Economics Chapter 11-13
Suppose the nominal GDP of the United States was $7,500 billion in year X and the GDP chain price index is 120.0. Real GDP in constant year X dollars is:
$6,250 billion.
The inflation rate in the United States was the highest in _____.
1980
_____ would overstate the consumer price index.
An improvement in the quality of products
Which of the following is an indicator of economic growth? An increase in the real gross national product of a country An upward movement along the production possibilities curve of a country An increase in the price level in an economy An inward shift of the production possibilities curve of a country
An increase in the real gross national product of a country
A discouraged worker is one who:
Has given up looking for jobs
A worker in a cotton mill received a 6.5 percent increase in nominal wage. The inflation rate was about 3.2 percent in that year. Which of the following is true in this case?
His real wage has increased.
_____ refers to a situation in which there is an extremely rapid rise in the general price level in an economy.
Hyperinflation
_____ is considered a coincident indicator.
Industrial production
Goods that are used as inputs for the production of other goods are _____.
Intermediate goods
The purchase of new office space by a software firm would be included as _____ in the gross domestic product (GDP) accounts.
Investment
Which of the following is true of the unemployment rate? It is the percentage of the adult population not in the labor force. It is the product of the number of people in the total population who are without jobs and the civilian labor force. It is the percentage of people in the civilian labor force who are without jobs but are looking for jobs. It is the percentage of people in the total population who are without jobs and are not looking for jobs.
It is the percentage of people in the civilian labor force who are without jobs but are looking for jobs.
Which of the following is true of the GDP gap?
It measures the cost of cyclical unemployment.
Which of the following is true of the official data on the unemployment rate in the United States?
It understates the problem of unemployment as it excludes discouraged workers.
The lower portion of the circular flow model shows factor markets in which households provide:
Land, labor, and capital
Gross domestic product (GDP) overstates national well-being in the presence of:
Negative externalities- it does not take into account pollution and environmental damage that result from an increase in the level of production.
The equation for determining real Gross Domestic Product (GDP) for year X is:
Nominal gdp for year X/gdp chain price index x100
Suppose borrowers and lenders agree to loans with fixed nominal interest rates. If the inflation rate is lower than expected, _____ benefit from the transactions.
Only lenders
Consider borrowers and lenders who agree to loans with fixed nominal interest rates. If inflation is higher than what the borrowers and lenders expected, then who benefits from lower real interest rates?
Only the borrowers benefit.
The GDP gap is the difference between:
actual real GDP and full-employment real GDP.
Real gross domestic product (GDP) measures the value of:
all final goods produced in a year based on the prices in a selected base year.
During a recovery phase, _____.
an economy is between a trough of a business cycle and the next peak
A depression is:
an extremely long period of recession.
The _____ measures changes in the average prices of goods and services purchased by a typical household in an economy.
consumer price index
The circular flow model shows that:
consumption expenditures flow from households to businesses in product markets.
Fluctuations in real gross domestic product can cause:
cyclical unemployment.
Unemployment caused by a recession in an economy is called:
cyclical unemployment.
The number of people officially unemployed is not the same as the number of people who cannot find a job because:
discouraged workers are not considered.
The circular flow model for an ultra-simple pure market economy shows the:
exchange of money, products, and resources between households and businesses.
The term business cycle refers to the:
fluctuations in the real gross domestic product of an economy.
Inflation is an increase in the:
general price level in an economy.
The index of leading indicators serves as a:
government's chief forecasting gauge for business cycles.
Which of the following is not a reason that teenagers experience higher rates of unemployment than other demographic groups in the United States?
high productivity
According to the Bureau of Labor Statistics' survey, _____ accounts for the largest share in the total expenditure by a typical urban family in the United States.
housing
One of the main causes of frictional unemployment is _____.
imperfect information in the job market
One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI:
includes only goods and services bought by typical urban consumers.
Variables that change before real gross domestic product (GDP) changes are measured by the:
index of leading indicators.
Transfer payments are made to:
individuals by the government without receiving any goods or services in exchange.
Last year the Freemans earned $90,000 in a year. This year their family income is $120,000. If the inflation rate is 5 percent, the Freemans':
nominal as well as real income have increased.
Full-time students are:
not a part of the civilian labor force.
The GDP gap is:
positive when the actual real GDP of an economy exceeds its potential real GDP.
Disinflation means a decrease in the:
rate of inflation.
A person is considered unemployed if:
she is currently not working but is actively looking for work.
A recession is a business contraction lasting at least:
six months
Full employment occurs when the rate of unemployment in an economy equals the sum of:
structural and frictional unemployment rates.
A mismatch of the skills of unemployed workers and the skills required for existing jobs leads to:
structural unemployment.
If a travel agent loses his job because people book their travel tickets online, it is an example of:
structural unemployment.
Consider a broom factory that permanently closes because of foreign competition. If the broom factory's workers cannot find new jobs because their skills are no longer marketable, then they are classified as
structurally unemployed.
As the price of gasoline rose during the 1970s, consumers cut back on their use of gasoline relative to other consumer goods. This situation contributed to a _____ bias in the consumer price index.
substitution
Suppose the price of banana rises over time and consumers respond by buying fewer bananas. This situation contributes to the _____ in the consumer price index.
substitution bias
Gross domestic product is calculated as the:
sum of the price multiplied by the quantity of goods and services produced within a country during a year.
The GDP chain price index is also called _____.
the GDP deflator
Inflation is measured by an increase in:
the consumer price index.
A criticism of the unemployment rate is that:
the data includes part-time workers as fully employed
People find it difficult to get jobs during recession because:
the demand for labor declines.
GDP is defined as
the market value of all final goods and services produced within the borders of a nation.
The unemployment rate will increase if:
the number of unemployed people remains unchanged but the size of the civilian labor force decreases.
Gross domestic product includes only _____.
the value of all domestically produced goods and services
The unemployment rate is measured as the:
total number of unemployed workers divided by the civilian labor force, multiplied by 100.
Frictional unemployment refers to:
unemployment when workers are between jobs.
Which of the following is most likely to be true if the value of Canada's net exports is negative?
Canadian dollars will flow out of the country to pay for imports
A small suburb of Chicago has a population of 150. Fifty of them work in a local candle-making factory and ten of them are looking for jobs. Fifty people have joined the armed forces and forty of them have retired from active service. The number of people in the civilian labor force in the suburb is:
60
Identify a factor that can cause structural unemployment.
A decrease in the demand for a good
The GDP gap is negative during:
A recession
The area after a trough to a peak is called what
An expansion
the correct definition of the civilian labor force.
All individuals who are employed or who are actively looking for a job
The circular flow model for a pure market economy shows that
Businesses purchase all their resources from households
Gross domestic product is expressed as _____ using the expenditure approach.
C+I+G+(X-M)
Which of the following statements is true of deflation? Deflation is a decline in the rate of change of inflation over time. Deflation is a decline in the rate of growth of an economy. Deflation is an increase in the general level of prices in an economy. Deflation is a decrease in the general price level of goods and services in an economy.
Deflation is a decrease in the general price level of goods and services in an economy.
In the expenditure method of gross domestic product (GDP) accounting, personal consumption expenditures include total spending by households on _____.
Durable and non durable goods and services
Gross domestic product (GDP) is a measure of a country's:
Economic performance
_____ lose due to inflation.
Fixed income earners
A professional football player decides to quit playing and spends six months looking for a job, before he decides to take up news reporting. This is likely to be reflected as an increase in the _____ in the economy.
Frictional unemployment rate
Which of the following is a shortcoming of gross domestic product (GDP)?
GDP excludes nonmarket transactions.
Which of the following is true if there is an increase in the value of final goods sold in black markets in an economy?
GDP is likely to understate the performance of the economy.
Which of the following does the circular flow model show? Goods and services flow from households to businesses in factor markets. Goods and services flow from businesses to households in factor markets. Goods and services flow from businesses to households in product markets. Goods and services flow from households to businesses in product markets.
Goods and services flow from businesses to households in product markets
In the expenditure approach to the computation of gross domestic product (GDP), the sum of fixed investment expenditures and changes in business inventories represents _____.
Gross Private Domestic Investment
Identify the correct statement about the gross domestic product (GDP) of a country. The value of services is not included in the calculation of GDP. Pollution generated in the production process is included in the calculation of a country's GDP. Qualitative improvements are not reflected in GDP. Nonmarket transactions are included in the calculation of a country's GDP.
Qualitative improvements are not reflected in GDP.
Sam is a musician who is out of work because modern machines replaced live musicians. This is an example of:
Structural unemployment
causes the consumer price index to overstate the impact of higher prices of a product on the price level.
Substitution bias
Which of the following transactions would be included in the calculation of the gross domestic product (GDP) of a country? Unemployment benefits Stock market transactions The commission from the sale of a house The sale of a used trailer
The commision from the sale of a house
The calculation of nominal gross domestic product is based on:
The current prices of goods and services
The circular flow model is based on the assumption that:
The factors of production are owned by households
The straight line in a business cycle is what
The growth trend line
_____ is an example of a lagging indicator.
The prime rate
Which of the following is true of the recent civilian unemployment rates in the United States?
The unemployment rate for African-American teenagers was higher than that for white teenagers.
_____ will be included in the government expenditures component of gross domestic product (GDP)
The value of a new bridge
A positive net exports figure implies that:
The value of exports of a country exceeds the value of its imports
Which of the following happens due to inflation? Those who lend money at an interest rate below the rate of inflation suffer economic losses. Real estate owners lose due to inflation. Stock owners lose due to inflation. Those who lend money at an interest rate above the rate of inflation suffer economic losses.
Those who lend money at an interest rate below the rate of inflation suffer economic losses.
A(n) _____ follows a recession in a business cycle.
Trough
Identify an example of a leading business-cycle indicator.
Unemployment claims
_____, there is an increase in real gross domestic product and a decrease in the unemployment rate in an economy.
When an economy is in the recovery phase of a business cycle
Real income in Year X is equal to:
Year X nominal income ——————————————- CPI/100
At the natural rate of unemployment, cyclical employment is ________
Zero
Jennifer Connell lost her job during an economic recession when her company was downsized. She started looking for jobs in other cities but was unable to find one. She is:
a member of the civilian labor force who is unemployed.
The consumer price index (CPI) includes only goods and services bought by
a typical urban consumer.
The recessionary phase in a business cycle is the period:
between a peak and a trough in the business cycle.
During a recession,_____.
business profits decrease and the economy's production capacity is underutilized
A lagging indicator is a variable that:
changes after a change in the level of real gross domestic product.
The cost-of-living index measures the:
changes in the average prices of consumer goods and services that households purchase.
A base year is a year:
chosen as a reference point for comparison with another year.