Economics Exam 2

The Bureau of Labor Statistics reported that in April 2015, the labor force in Michigan was 4,737 and employment was 4,472 thousand. Calculate the employment rate in Michigan in April 2015.

The unemployment rate in Michigan in April 2015 is 5.6 percent.

Unemployment is 4.9 percent—less than half of the Great Recession peak—but Bernie Sanders got a big cheer when he dismissed the official unemployment rate as not reflecting those who are involuntarily working​ part-time, or those who have become so discouraged they have given up looking for employment. Which of the alternative measures of unemployment does Bernie Sanders think is more relevant than the official unemployment rate and what was its level at the start of​ 2016? Bernie Sanders thinks the​ _______ measure of unemployment is more relevant than the official unemployment rate. At the start of​ 2016, this measurement was​ _______.

U-6; 10 percent

__________ is an example of U.S. consumption expenditure.

Your purchase of a model car kit

Which of the following correctly describes a final good? i) A final good is bought by its final consumer. ii) A final good can be used by a firm as a component of another good or service. iii) Investment goods cannot be a final good.

i only

When measuring GDP by the income approach, wage income includes i) health-care insurance paid for by the firm and its employees ii) Social Security contributions made by the firm iii) wages paid during a worker's vacation time

i, ii, and iii

In 1961, real GDP totaled $575 billion and in 2011 it totaled $1,255 billion. Between 1961 and 2011, the population increased from 50 million to 100 million. Between 1961 and 2011, the standard of living based on real GDP per person

increased from $11,500 to $12,550

The U.S. labor force participation rate __________.

increased from 59 percent in 1960 to 67 percent in 1999

Between 1960 and 1999, the labor force participation rate ___________.

increased mainly because the number of women who entered the labor force increased

A discouraged worker

is a marginally attached worker who has not made specific efforts to find a job within the previous four weeks because previous unsuccessful attempts were discouraging.

When the unemployment rate __________ the natural unemployment rate, real GDP __________ potential GDP.

is greater than; is less than

The purchase of 500 shares of Honda stock by the California State Employees' Pension fund

is not counted as part of GDP.

The natural unemployment rate __________.

is the unemployment rate at full employment

When the unemployment rate is __________ than the natural unemployment rate, cyclical unemployment is __________.

less; negative

The value of exports of goods and services minus the value of imports of goods and services is __________.

net exports of goods and services

The unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs is __________.

structural unemployment

Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, __________.

structural unemployment increases

Which of the following are included in the income approach to measuring GDP?

wages; indirect taxes less subsidies; rent

The U.S. unemployment rate __________.

was lower during World War II than during the Vietnam War

Suppose that business firms spend $500 on new capital equipment this year. Of this $500 million, $300 million was spent on domestically produced capital and $200 million was spent on foreign-produced capital. All else equal, these transactions contribute __________ to GDP.

$300 million

The labor force participation rate of women increased most during the ___________. One of the reasons why this rapid increse occured during this decade was that __________.

1970s more women graduated from college

The labor force participation rate of men decreased the most during the __________. One of the reasons why this decrease occurred was that __________.

2000s more older men decided to retire early

Consider 2000 and 2013. We can tell that real GDP was below potential GDP in __________ because __________.

2013; in 2013 a greater proportion of the unemployed were unemployed for 27 weeks and over than in 2000

Consider the business cycle, and then choose the statement that is correct.

A business cycle is periodic but irregular.

GDP in the United States increased between 2016 and 2017. Which of the following could NOT account for this increase? A. We paid lower prices for our goods and services and production remained constant. B. Our disposable income increased. C. We produced more goods and services and prices remained relatively constant. D. A combination of producing more goods and services and paying higher prices for our goods and services occurred.

A. We paid lower prices for our goods and services and production remained constant.

__________ good is used as a component of a final good We __________ add the value of intermediate goods produced to the value of final goods to measure GDP.

An intermediate; do not

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.

Choose the statement that is correct about U.S. unemployment.

At the height of Great Depression, one in four people who wanted jobs couldn't find them.

Choose the correct statement. A. the sum of all incomes is called net domestic product at market prices. B. The difference between gross product and net product is depreciation. C. A subsidy is a payment from a firm to the government. D. To get from factor cost to market price, we add subsidies and subtract indirect taxes.

B. The difference between gross product and net product is depreciation.

Consider unemployment in the industrialized world. Choose the correct statement.

The Eurozone has a higher average unemployment rate than the United States.

Consider what is included in the measurement of GDP, then choose the correct statement.

The underground economy, which is not included in GDP is the part of the economy that is hidden from the view of the government.

The Bureau of Labor Statistics reported that in April, 2020, the labor force was 156,481,00, employment was 133,403,000, and the working-age population was 259,896,000. Calculate for that month the labor force participation rate and the unemployment rate.

The labor force participation rate was 60.2 percent. The unemployment rate was 14.7 percent.

Which of the following is an example of government expenditure on goods and services?

The purchase of office supplies for the office of the junior senator from New York

Consider U.S. unemployment and choose the correct statement.

There is always someone without a job who is searching for one, so there is always some unemployment.

What is a characteristic of an economy at full employment?

There is no cyclical unemployment.

The United Nations Human Development Report gives the following data for real GDP per person in​ 2002: China,​ $4,580; Russia,​ $8,230; Canada,​ $29,480; United​ States, $35,750. Life expectancy at birth is 79.3 in​ Canada, 77.0 in the United​ States, 70.5 in​ China, and 66.7 in Russia. Freedom House rates political freedom each​ year, and its ratings are as​ follows: Canada and the United​ States, 1.1​ (1.0 is the most​ free); Russia,​ 4.5; and​ China, 7.6​ (ratings in the​ 7+ range are the least​ free). How do life expectancy at birth and political freedom change the relative ranking of living standards that real GDP per person​ indicate?

They don't change the relative ranking because they rank countries in a similar way as real GDP per person ranks them.

Which of the following is included in the measure of U.S. GDP?

a 2013 Grand Am produced and sold as a new car in the united States in 2013

Classify each of the following items as a final good or an intermediate good, and classify the expenditure on each final good as consumption expenditure or investment: Item 1: New concrete mixers bought by Chicago Concrete Inc Item 2: Aluminum cans bought by Coca Cola Item 3: A textbook bought a student Item 4: Trucks bought by FedEx. Item 1 is __________ and Item 2 is __________. Item 3 is __________ and Item 4 is __________.

a final good that is investment; an intermediate good a final good that is consumption expenditure; a final good that is investment

In calculating GDP, we must

add the market value of exports and subtract the market value of exports

Measuring total production by valuing items at their market value allows us to

add together the value of different goods that have different prices.

In each of the following transactions, classify the item as a final good, an intermediate good, or neither. Gravel purchased by a firm that produces cement is an example of __________. The garbage can you bought when you moved into residence is an example of __________.

an intermediate good; a final good

Undistributed profits __________ counted as part of GDP because __________.

are; they are considered income paid to households and loaned back to firms

Which of the following are included in the expenditure approach to measuring GDP?

consumption expenditure; investment; net exports of goods and services

To make comparisons of real GDP between two countries we must __________.

convert the real GDP of one country into the same currency units as the real GDP of the other country, and use the same prices to value the goods and services in the countries being compared

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

National income less retained profits plus transfer payments less personal income taxes equals

disposable personal income

Real GDP __________.

does not accurately measure household production, underground economic activity, or life expectancy

Everything else the same, if government expenditure increases by $400 billion and imports increase by $400 billion, then GDP

does not change.

The purchase of a new Boeing fighter jet by Israel is classified in the U.S. GDP accounts as

export expenditure.

Net exports of goods and services increase when __________.

exports of goods and services increase and imports of goods and services decrease

The items that firms in the United States produce and sell to the rest of the world are __________. The items that households, firms, and governments in the United States buy from the rest of the world are __________.

exports of goods and services; imports of goods and services

Gross Domestic Product is the market value of all __________ produced within a country in a given period of time.

final goods and services

U.S. gross domestic product is the market value of all the​ ______ produced​ ______ in a given time period.

final goods and services; within the United States

Total expenditure in the United States is equal to consumption expenditure plus investment __________.

plus government expenditure on goods and services plus net exports

Which of the following is NOT directly included in U.S. GDP?

popcorn purchased by a movie theater chain in Georgia

At a business cycle trough, cyclical unemployment is __________ and at a business cycle peak, cyclical unemployment is __________.

positive; negative

The U.S. economy is experiencing falling output, falling employment, falling incomes and rising unemployment. These conditions best describe a business cycle ________.

recession

The Z-Pop ratio __________.

shows an upward trend since 2000 but by 2016 it does not reach the pre-recession level

In order to be classified as a recession, a contraction of general economic activity must last at least

six months.

GDP calculated by the expenditure approach minus GDP calculated by the income approach equals

statistical discrepency

Gross national product is __________.

the market of all the final goods and services produced within a country in a given time period

When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

Which of the following is a final good or service?

the new economics textbook you are using

Which of the following is an example of investment?

the purchase of pill counting machines by Walgreens

Full unemployment is defined as a situation in which __________.

the unemployment rate equals the natural unemployment rate

At the peak of the business cycle, the

unemployment rate is below the natural unemployment rate.