Economics Exam 2 Set
The productivity growth slow down, refers to the
. During the 1970s and for some years afterwards.
Real GDP can be criticized as a measure of economic welfare because it
Does not take account of the degradation of environmental quality, does not include the value of products produced in the household, and does not include leisure time available to a society
According to the new growth theory, technological change is driven by
Firms attempts to increase their profit
Which type of price index theory averages the base year and current years quantities?
Fisher's Mean
Core inflation represents the general change in prices excluding
Food and energy
When a student finish his college and begins looking for work
Frictional unemployment increases
What effect does technological change have?
Increases potential GDP
If the population increases in our growth model, then the potential GDP_____ and employment ____
Increases; decreases
Unpredictable changes in the valley of money, which brings about gains and losses, or a consequence of unpredictable changes in
Inflation
What is not a component of the income approach to measuring US GDP
Investment
The chairman of the federal reserve system is
Jerome Powell
According to new growth theory,
Knowledge is not subject to diminishing returns
Which type of price index theory uses base years quantities
Laspeyres
The CPI uses a_____ type price index while the GDP deflator uses a _______ based chain-type index
Laspeyres, Fishers mean
Because the bias in calculating the CPI, actual inflation is
Less than the measured inflation rate by about 1% per year
In the equation, GDP=C +I + G + X -M, G refers to
Local, state, and federal government expenditure on goods and services, but does not include transfer payments
The _______ is calculated as the number of people ____ divided by the labor force multipled by 100
Unemployment rate; unemployed
The consumer price index is a measure of the average of the prices paid by_____ for a fixed basket of consumer goods and services
Urban consumers
cyclical unemployment occurs when
a business cycle recession decreases employment.
Deflation represents
a reduction in the aggregate price level.
Economists distinguish real GDP from nominal GDP to
determine whether real production has changed.
Two methods of measuring GDP are
income approach and expenditure approach
According to the classical growth theory of Thomas Malthus:
increases in real GDP per person are only temporary.
The gap between real GDP per person in Africa and real GDP per person in the United States has been
increasing
In the national income accounts, the purchase of a new house counts as
investment
Activities that encourage faster growth are
investment in new capital and human capital
Structural unemployment is the result of
technological change, absolute job skills, or foreign competition.
When calculating GDP, underground, economic activity is
the part of the economy purposely hidden
The term capital, as used in macro economics refers to
the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.
The labor force is defined as
workers with jobs and unemployed workers.
The difference between gross investment and net investment is
depreciation
The producer surplus on a unit output is the difference between the market price in the supply price
True
Hyperinflation is defined as
very high inflation rates
Over the last 100 years, the average US growth rate and real GDP per person was about
2% per year
If the nominal interest rate is 8% and the current inflation rate is 3% approximately what is the real interest rate?
5 %
In June 2022, recent inflation, annualized, as measured by the CPI peaked at
8.9%
Event ceiling creates a shortage as a result, what occurs next
A loss of both consumer and producer surplus
Which theory of economic growth concludes that growth can continue indefinitely
A new theory
Discouraged workers _____ counted as officially unemployed because they____
Are not; are not actively seeking work
The view the population growth occurs when real GDP per person exceeds the amount necessary to sustain life is part of the ______
Classical Growth theory
Consumer Price Index (CPI)
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.
A minimum wage sent above the equilibrium price will
Create surplus of labor
Unemployment caused by fluctuation of the business cycle is called______ unemployment
Cyclical
The reason the consumer price index has not officially adopted. The fishers mean approach to calculating inflation is because.
Social Security and many pension funds are indexed to inflation
The decrease in slope of production function reflects
Diminishing returns
Gross domestic product is the total_____ produced within a country in a given time period.
Market value of all final goods and services
The biases in the CPI include the
New goods, quality, change, and the substitution bias
Labor, productivity, real GDP per labor hour, increases if
New technologies are continuously discovered, there is an increase in the accumulation of human capital, and savings and investment cause an increase in the quantity of capital per worker
Frictional unemployment comes about because
Normal labor market turnover
Marginally attached workers fall into what population category?
Not in the labor force
During a recession, the_____
Number of marginally attached workers increases
Full employment occurs
Only if the unemployment rate is equal to the natural rate of unemployment
Which type of price index theory uses current years quantities
Paasche
The unemployment rate measure is the percentage of
People in the labor force who can't find a job
Some economists that do not like using the consumer price index is a measure of consumer inflation, instead prefer using
Personal consumption expenditure
Expenditures Approach to GDP, the largest component is
Personal consumption expenditures
The largest component of GDP in the expenditures approach is
Personal consumption expenditures
All of the following contribute to labor, productivity growth, except
Population growth
Labor, growth of depends, mainly on______, and labor productivity growth depends mainly on _____
Population growth; technological advances
US investment is finance from
Private, saving, government budget surpluses, and borrowing from the rest of the world
And labor market an increase in labor productivity____ the real wage and _____ the level of employment
Raises ; increases
Labor productivity is
Real GDP per hour of labor or real GDP per worker
An assumption of classical grow theory is that when____ the population growth rate ____
Real GDP per person exceeds the subsistence level; increases
According to the new groove theory, competition
Reduces profit
A price floor
Results in a surplus, if the floor price is higher than the equilibrium price
An increase in the working age population results in a
Rightward shift of the supply of labor curve, and an increase in potential GDP
If new capital or technology increases labor, productivity, the supply of labor______, and the demand for labor ____
Stays the same, increases
Substitution bias in the CPI refers to the fact that the CPI
Takes new account of the substitution of goods by consumers when relative prices change
What policy actions could speed productivity growth?
Tax incentives to encourage saving, encouraging international trade, directing public funds towards financing basic research.
Neoclassical graph theory attributes, economic growth to
Technological change
Pollution is a byproduct of some production processes, so on this count real GDP as measured
Tends to overstate economic welfare
Looking at inflation rates in the US since the 1970s/early 1980s we see that
The 1970s/early 1980s experienced the highest inflation rates
The primary tool for policymakers, and dealing with inflation is
The FED raising interest rates and cutting money supply growth
Is a rich country grows at a faster rate than a poor one then
The gap in their standard of living will widen overtime
Other things remaining the same, the greater than expected profit,
The greater the amount of investment
The primary concern for aggressively, reducing inflation is
The risk of a recession
Potential GDP is
The value of production, when all the nations resources are fully employed
The primary cause of inflation
Too much fiscal spending
The unemployment-to-population ratio is defined as
Total employment, divided by the working age population, then multiplied by 100
A price ceiling is a price
above which a seller cannot legally sell
The use of purchasing power parity prices
accounts for differences in the prices of the same goods in different countries when measuring real GDP.
The largest component of national income is
compensation of employees
Depreciation is defined as
decrease in the stock of capital due to wear and tear.
Three types of unemployment are
frictional, structural, cyclical
Net investment equals
gross investment minus depreciation
We are interested in long-term growth, primarily because it brings
higher standards of living
Workers who pursue an education, directly increase their
human capital
The labor, force, participation rate is calculated as the
labor force divided by the working age population then multiplied by 100.
Deadweight, loss or welfare loss is
made up of a loss of both consumer surplus and producer surplus.
In the US, resources are most often allocated by
market price
Which growth theory models growth as a perpetual motion machine?
new growth theory
Which theory emphasizes the significance of new discoveries that can be used by many people at the same time?
new growth theory
Price indexes can overstate inflation because they
omit some quality improvements
The bias in the CPI typically
overstates inflation
Labor growth depends mainly on ________ and labor productivity growth depends on ________.
population growth; technological advances
What is not included in real GDP?
production in the home
All of the following household expenditures are included in consumption expenditure , except
purchase of corporate stock.
Human capital is
the knowledge and skills a worker gains through education and experience
GDP declines during
the movement from peak to trough
Real GDP decreases during
the movement from peak to trough
A market is allocatively efficient if
the sum of the consumer surplus and the producer surplus has been maximized.
Intermediate goods are excluded from GDP, because
their inclusion would involve double counting
