employment-population ratio.

The difference between a nominal variable and a real variable is that

nominal variables are calculated in​ current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation.

All of the following are problems in measuring the unemployment rate except that

people on active military service are included as unemployed.

The​ employment-population ratio measures the

percentage of the working age population that is employed.

The payment of government unemployment insurance reduces the severity of recessions by

preventing a huge drop in income and spending for the unemployed.

Many economists prefer

the establishment survey because it is determined by actual payroll records rather than unverified answers.

When the economy is at full​ employment, unemployment is equal to

the natural rate of unemployment.

The real interest rate equals

the nominal interest rate minus the inflation rate.

If inflation is expected to​ increase,

the nominal interest rate will increase.

Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this​ information, we know for certain that

the price level in 2016 was less than the price level in the base year.

The two key factors that cause labor productivity to increase over time are

the quantity of capital per hour worked and the level of technology.

The natural rate of unemployment is

the sum of structural unemployment and frictional unemployment.

Gross Domestic Product is calculated by summing up

the total market value of final goods and services produced in the economy during a period of time.

When there are workers that drop out of the labor forceworkers that drop out of the labor force​, the official BLS measure of the unemployment rate ______ the true degree of unemployment.

understates

When an unemployed person drops out of the labor​ force, the unemployment rate

understates the true degree of joblessness in the economy.

Nominal incomes generally increase with inflation because

when inflation is​ anticipated, average nominal incomes also increase by the same percentage as the rate of inflation.

If an economy experiences​ deflation, the real interest rate

will be greater than the nominal interest rate.

If the inflation rate is 6 percent and the nominal interest rate is 4​ percent, then the real interest rate is

​-2 percent, which is the nominal interest rate minus the inflation rate.

What are the four major categories of​ expenditure?

​Consumption, investment, government​ purchases, and net exports.

The substitution bias in the consumer price index refers to the idea that consumers​ ______ the quantity of products they buy in response to​ price, and the CPI does not reflect this and​ ________ the cost of the market basket.

​change; over estimates

When aggregate expenditure is greater than​ GDP, inventories will​ __________ and GDP and total employment will​ __________.

​fall; increase

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure​ inflation, but​ ______ quality increases. This causes the CPI to​ ______ the cost of the market basket.

​not; overstate