econ test 2
In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012? A) 9.0 percent B) 0.38 percent C) 3.8 percent D) 8.3 percent
A) 9.0 percent
The above table shows answers given by people interviewed in the Current Population Survey. Which people are structurally unemployed? A) B and C. B) A, B, and D C) A, B, and C D) A, B, C, and D
A) B and C.
In the illustration above, which figure shows an aggregate production function? A) Figure A B) Figure B C) Figure C D) Figure D
A) Figure A
If capital per worker rises A) labor productivity increases. B) labor productivity decreases. C) no technological progress occurs. D) firms respond by raising their prices.
A) labor productivity increases
If the quantity of capital per worker in the economy increases A) labor productivity increases. B) the stock of human capital necessarily increases. C) the stock of financial assets held by the public increases. D) the amount of money held by workers increases.
A) labor productivity increases.
When labor productivity increases, the demand for labor curve ________ and the supply of labor curve ________. A) shifts rightward; does not shift B) shift s leftward; does not shift C) shifts rightward; shifts rightward D) shifts leftward; shifts rightward
A) shifts rightward; does not shift
In 2016, consumers in Dexter consumed only books and pens. The prices and quantities for 2016 and 2017 are listed in the table above. The reference base period for Dexter's CPI is 2016. What is the cost of the CPI basket in 2017? A) $540 B) $430 C) $335 D) $320
A) $540
Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5 percent. Then cyclical unemployment is A) -1 percent. B) 0 percent. C) 1 percent. D) 8 percent.
A) -1 percent.
If the CPI was 122.3 at the end of last year and 124.5 at the end of this year, the inflation rate over these two years was A) 1.8 percent. B) 18.0 percent. C) 2.5 percent. D) 22.5 percent
A) 1.8 percent.
The information in the table above gives the 2016 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2017 prices. What is the value of the CPI for the reference base period, 2016? A) 100 B) 140 C) 75 D) 133
A) 100
Last year's price level was 120 and since then there has been a 5 percent inflation. This year's price level is A) 126. B) 130. C) 125. D) none of the above.
A) 126.
The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is A) 160. B) 140. C) 62.5. D) 1.60.
A) 160.
In the table above, what inflation rate belongs in space A? A) 17.0 percent B) 8.3 percent C) -4.0 percent D) 6.8 percent
A) 17.0 percent
If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals A) 225. B) 300. C) 250. D) 450.
A) 225.
Suppose a nation's population grows by 2 percent and, at the same time, its GDP grows by 5 percent. Approximately how fast will real GDP per person increase? A) 3 percent per year B) 10 percent per year C) 5 percent per year D) 2 percent per year
A) 3 percent per year
Slowdonia's current growth rate of real GDP per person is 2 percent a year. How long will it take to double real GDP per person? A) 35 years B) approximately 10 years C) half a year D) 28.6 years
A) 35 years
If the CPI was 132.5 at the end of last year and 140.2 at the end of this year, the inflation rate over these two years was A) 5.8 percent. B) 7.7 percent. C) 5.4 percent. D) 4.4 percent.
A) 5.8 percent.
In the table above, what inflation rate belongs in space B? A) 6.8 percent B) 17.0 percent C) -4.0 percent D) 8.3 percent
A) 6.8 percent
If the population is 300 million, with 70 million under the age of 16 and institutionalized, another 70 million not in the labor force, 10 million unemployed, and 150 million employed, the employment-to-population rate is A) 65.2 percent. B) 53.3 percent. C) 87.5 percent. D) 46.7 percent.
A) 65.2 percent.
Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double? A) 7 years B) 20 years C) 10 years D) 0.7 years
A) 7 years
Slowdonia's current growth rate of real GDP per person is 1 percent a year. Approximately how long will it take to double real GDP per person? A) 70 years B) 35 years C) 10 years D) 100 years
A) 70 years
Frictional unemployment is A) unemployment associated with the changing of jobs in a changing economy. B) unemployment associated with business cycle recessions. C) unemployment associated with declining industries. D) long-term unemployment.
A) unemployment associated with the changing of jobs in a changing economy.
The labor force participation rate is percentage of the ________ who are in the labor force. A) working-age population B) people over age 16 C) people under age 65 D) population
A) working-age population
Based on the data in the above table, gross domestic product equals A) $2,840. B) $2,465. C) $2,750. D) $2,190.
B) $2,465
In the above table, the inflation rate between 2013 and 2014 is approximately A) 110 percent. B) 10 percent. C) 9 percent. D) 100 percent.
B) 10 percent.
In the above table, the working age population is A) 140 million. B) 225 million. C) 155 million. D) 100 million.
B) 225 million.
If the Consumer Price Index last year was 110 and 115 this year, the inflation rate is approximately A) 15.0 percent. B) 4.5 percent. C) 5.0 percent. D) 10.0 percent.
B) 4.5 percent.
In the above table, the employment-to-population ratio is A) 62 percent. B) 44 percent. C) 51 percent. D) 42 percent.
B) 44 percent.
In a country with a working-age population of 100 million, 70 million workers are employed and 5 million workers are unemployed. What is the labor force participation rate? A) 70 percent B) 75 percent C) 5 percent D) 7 percent
B) 75 percent
If this year the price level is 135 and last year it was 125, the inflation rate is A) 12 percent. B) 8 percent. C) 10 percent. D) none of the above
B) 8 percent.
Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms, factories, shops, and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced. A) I and II B) I and III C) II and III D) I, II and III
B) I and III
According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Which of the following is TRUE ? A) India's PPF has not shifted since 1997. B) India's PPF has been shifting rightward since 1997. C) India has been moving from a point within its PPF to points beyond its PPF. D) India's PPF has been shifting leftward since 1997.
B) India's PPF has been shifting rightward since 1997.
________ refers to a period when the ________ decreases. A) Recession; growth rate of nominal GDP B) Productivity growth slowdown; growth rate of output per person C) Recession; growth rate of output per person D) Productivity growth slowdown; growth rate of real GDP
B) Productivity growth slowdown; growth rate of output per person
Suppose the CPI last year is 121 and the CPI this year is 137. The CORRECT method to calculate the inflation rate is A) 137 × 121 = 258. B) [(137 - 121)/121] × 100 = 13.2. C) (137 - 121)/100 = 0.16. D) (137/121) × 100 = 113.2.
B) [(137 - 121)/121] × 100 = 13.2.
An individual who has stopped looking for a job but has looked in the past and still wants a job is referred to as A) a productive worker. B) a marginally attached worker. C) a contingent worker. D) an unemployed worker.
B) a marginally attached worker.
Which of the following is NOT considered to be in the labor force? A) a person who is not working but who has tried to find a job in the past week B) a person who is not working and who has not tried to find a job C) a student who works part-time D) a person who is waiting to start a new job in the next 30 days
B) a person who is not working and who has not tried to find a job
Suppose the country of Dingo experienced an economic trough in January 2011. We can conclude that A) Dingo's potential GDP fell in 2011. B) an expansion occurred after January 2011. C) Dingo did not experience a recession in 2010. D) real GDP in Dingo was increasing in January 2011
B) an expansion occurred after January 2011.
From 1980 to 2000 the labor force participation rate generally ________ and from 2000 to 2015 the rate generally ________. A) decreased; decreased B) increased; decreased C) increased; increased D) decreased; increased
B) increased; decreased
Which of the following does NOT increase labor productivity? A) physical capital growth B) increases in aggregate hours C) human capital growth D) technological advances
B) increases in aggregate hours
If the price level for the last three months has been 112, 125, and 126, we would say A) inflation has been constant over the three months. B) inflation was more rapid between the first and second month than between the second and third month. C) inflation has steadily increased over the three months. D) inflation was less rapid between the first and second month than between the second and third month.
B) inflation was more rapid between the first and second month than between the second and third month.
An increase in the price level is defined as A) an expansion. B) inflation. C) a growth boom. D) a recession.
B) inflation.
The natural unemployment rate A) is the unemployment rate when there is only cyclical unemployment. B) is the unemployment rate at full employment. C) is the unemployment rate when there is no structural unemployment. D) occurs when the unemployment rate is 0 percent.
B) is the unemployment rate at full employment.
A decrease in population shifts the A) labor supply curve rightward. B) labor supply curve leftward. C) labor demand curve rightward. D) labor demand curve leftward.
B) labor supply curve leftward.
In any year, real GDP A) always equals potential GDP. B) might be greater or less than potential GDP. C) will be greater than potential GDP if the inflation rate is positive. D) must always be less than potential GDP.
B) might be greater or less than potential GDP.
In any year, real GDP A) must always be less than potential GDP. B) might be greater or less than potential GDP. C) always equals potential GDP. D) will always be greater than potential GDP because of the tendency of nations to incur inflation.
B) might be greater or less than potential GDP.
The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) move to point such as Z. B) move to point such as X. C) remain at point W. D) move to point such as Y.
B) move to point such as X.
In the above figure, if the real wage is $10 per hour, a labor A) surplus will occur and the real wage will rise. B) shortage will occur and the real wage will rise. C) shortage will occur and the real wage will fall. D) surplus will occur and the real wage will fall.
B) shortage will occur and the real wage will rise.
The information in the table above gives the 2016 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2017 prices. What is the value of the CPI for 2017? A) 133 B) 75 C) 140 D) 100
C) 140
If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals A) 450. B) 325. C) 225. D) 200.
C) 225.
At the end of last year the Consumer Price Index was equal to 157.5 and at the end of this year it was equal to 163.8. What is the inflation rate over this time period? A) 10.1 percent B) 3.85 percent C) 4.0 percent D) 6.3 percent
C) 4.0 percent
Because of the biases in calculating the CPI, actual inflation is A) accurately measured. B) more than the measured inflation rate. C) Less than the measured inflation rate D) None of the above because the difference varies from one year to the next.
C) Less than the measured inflation rate
From September 2013 to September 2014, the employment-to-population ratio increased from 58.6 percent to 59.0 percent. This change could have been the result of A) discouraged workers starting to look for jobs again. B) unemployed workers becoming discouraged workers. C) a decrease in the working-age population. D) unemployed workers becoming part-time workers.
C) a decrease in the working-age population.
An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease. II. U.S. investment increases. A) only I B) only II C) both I and II D) neither I nor II
C) both I and II
The cost of inflation to society includes I. the opportunity costs of resources used by people to protect themselves against inflation. II. the diversion of productive resources to forecasting inflation. A) I only B) II only C) both I and II D) neither I nor II
C) both I and II
The largest component of national income is A) proprietors' income. B) corporate profits. C) compensation of employees. D) rental income.
C) compensation of employees.
The times during which real GDP increases are referred to as A) corrections. B) anti-cycles. C) expansions. D) contractions
C) expansions.
If the inflation rate is negative, the price level in an economy is A) rising rapidly. B) rising slowly. C) falling. D) constant.
C) falling.
The three types of unemployment are A) frictional, part-time, and involuntary. B) voluntary, involuntary, and structural. C) frictional, structural, and cyclical. D) voluntary, part-time, and cyclical.
C) frictional, structural, and cyclical.
Potential GDP per labor hour can increase due to A) increases in population. B) increases in the quantity of money. C) increases in labor productivity. D) decreases in the quantity of capital.
C) increases in labor productivity.
An increase in education and training A) increases the employment-to-population ratio. B) decreases real GDP growth. C) increases labor productivity. D) increases aggregate hours
C) increases labor productivity.
Unpredictable changes in the value of money, which brings about gains and losses, are a consequence of unpredictable changes in A) productivity. B) unemployment rate. C) inflation. D) real GDP.
C) inflation.
If a new and better good replaced an older and less expensive good, then the price level measured by the CPI A) is the same as the actual price level because it measures the prices of the actual goods. B) is lower than the actual price level. C) is higher than the actual price level. D) might be either higher or lower than the actual price.
C) is higher than the actual price level.
If unemployment equals the natural unemployment rate, then there A) is zero unemployment. B) are no job openings existing at the time. C) is only frictional or structural unemployment. D) is less than full employment.
C) is only frictional or structural unemployment.
Which labor market statistic tends rise during recessions and fall during expansions? A) aggregate hours B) the employment-to-population ratio C) the unemployment rate D) the labor-force participation rate
C) the unemployment rate
In the computation of GDP, Social Security payments count as A) transfer payments and are not included in GDP. B) transfer payments and are included in GDP. C) government expenditure on goods and services and are included in GDP. D) government expenditure on goods and services and are not included in GDP.
A) transfer payments and are not included in GDP.
What term is used to describe the lowest point of a business cycle? A) trough B) expansion C) recession D) peak
A) trough
If real GDP is $13,000 billion and aggregate hours are 270 billion, labor productivity equals A) $6.50 per hour. B) $45 per hour. C) $650 per hour. D) $48 per hour.
D) $48 per hour.
If the CPI this year is 220 and was 200 in last year, the annual inflation rate between the two years is A) 20 percent. B) 5 percent. C) 2 percent. D) 10 percent.
D) 10 percent.
Of the following sequences of price levels, which CORRECTLY represents a 5 percent inflation rate? A) 100, 105, 110, 115 B) 100, 105, 105, 105 C) 100, 100, 100, 100 D) 100, 105, 110.25, 115.76
D) 100, 105, 110.25, 115.76
Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor force participation rate is 80 percent and the working-age population is 500 million people. What number of people are unemployed? A) 5 million people B) 25 million people C) 100 million people D) 20 million people
D) 20 million people
Suppose the price level this year is 150 and the price level last year was 125. The inflation rate between last year and this year was A) 1.6 percent. B) 16.6 percent. C) 2 percent. D) 20 percent
D) 20 percent
Using the data in the above table, the unemployment rate is A) 4.16 percent. B) 5.55 percent. C) 28.0 percent. D) 4.0 percent.
D) 4.0 percent.
Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years? A) 30.7 percent B) 6.7 percent C) 5.1 percent D) 5.4 percent
D) 5.4 percent
Using the information in the above table, the labor force participation rate is A) 95.7 percent. B) 56 percent. C) 64.0 percent. D) 67.1 percent.
D) 67.1 percent.
Inflation is a problem when A) it causes the value of money to vary unpredictably. B) it is unpredictable. C) it causes resources to be diverted from productive uses. D) All of the above answers are correct
D) All of the above answers are correct
Labor productivity, real GDP per labor hour, increases if A) there is an increase in the accumulation of human capital. B) new technologies are continuously discovered. C) saving and investment cause an increase in the quantity of capital per worker. D) All of the above answers are correct.
D) All of the above answers are correct.
Which of the following means that the CPI overstates the actual inflation rate? A) quality change bias B) new goods bias C) outlet substitution bias D) All of the above cause the CPI to overstate inflation
D) All of the above cause the CPI to overstate inflation
Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $15 trillion in 2017, and $16 trillion in 2018. Over this time period, the real GDP growth rate is A) constant. B) negative. C) increasing. D) decreasing
D) decreasing
If the nation's capital stock increases so that workers become more productive, the A) supply of labor will increase. B) demand for labor will decrease. C) supply of labor will decrease. D) demand for labor will increase.
D) demand for labor will increase.
Which of the following is NOT associated with the new growth theory? A) innovation B) research C) technology D) natural resources
D) natural resources
In the United States, the inflation rate has A) risen constantly over the past 30 years. B) fallen as a result of OPEC oil price hikes. C) remained almost constant over the past 25 years. D) risen and fallen since the 1970s.
D) risen and fallen since the 1970s.
Hyperinflation is defined as A) very low inflation rates. B) declining inflation rates. C) rising but low inflation rates. D) very high inflation rates.
D) very high inflation rates.
An observer of the economy notices that over the past 12 months the unemployment rate has fallen from 7.0 percent to 6.5 percent. During the same time, the rate of growth in real GDP has been positive. From this information we might conclude that A) an expansion is occurring in the economy. B) inflation is not occurring. C) a recession is in progress. D) a trough in the business cycle will soon be reached.
A) an expansion is occurring in the economy.
The official U-3 unemployment rate includes the total number of people who A) are available and looking for work but unable to find employment. B) would like to have a full-time job but are working part-time. C) have jobs or are currently looking for jobs. D) would like to have a job but have stopped seeking work.
A) are available and looking for work but unable to find employment.
Purchasing power parity prices are used to construct GDP data that A) can be used to make more valid comparisons between one country and another. B) is a proper measure of economic welfare. C) do not omit the underground economy. D) adjust for differences in population
A) can be used to make more valid comparisons between one country and another.
The consumer price index (CPI) A) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period. B) is the ratio of the average price of a typical basket of goods to the cost of producing those goods. C) measures the increase in the prices of the goods included in GDP. D) compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period
A) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.
Suppose the country of Quasiland experienced a decrease in real GDP and people were laid off from their jobs. The people would be considered part of A) cyclical unemployment. B) frictional unemployment. C) discouraged workers. D) structural unemployment
A) cyclical unemployment.
Unemployment that is the result of recessions is called A) cyclical unemployment. B) downtime unemployment. C) structural unemployment. D) frictional unemployment.
A) cyclical unemployment.
Cyclical unemployment ________ during expansions and ________ during recessions. A) decreases; increases B) increases; increases C) decreases; decreases D) increases; decreases
A) decreases; increases
The Rule of 70 is used to A) estimate how long it will take the level of any variable to double. B) calculate the standard of living. C) calculate the economy's growth rate. D) estimate how much of an economy's growth rate is due to increases in capital per hour of labor
A) estimate how long it will take the level of any variable to double.
To measure GDP using the expenditure approach you must collect data on A) exports. B) wages. C) saving. D) inflation.
A) exports.
Real GDP A) fluctuates around potential GDP. B) fluctuates from year to year but is always below potential GDP. C) grows at a constant 3 to 4 percent per year. D) can be called potential GDP when it is adjusted for price changes.
A) fluctuates around potential GDP.
Cyclical unemployment A) fluctuates over the business cycle. B) decreases during a recession. C) is higher during an expansion. D) is always present in an economy.
A) fluctuates over the business cycle.
When the economy is operating at full employment, the natural unemployment rate consists of only A) frictional and structural unemployment. B) frictional and cyclical unemployment. C) cyclical unemployment. D) structural and cyclical unemployment
A) frictional and structural unemployment.
Classical growth theory states that A) growth is followed by increases in the population, eventually leaving real GDP per person unchanged. B) growth is maximized when everyone is fully employed. C) growth in real GDP per person is difficult in the beginning but easier in the later stages. D) advances in technology will always insure a permanent increase in real GDP per person.
A) growth is followed by increases in the population, eventually leaving real GDP per person unchanged.
A worker's stock of knowledge is known as A) human capital. B) monetary capital. C) financial capital. D) physical capital.
A) human capital.
The official U-3 unemployment rate A) includes persons without a job who have made efforts in the last week to find a job. B) counts discouraged workers as unemployed. C) counts people with part-time jobs who want full-time jobs as unemployed. D) includes persons without a job, whether they are actively searching for work or not
A) includes persons without a job who have made efforts in the last week to find a job.
From 1980 to 2000 the employment-to-population ratio generally ________ and from 2000 to 2015 the ratio generally ________. A) increased; decreased B) decreased; increased C) increased; increased D) decreased; decreased
A) increased; decreased
An increase in saving that leads to more capital accumulation ________ labor productivity. A) increases B) decreases C) does not change D) probably changes but in an ambiguous direction
A) increases
As a result of the rightward shift in the demand curve for labor from LD0 to LD1, the equilibrium level of employment ________ and potential GDP ________. A) increases; increases B) increases; decreases C) decreases; decreases D) decreases; increases
A) increases; increases
A discouraged worker ________ counted as officially unemployed and ________ counted as in the labor force. A) is not; is not B) is; is not C) is; is D) is not; is
A) is not; is not
Moving along the aggregate production function shows the relationship between ________, holding all else constant. A) labor input and real GDP B) labor input, capital input and real GDP C) technology and real GDP D) capital input and real GDP
A) labor input and real GDP
Full employment occurs A) only if the unemployment rate is equal to the natural unemployment rate. B) only if unemployment is equal to structural unemployment plus cyclical unemployment. C) only if the unemployment rate is zero. D) None of the above answers are correct.
A) only if the unemployment rate is equal to the natural unemployment rate.
All of the following contribute to labor productivity growth EXCEPT A) population growth. B) technological advancements. C) human capital growth. D) physical capital growth.
A) population growth.
If the CPI is 120, this means that A) prices are 20 percent higher than in the reference base period. B) prices are 0.12 times higher than in the reference base period. C) prices are 120 percent higher than in the reference base period. D) the inflation rate must be positive.
A) prices are 20 percent higher than in the reference base period.
In the table above, what price level belongs in space D? A) 140 B) 145 C) 130 D) 125
C) 130
In the 2000s, video recordings were made primarily on DVDs. However, in the 2010s streaming movies became increasingly popular, leading to a sharp decline in DVDs. As a result, many people who manufactured DVDs lost their jobs and didn't have the skills necessary to work in jobs required to stream movies. This occurrence is best consider an example of A) structural unemployment. B) underemployment. C) frictional unemployment. D) cyclical unemployment.
A) structural unemployment.
Andrew just lost his job as a corkscrew operator since his company has found a machine to perform his work tasks. Andrew did not have the skills needed to operate the machine. Andrew has searched for a new job for 6 months and continues to search. Therefore, Andrew is considered to be A) structurally unemployed. B) frictionally unemployed. C) a discouraged worker. D) cyclically unemployed.
A) structurally unemployed.
Substitution bias in the CPI refers to the fact that the CPI A) takes no account of the substitution of goods by consumers when relative prices change. B) substitutes quality changes whenever they occur without taking account of the cost of the quality changes. C) substitutes relative prices for absolute prices of goods. D) takes into account the substitution of goods by consumers when relative prices change.
A) takes no account of the substitution of goods by consumers when relative prices change.
Which of the following measurements of inflation strips out volatile food and fuel prices? A) the core PCE B) the PCE deflator C) the GDP deflator D) the chained CPI
A) the core PCE
If this year's price level exceeds last year's A) the inflation rate between these years has been positive. B) deflation is occurring. C) no relative price changes are occurring. D) the inflation rate is accelerating.
A) the inflation rate between these years has been positive.
Suppose that the price level was 100 in 2014, 110 in 2015, and 130 in 2016. Over these three years A) the inflation rate was positive and accelerating. B) deflation occurred at an accelerating rate. C) prices were stable. D) the inflation rate was positive but slowing.
A) the inflation rate was positive and accelerating.
Potential GDP is A) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation. B) the level of GDP not adjusted for price changes. C) always different from real GDP. D) another name for real GDP.
A) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.
Assume the inflation rate falls from 4 percent to 2 percent. This means that A) the price level is increasing more slowly. B) the economy is experiencing deflation. C) real GDP is decreasing. D) the price level has fallen.
A) the price level is increasing more slowly.
The technique currently used to calculate the CPI implicitly assumes that over time consumers buy A) the same relative quantities of goods as in a base year. B) relatively more of goods whose relative prices are rising. C) goods and services whose quality improves at the rate of growth of real income. D) relatively less of goods whose relative prices are rising.
A) the same relative quantities of goods as in a base year.
The aggregate production function is graphed as A) an upward sloping line that becomes steeper as the quantity of labor increases. B) an upward sloping line that becomes flatter as the quantity of labor increases. C) an upward sloping straight line. D) a downward sloping curve.
B) an upward sloping line that becomes flatter as the quantity of labor increases.
The assumption that population growth will lead to a fall in real GDP per person rate back to subsistence level is A) central to the new growth theory. B) associated with Malthusians. C) part of the neoclassical school of growth theory. D) accepted by all economists today.
B) associated with Malthusians.
Structural unemployment is A) associated with the changing of jobs in a dynamic economy. B) associated with changes in technology that change required job skills. C) very short-term unemployment. D) associated with general downturns in the economy.
B) associated with changes in technology that change required job skills.
The commodity substitution bias is that A) government spending is a good substitute for investment expenditures. B) consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative price falls. C) consumers substitute high-quality goods for low-quality goods. D) national saving and foreign borrowing are interchangeable.
B) consumers decrease the quantity they buy of goods whose relative prices rise and increase the quantity of goods whose relative price falls.
All of the following would increase the growth rate of the economy EXCEPT A) stimulating research and development. B) discouraging international trade. C) raising the saving rate. D) None of the above answers is correct because they all would increase the growth rate.
B) discouraging international trade.
The percentage of people employed aged 16 years and older divided by the working-age population is known as the A) labor force participation rate. B) employment-to-population ratio. C) working-age population ratio. D) employment rate
B) employment-to-population ratio.
The business cycle refers to A) changes in the level of the stock market. B) fluctuations in the level of real GDP around potential GDP. C) changes in the level of employment. D) changes in the level of nominal GDP.
B) fluctuations in the level of real GDP around potential GDP.
The type of unemployment created by the normal rate of reentry and entry into the labor force is A) seasonal unemployment. B) frictional unemployment. C) cyclical unemployment. D) structural unemployment.
B) frictional unemployment.
Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding employment. Matt is best be considered as A) included in the economy's "hidden employment." B) frictionally unemployed. C) cyclically unemployed. D) still being employed.
B) frictionally unemployed.
In 2016, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2017, real GDP was $4.59 billion and population was 2.97 million. From 2016 to 2017, Armenia's standard of living A) decreased. B) increased. C) did not change. D) might have increased, decreased, or remained unchanged but more information is needed to determine which
B) increased.
As labor increases, there is a A) movement along the aggregate production function, but no shift in it. B) movement along the aggregate production function and real GDP will increase less with each additional increase in labor. C) movement along the aggregate production function and real GDP will decrease less with each additional increase in labor. D) shift of the aggregate production function, but no movement along it.
B) movement along the aggregate production function and real GDP will increase less with each additional increase in labor.
Which growth theory predicts perpetual growth? A) classical growth theory B) new growth theory C) neoclassical growth theory D) None of the above answers is correct.
B) new growth theory
The bias in the CPI typically A) understates inflation. B) overstates inflation. C) about half the time overstates and about half the time understates the inflation rate. D) cannot be measured or estimated.
B) overstates inflation.
The maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation is called A) actual GDP. B) potential GDP. C) nominal GDP. D) real GDP.
B) potential GDP.
The currently used method for calculating the CPI A) has no effect on government expenditures. B) probably overstates inflation. C) accounts for people increasing consumption of a good that falls in relative price. D) None of the above answers are correct
B) probably overstates inflation.
New growth theory proposes that real GDP per person grows because of ________ and that growth ________. A) productivity shocks; occurs randomly B) the pursuit of profit; can persist indefinitely C) technological change; can only increase above the subsistence level temporarily D) productivity shocks; can persist indefinitely
B) the pursuit of profit; can persist indefinitely
Which of the following measurements of inflation tracks the rate at which infrequently changed prices are changing? A) the PCE deflator B) the sticky-price CPI C) the core PCE D) the chained CPI
B) the sticky-price CPI
In the national income accounts, government expenditure on goods and services exclude A) state and local government purchases. B) transfer payments. C) local government purchases but include state government purchases. D) spending on national defense.
B) transfer payments.
The cost of inflation to society includes A) the lost spending when people do not have enough money. B) unpredictable changes in the value of money. C) higher interest rates paid by borrowers. D) higher interest rates paid by the government on its debt.
B) unpredictable changes in the value of money.
An advance in technology increases the productivity of labor. As a result, the nation's production function shifts ________ and the ________ labor curve shifts rightward. A) downward; supply of B) upward; demand for C) upward; supply of D) downward; demand for
B) upward; demand for
Real GDP measures the A) total profits earned by all businesses valued using prices from a single year. B) value of total production linked to prices of a single year. C) general upward drift in prices. D) changes in the prices of output measured in dollars
B) value of total production linked to prices of a single year.
At the end of last year, the CPI equaled 120. At the end of this year, the CPI equals 132. What is the inflation rate over this year? A) 12 percent B) 6 percent C) 10 percent D) None of the above answers are correct because more information is needed to calculate the inflation rate.
C) 10 percent
A central proposition of the new growth theory is that A) government direction and oversight is necessary for consistent growth. B) growth is often just an illusion fostered by growth accounting. C) knowledge is not subject to diminishing returns D) growth will cease but prosperity will persist
C) knowledge is not subject to diminishing returns
The more education that workers have, the ________ is their human capital and the ________ is their productivity. A) smaller; smaller B) smaller; higher C) larger; higher D) larger; smaller
C) larger; higher
The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will A) move to point such as Y. B) remain at point W. C) move to point such as Z. D) move to point such as X.
C) move to point such as Z.
The biases in the CPI include the A) old goods, unemployment, and inflation biases. B) old goods, new goods, and quality change biases. C) new goods, quality change, and substitution biases. D) substitution, new goods, and old goods biases.
C) new goods, quality change, and substitution biases.
In July 2014, the CPI inflation rate was 0.3 percent while the core CPI inflation rate was 0.1 percent. The difference between these two measurements of inflation indicates A) a negative underlying inflation rate. B) prices for food and fuel were increasing less rapidly than prices for other goods. C) prices for food and fuel were increasing more rapidly than prices for other goods. D) the underlying inflation rate was higher than the overall inflation rate.
C) prices for food and fuel were increasing more rapidly than prices for other goods.
The quantity of labor supplied depends on the A) price of output not the money wage rate nor the real wage rate. B) money wage rate not the real wage rate. C) real wage rate not the money wage rate. D) level of profits.
C) real wage rate not the money wage rate.
Suppose that the unemployment rate equals 4.5 percent and that the natural unemployment rate is 5.5 percent. We can conclude that A) the output gap equals zero. B) we have mismeasured the natural unemployment rate. C) the output gap is positive. D) the output gap is negative.
C) the output gap is positive.
A business cycle is A) the cyclical movement in the interest rates. B) the increase in consumer spending that accompanies an increase in disposable income. C) the pattern of short-run upward and downward movements in total output. D) the cyclical change in the nation's balance of trade.
C) the pattern of short-run upward and downward movements in total output.
GDP can be computed as the sum of A) all sales that have taken place in an economy over a period of time. B) the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time. C) the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time. D) the total expenditures of consumers and business over a period of time.
C) the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.
Using the definition of unemployment, which of the following individuals would be unemployed? A) Because of the increased level of automobile imports, an employee of General Motors is laid off but expects to be called back to work soon. B) Because of a reduction in the military budget, your next door neighbor loses her job in a plant where nuclear warheads are made and must look for a new job. C) A full-time student quits school, enters the labor market for the first time, and searches for employment. D) All of these individuals are unemployed.
D) All of these individuals are unemployed.
The natural unemployment rate I. occurs when only there is no cyclical unemployment present. II. is the unemployment rate when the economy is at potential GDP. A) I only. B) II only C) neither I nor II D) I and II
D) I and II
Which of the following ideas apply to the neoclassical growth theory? I. The rate of technological change influences the rate of economic growth. II. Technological change promotes saving and investment. III. Convergence of economic growth rates across countries. A) I only B) III only C) I and II D) I, II and III
D) I, II and III
Real GDP grows when I. the quantities of the factors of production grow. II. persistent advances in technology make factors of production increasingly productive. III. human capital grows. A) only I B) both I and III C) only II D) I, II, and III
D) I, II, and III
Bob inherits a large sum of money from his dead uncle's estate. Bob decides to retire young, so he quits his job and heads to the Bahamas. Bob is an example of A) structural unemployment. B) cyclical unemployment. C) frictional unemployment. D) None of the above is correct.
D) None of the above is correct.
When calculating the compensation of employees part of GDP A) fringe benefits are not included. B) the value of vacation time must be included. C) taxes withheld on earnings are not included. D) Social Security contributions must be included.
D) Social Security contributions must be included.
Suppose the population of Tiny Town is 100 people and the working age population is 70. If 10 of these people are unemployed, the unemployment rate in Tiny Town is A) 10/80 × 100. B) 10 percent. C) 10/70 × 100. D) There is not enough information provided to calculate the unemployment rate.
D) There is not enough information provided to calculate the unemployment rate.
All of the following are components of the expenditure approach to measuring GDP EXCEPT A) Shaniq's purchase of a meal at the Olive Garden in Atlanta. B) the army buying new M1 Abram tanks. C) Ford Motor Company buying new Dell computers for use in its marketing department in Dearborn, Michigan. D) a Senator from Iowa being paid the monthly salary.
D) a Senator from Iowa being paid the monthly salary.
According to the BEA, in the second quarter of 2012 state and local government spending on goods and services changed by -1.4 percent. Using the expenditure approach, this change leads to A) a decrease in gross private domestic investment. B) no change in GDP because state and local government expenditure is always canceled out by federal government expenditure. C) no change in GDP because only federal government expenditures are included in GDP. D) a decrease in government expenditure on goods and services.
D) a decrease in government expenditure on goods and services.
Reported GDP increases when, in fact, total production is unchanged when I. there is a shift from household production to market production. II. a previously illegal activity is legalized. A) I only B) II only C) neither I nor II D) both I and II
D) both I and II
Transfer payments are not part of government expenditure on goods and services because transfer payments A) The premise of the question is incorrect because transfer payments are part of government purchases of goods and services. B) are not predictable given the nature of their appropriation and allocation. C) are not always spent on goods produced in the U.S. D) do not represent the purchase of a final good or service.
D) do not represent the purchase of a final good or service.
Catherine quit her job in order to look for a new one; therefore, she is best considered as A) cyclically unemployed. B) structurally unemployed. C) seasonally unemployed. D) frictionally unemployed
D) frictionally unemployed
The natural unemployment rate A) is attained whenever the unemployment rate is less than 5 percent because 95 percent employment is considered full employment. B) estimated to be close to 9 percent in recent years in the United States. C) occurs when 100 percent of the labor force is employed. D) has been estimated to range between 4 percent and 6 percent in the United States in recent years.
D) has been estimated to range between 4 percent and 6 percent in the United States in recent years.
As currently calculated, the CPI tends to overstate the true inflation rate because A) the market basket fails to weigh housing costs sufficiently. B) the market basket selected is inappropriate. C) we cannot know what the true inflation rate is. D) it fails to correctly measure quality changes for some products.
D) it fails to correctly measure quality changes for some products.
The real wage rate will fall if the A) labor demand curve shifts rightward and the labor supply curve does not shift. B) labor supply curve shifts leftward and the labor demand curve does not shift. C) labor demand curve shifts rightward more than the labor supply curve shifts rightward. D) labor supply curve shifts rightward and the labor demand curve does not shift.
D) labor supply curve shifts rightward and the labor demand curve does not shift.
The figure above shows the U.S. production function. From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population. The combined effect can best be shown by a A) movement from point Y to point X. B) movement from point W to point X. C) movement from point Y to point Z. D) movement from point W to point Z.
D) movement from point W to point Z.
The labor force participation rate shows the percentage of A) people not working, but who want to work. B) new entrants into the labor force. C) people who are not actively participating in meaningful economic activity. D) non-institutionalized working-age people who are actually working or seeking employment
D) non-institutionalized working-age people who are actually working or seeking employment
Marginally attached workers fall into which of the following population categories? A) unemployed B) employed C) labor force D) not in the labor force
D) not in the labor force
Human capital is A) the saving done by human beings. B) the investment people make in industries that make capital goods. C) a measure of the labor productivity of workers. D) people's knowledge and skills.
D) people's knowledge and skills.
In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment. A) lowers; decreases B) raises; decreases C) lowers; increases D) raises; increases
D) raises; increases
Neoclassical growth theory proposes that A) real GDP growth is caused by growth in the population. B) discoveries result from choices that increase profits. C) technological progress increases the population growth rate and drives down real wages. D) real GDP per person grows because technological change increases profit opportunities.
D) real GDP per person grows because technological change increases profit opportunities.
An advance in technology will A) not shift the production function but will lead to a movement down along the production function. B) not shift the production function but will lead to a movement up along the production function. C) shift the production function downward. D) shift the production function upward.
D) shift the production function upward.
Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, A) there is a shortage of workers in both sectors. B) cyclical unemployment increases. C) the economy remains at full employment. D) structural unemployment increases.
D) structural unemployment increases.
The labor force is defined as the A) number of people who are working. B) number of people in blue-collar jobs. C) number of people over 16 years of age. D) sum of employed and unemployed people.
D) sum of employed and unemployed people.
The Industrial Revolution in England in large was the result of A) growth in human capital. B) population growth. C) technological innovations that were financed mainly by government spending. D) technological innovations encouraged by the patent system.
D) technological innovations encouraged by the patent system.
In China, suppose that the price level was 100 in 2014, 110 in 2015, and 120 in 2016. Over these three years A) inflation did not occur. B) prices were stable. C) the inflation rate accelerated. D) the inflation rate was positive
D) the inflation rate was positive
Potential GDP is A) the level of GDP achieved during periods when 100 percent of the labor force is employed. B) the maximum GDP that an economy actually achieves throughout its entire history. C) a goal that can never be achieved by the economy. D) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation
D) the maximum amount of GDP that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation
The unemployment rate is measured as A) an indicator for potential inflation. B) the number of people that want to work but cannot find jobs out of the entire population. C) an indicator to determine long-term economic growth. D) the percentage of people in the labor force who are unemployed.
D) the percentage of people in the labor force who are unemployed.
Which of the following is NOT an important factor affecting growth in labor productivity? A) the growth rate of physical capital B) the saving rate C) the growth rate of labor productivity D) the speed with which prices fall
D) the speed with which prices fall
Full employment occurs when A) there is no frictional unemployment. B) the unemployment rate is less than 5 percent. C) there is no unemployment. D) there is no cyclical unemployment
D) there is no cyclical unemployment
In September 2014, the official U-3 unemployment rate dropped from 6.1 percent to 5.9 percent. This change could have been caused by A) workers who had previously given up looking for a job starting to look again. B) part-time workers getting a full-time job. C) full-time workers becoming part-time workers. D) unemployed workers giving up looking for a job.
D) unemployed workers giving up looking for a job.
