Macro chapter 5, 6, 7, and bridge questions

CPI

focuses on retail prices to consumers

During a ______ the economy reaches the bottom of the cycle

trough

If Greenville's GDP doubled over 5 years, what was the approximate annual growth rate (using the rule of 70)? a) 5% b) 20% c) 9% d) 14%

d) 14%

During a _____ economic growth slows down to turn negative

recession

During a ______ economic activity begins to pick up

recovery

PPI

reflects prices received by producers at the wholesale level

GDP per capita in the countries of Neverland and Everland are 2,000 and 500, respectively. This suggests that, other things being equal, the returns from capital investment would be: 1) Greater in Neverland. 2) Greater in Everland. 3) The same in both countries.

2) Greater in Everland

Suppose that the stock market rises significantly over the next year, making investors wealthier and more optimistic about the economy while raising the overall level of consumption. Is this increase in consumer confidence a microeconomic or a macroeconomic issue? a) microeconomic b) macroeconomic c) both macro and micro d) neither

Macroeconomic

Which of the following persons would be considered unemployed? a) Nick, a union member on strike at his factory because he demands better job benefits. b) Beth, laid off from her job as a mechanic, chose to return to school instead of looking for another job. c) Jack, not having worked in eight months, feels hopeless, which is why he does not bother applying for jobs. d) None of the above are considered unemployed.

d) None of the above are considered unemployed.

GDP Deflator

includes all goods and services covered by the national income and product accounts

Some people believe that the government should guarantee its citizens a basic standard of living by raising the minimum wage, providing housing assistance to the poor, and offering health care coverage to everyone. What type of economist is most likely to favor this view? a) all would favor b) classical c) monetarist d) keynesian

keynesian

In an attempt to promote renewable energy, the President and Congress approve an annual rebate to those who install solar panels on their roofs. What type of economic policy would this represent? a) fiscal policy b) monetary c) both d) neither

Neither

Suppose that the CPI in 2013 was 250 and the CPI in 2014 was 260. What is the rate of inflation in this economy? a) 3.8% b) 4.0% c) 10.0% d) 96.2%

b) 4.0%

During a ____ the economy is operating at its capacity

peak

If C = $1,000, I = $500, G = $800, X = $400, and M = $600, what is the value of GDP? $3,300 $2,300 $2,500 $2,100

$2,100

If the village of Happyville has 150 residents, of which 50 are children or senior citizens, 95 are working, and 5 are actively seeking work, the unemployment rate is: a) 36.7%. b) 5%. c) 3.3%. d) 33.3%.

b) 5%

If China's economy maintains a 7% annual growth rate over the next 20 years, about how large will its economy be in 20 years if its current GDP is $12 trillion? a) $36 trillion b) $24 trillion c) $48 trillion d) $29 trillion

c) $48 trillion

cyclical unemployment a) extensive job training and retraining programs b) a job-matching employment service that reduces search time c) appropriate monetary and fiscal policies

c) appropriate monetary and fiscal policies

If a bundle of goods used to calculate the consumer price index rises from $80 to $86 over a one-year period, what is the inflation rate for that year? a) 6.0% b) 10% c) 6.9% d) 7.5%

d) 7.5%

Which of the following scenarios would result in economic growth in the country of Everland? a) GDP and prices double. b) GDP and population doubles, while prices remain the same. c) Population doubles while GDP and prices remain the same. d) GDP doubles while prices remain the same.

d) GDP doubles while prices remain the same

Currently national income and production statistics do little to account for the environmental benefits or harmful impacts of economic activity. Suppose that a new method of calculating gross domestic product (GDP) was implemented to account for environmental factors. The new method allows for a reduction in GDP as a result of the severity of environmental degradation in a country. If this method is used, which of the following countries might experience the greatest adjustment to their GDP calculation? a) China b) Ireland c) Sweden d) Finland

a) China

Suppose the production function for the country of Westlandia is Q = K + L, where Q is output, K is capital, and L is labor. Which of the following statements is true about this production function? a) Westlandia could achieve economic growth with labor alone. b) Labor exhibits diminishing marginal returns. c) Capital exhibits diminishing marginal returns d) All of the above statements are true.

a) Westlandia could achieve economic growth with labor alone.

Which of the following is an example of monetary policy? a) A rise in short-term interest rates b) A new bridge being built by the government c) A reduction in the federal income tax d) An increase in Social Security payments

a) a rise in short-term interest rates

Business cycles are officially dated by the National Bureau of Economic Research (NBER), which is tasked with dating "turning points." Turning points are times at which the economy switches from peak to downturn or from trough to recovery. A key problem with the way the NBER dates turning points is that turning points are dated a) after the events have started b) inaccurately c) before the events have started

after the events have started

Calculate the GDP of Dinoland using the expenditures approach given the following data: personal consumption expenditures = $10 billion; gross private domestic investment = $5 billion; government spending = $3 billion; exports = $2 billion, imports = $1 billion. a) $21 billion b) $19 billion c) $18 billion d) $17 billion

b) $19 billion

frictional unemployment a) extensive job training and retraining programs b) a job-matching employment service that reduces search time c) appropriate monetary and fiscal policies

b) A job-matching employment service that reduces search time

Why does a small difference in economic growth result in a large difference in wealth over time? a) Over time, small growth rates turn into large growth rates. b) The effect of compounding allows growth to build upon previous growth. c) Over time, small growth rates end up turning negative, preventing further growth. d) Governments are more likely to support big countries than small countries.

b) The effect of compounding allows growth to build upon previous growth.

Which of the following is least likely to result in inflation? a) The government printing money to finance deficits. b) A reduction in consumer confidence. c) A drought in California that causes farm production to fall. d) Rising instability in oil-producing nations.

b) a reduction in consumer confidence

Many hotel chains are automating the check‑in process by allowing guests to download onto their phones a scannable code that enables them to unlock their rooms. Guests can thereby bypass the front desk altogether upon arrival. 1. This technology will ________ the number of front desk workers. a) increase b) decrease 2. This technology will create __________ unemployment. a) frictional b) cyclical c) structural

b) decrease c) structural

Jonathan is currently enrolled in college full-time; however, he works part-time at a restaurant on weekends to earn some spending cash. Jonathan would be considered: a) unemployed b) employed c) not in the labor force d) institutionalized

b) employed

Which of the following is a macroeconomic issue? a) Alex decides to spend his summer vacation at a science camp. b) South Park experiences an economic boom from increased tourism. c) Kira's Dress Factory decides to hire more workers. d) Jamal's Ice Cream Truck shuts down during the winter due to lack of customers.

b) south park experiences an economic boom from increased tourism

Suppose that due to a poor economy, 1 million workers lost their jobs, causing the unemployment rate to increase to 10%. After a few months of searching, 300,000 of these unemployed workers give up looking for work. How would the decision by these 300,000 people affect the unemployment rate, all else equal? a) The unemployment rate would increase. b) The unemployment rate would decrease. c) The unemployment rate would remain unchanged. d) There is not enough information to answer this question.

b) the unemployment rate would decrease

Which type of economist would be least supportive of attempts to build a new high-speed railway network by raising taxes on gasoline? a) monetarist b) classical c) none d) keynesian

classical

A debate that regularly occurs in Congress concerns raising the debt ceiling, allowing the U.S. government to continue paying its obligations. A few years ago, one politician proposed that instead of raising the debt ceiling, the U.S. Treasury should just mint a 1-trillion-dollar coin and use it to "pay off" the federal deficit. If such a coin were to be minted, what would be the potential effects on inflation? a) the long run, circulation of the coin will lead to hyperinflation. b) In the long run, circulation of the coin will lead to deflation. c) In the long run, circulation of the coin will lead to stagflation. d) In the long run, circulation of the coin will lead to inflation.

d) In the long run, circulation of the coin will lead to inflation.

Which of the following would represent the fastest annual growth of GDP per capita? a) An increase in real GDP of 5% and population growth of 1%. b) An increase in real GDP of 2% and population decline of 1%. c) An increase in real GDP per capita of 3%. d) An increase in real GDP of 6% and population growth of 4%.

a) An increase in real GDP of 5% and population growth of 1%.

Suppose that the consumer price index in Eastlandia rises from 150 to 159 over the past year, and that the city sets its car registration prices so that real prices stay the same. If the cost to register a car was $50 last year, how much would it cost this year, in nominal terms? a) $50 b) $56 c) $53 d) $59

c) $53

Among the major spending categories that make up GDP, gross private domestic investment (GPDI) is much more volatile than personal consumption expenditures over the business cycle. Choose the options that provide examples that may explain this volatility a) Individuals are less likely to purchase new homes when the economy is performing poorly b) Individuals are less likely to purchase new major appliances when the economy is down c) The government is less likely to purchase new structures during a recession d) Restaurant chains are less likely to open a new franchise when sales are down.

a) Individuals are less likely to purchase new homes when the economy is performing poorly d) Restaurant chains are less likely to open a new franchise when sales are down.

Which of the following government actions would represent the largest increase in physical capital? a) Investment in hospitals and other health care facilities to modernize their operations. b) Expansion of research and development in biotechnology. c) Tax credits to offset college tuition. d) Taxes on corporate earnings.

a) Investment in hospitals and other health care facilities to modernize their operations.

You are planning to purchase a new car with a low fixed‑interest rate loan. You believe that inflation is going to increase significantly over the next few years, and your expectations are above market expectations. What should you do based on your expectations? a) Buy the car now because the real value of your payments will decline. b) Buy the car now because the real value of your payments will increase. c) Wait a few years and purchase the car with your savings. d) Wait a few years and evaluate whether you need a new car.

a) buy the car now because the real value of your payments will decline

In 2008, the rate of inflation was 2%, which then rose to 3% in 2009 before falling back to 2% in 2010. Between 2008 and 2009, the economy experienced _____ and between 2009 and 2010, the economy experienced _____. a) inflation; disinflation b) inflation; deflation c) disinflation; inflation d) disinflation; deflation

a) inflation; disinflation

At the start of a recovery following a recession, employment begins to rise, and the news media reports data on job growth. As a result, discouraged workers start to return to the labor force. As a result of the above events, the unemployment rate would a) rise or fall. b) first rise and then fall. c) rise. d) fall.

a) rise or fall

All of the following are considered factors of production except a) a vacant piece of land that has never been used. b) an antique sewing machine that Jill still uses to alter clothes. c) Randy, who has worked as a mechanic for twenty years. d) All of the above are factors of production.

d) all of the above are factors of production

Assume that a person just lost his job and decided to take a two-month-long break to travel to Europe before looking for a new one. Just as he returns home from his trip, he is interviewed by the Department of Labor about his employment status. How would he be classified? a) Not in the labor force b) Discouraged c) Employed d) Unemployed

a) not in the labor force

GDP calculated using the income approach, including adjustment, will be ___________ GDP calculated using the expenditure approach. a) unrelated to b) less than c) the same as d) greater than

c) the same as

The town of Villageton has 500 residents, of which 300 are employed, 30 are not working but actively seeking work, 80 are children in school, 40 are retirees, 30 are full-time college students, and 20 are institutionalized. a. Calculate the unemployment rate in Villageton. Round your answer to the nearest tenth. Unemployment rate: _______% b. Suppose that 10 of the 30 college students graduate and enter the labor force actively seeking work, but only 5 find a job. How does this change the unemployment rate in Villageton? Round your answer to the nearest tenth. Unemployment rate: _________%

1.) 9.1 2.) 10.3

At which of the following stages is the unemployment rate likely to be highest? a) at the end of an economic recovery b) midway through an economic recession c) at the very start of an economic recovery d) at the very beginning of an economic recession

At the very start of an economic recovery

Business cycles are alternating increases and decreases in economic activity divided into four phases; peak, recession, trough, and recovery. Which statement regarding the recovery phase of the business cycle is true? a) An economy in the recovery phase of the business cycle can have a lower GDP and a higher unemployment rate than the preceding recession. b) An economy in the recovery phase of the business cycle always has a higher GDP and a lower unemployment rate than the preceding recession. c) The recovery phase of the business cycle is followed by recession. d) The recovery phase of the business cycle is preceded by a peak.

a) An economy in the recovery phase of the business cycle can have a lower GDP and a higher unemployment rate than the preceding recession.

Suppose a person works hard at a job after graduation and after her first year, her effort is rewarded with a 4% raise when the average wage increase in her company is 2%. Later, the government releases its inflation report and says that the inflation rate is 6%. Given this information, which of the following is true regarding her standard of living? a) Her standard of living did not improve because the purchasing power of her income is less than it was last year. b) Her standard of living has remained the same because the rate of inflation does not influence purchasing power. c) Her standard of living has improved because the 4% raise is enough to offset the average rise in prices. d) Her standard of living has increased by the amount of inflation, namely, 6%.

a) Her standard of living did not improve because the purchasing power of her income is less than it was last year.

Critics of how GDP is measured argue that it fails to fully account for "intangibles" in knowledge‑based goods. For example, the values of books are counted in the year they were produced. However, when a book is lent out in a library or resold in the used book market, it does not add to GDP, despite the benefits and knowledge it provides to readers. What might be some problems associated with trying to include intangibles in GDP? a) It is difficult to place a value on something that is intangible. b) It is difficult to identify a precise time when intangibles produce value. c) The value of an intangible is subjective and varies from person to person. d) It is difficult to place value on things that do not provide benefits.

a) It is difficult to place a value on something that is intangible. b) It is difficult to identify a precise time when intangibles produce value. c) The value of an intangible is subjective and varies from person to person.

Government spending, as a percentage of GDP, tends to increase during recessions and decrease during times of economic expansion. Why does government spending tend to change, depending on the phase of the business cycle? a) More people seek government benefits during recessions, causing the government to spend more during these periods. b) The government increases spending during expansions to encourage economic growth. c) The business cycle has no impact on government spending d) Fewer people seek government benefits during recessions, causing the government to spend less during these periods.

a) More people seek government benefits during recessions, causing the government to spend more during these periods.

If Galaxia has a GDP that is 10 times larger than that of Myopia, which country would likely have greater marginal returns to capital based on the law of diminishing marginal returns to capital? a) Myopia b) Galaxia c) Both countries would have equal marginal returns to capital. d) Both countries would have marginal returns to capital equal to 0 due to diminishing returns.

a) Myopia

Which of the following policies would likely not promote economic growth? a) Reducing the number of student visas issued to international students. b) Replacing old snow plows with new state-of-the-art snow plows. c) Awarding scholarships to bright high school students. d) Offering after-work computer enhancement classes.

a) Reducing the number of student visas issued to international students.

The gross domestic product (GDP) of China has grown at around 10% annually for most of the last 20 years. However, in recent years, the growth rate has fallen to around 6% annually. This is still much higher than the growth rate of U.S. GDP, which is about 2% annually. If prices of goods and services in China fall due to slower growth, what impact will this have on U.S. GDP? a) Slower growth in China will cause Americans to purchase more goods from China, which will decrease the GDP of the United States. b) Slower growth in China will cause Americans to purchase more goods domestically, which will increase the GDP of the United States. c) China's economy has no impact on the GDP of the United States. d) Slower growth in China will cause Americans to purchase more goods from China, which will increase the GDP of the United States.

a) Slower growth in China will cause Americans to purchase more goods from China, which will decrease the GDP of the United States.

Suppose that Pandastan has a GDP of $5 billion and a population of 2 million, while Tigerstan has a GDP of $3 billion and a population of 1 million. Which country has a higher GDP per capita, and what is that value? a) Tigerstan; $3,000 b) Tigerstan; $3,333 c) Pandastan; $2,500 d) Pandastan; $4,000

a) Tigerstan; $3,000

Which of these criteria is NOT required for a person to be considered unemployed? a) An individual should browse online employment openings. b) An individual should have been previously employed. c) An individual should not have a job but should be available for work. d) An individual should have been actively seeking work in the previous four weeks.

a) an individual should browse online employment openings

Suppose Hyperpolis's GDP increases by 15%, and its inflation rate is 12%, while Superpolis's GDP increases by 6%, and its inflation rate is 3%. Assuming the population in both countries remained constant, which economy grew faster? a) Both economies grew at the same rate. b) Hyperpolis's economy grew faster. c) Superpolis's economy grew faster. d) It is not possible to determine which economy grew faster.

a) both economies grew at the same rate

When the economy experiences unanticipated inflation, all of the following groups "lose" EXCEPT: a) debtors. b) creditors. c) workers. d) producers.

a) debtors

Structural Unemployment a) extensive job training and retraining programs b) a job-matching employment service that reduces search time c) appropriate monetary and fiscal policies

a) extensive job training and retraining programs

Suppose Mexico's population grew by 10% over the past two decades, due to increased immigration from Central America. Also, suppose Costa Rica's population grew by 10% over the same period, primarily due to rising life expectancy. All else equal, what would the effect of population growth be on unemployment? Mexico's unemployment rate will likely __________ more than Costa Rica's. a) increase b) decrease

a) increase

Gross domestic product (GDP) is the most widely reported value in the national income and product accounts. GDP measures an economy's total output. Measurements of GDP do not include the value of _____________ to avoid double counting. a) intermediate goods b) final goods c) goods produced inside the country d) goods produced outside the country

a) intermediate goods

Teenagers and young people have high unemployment rates because they: a) lack the experience and job skills needed for lower unemployment rates. b) work for no pay and earn no income for all the jobs in which they are engaged. c) fall in the category of discouraged workers. d) are more likely to suffer temporary illness and therefore are not a part of the labor force.

a) lack the experience and job skills needed for lower unemployment rates

The prices of certain goods, such as computers and televisions, generally fall with technological advancement. Why is the inflation rate positive when the prices of some goods fall? a) The inflation rate is calculated based on a typical basket of goods and services. b) When the price of a good falls, the good is excluded from the representative basket. c) Technological goods, such as televisions, are not used to measure inflation. d) The inflation rate is calculated by taking the absolute values of changes in prices.

a) the inflation rate is calculated based on a typical basket of goods and services

GDP per capita provides a rough measure of a country's standard of living relative to other countries. GDP per capita is measured as a) total output divided by the population. b) population divided by total inputs. c) population divided by total output. d) total inputs divided by the population.

a) total output divided by the population

Suppose that in Southlandia, frictional unemployment is 2%, structural unemployment is 3%, and cyclical unemployment is 4%. What is the natural rate of unemployment in Southlandia? a) 2% b) 3% c) 5% d) 9%

c) 5%

Suppose Jollyland has a population of 1,000 people and a GDP of $1 million, while Follyland has a population of 8,000 people and a GDP of $8 million. Which country has a higher GDP per capita? a) Follyland b) Jollyland c) Both countries have the same GDP per capita. d) There is not enough information to determine GDP per capita.

c) Both countries have the same GDP per capita.

Suppose that GDP is $50 million in 2015 but falls to $48 million in 2016, and that no changes in personal consumption expenditures, gross private domestic investment, and government spending are recorded. What must have happened to net exports to cause this change? a) From 2015 to 2016, both imports and exports must have risen by $2 million. b) From 2015 to 2016, both imports and exports must have fallen by $2 million. c) From 2015 to 2016, the difference between exports and imports must have fallen by $2 million. d) From 2015 to 2016, the difference between exports and imports must have risen by $2 million.

c) From 2015 to 2016, the difference between exports and imports must have fallen by $2 million.

Suppose one has data for the following categories: net interest, government spending, corporate profits, net exports, gross private domestic investment, rental income, and personal consumption expenditures. Which measure of GDP can be calculated? a) GDP using both approaches. b) GDP using the income approach. c) GDP using the expenditures approach. d) There is not enough information to calculate GDP using either approach.

c) GDP using the expenditures approach

Which of the following persons would be considered employed? a) Sam, a 12 year old who helps his mom stock shelves at her gift shop. b) Ron, a recently enrolled full-time college student in hopes of finding a well-paying job. c) Jennifer, a teacher who is on two-month maternity leave but will return to work. d) All of the above persons are considered employed.

c) Jennifer, a teacher who is on two-month maternity leave but will return to work.

From 2015 to 2016, the overall price level rose from 200 to 220. Over the same period, tuition rates at the local community college rose from $100 to $115 per credit hour. What can be concluded from the rise in tuition relative to overall inflation? a) Tuition rates increased at the same rate as inflation. b) Tuition rates increased at a slower rate than inflation. c) Tuition rates increased at a faster rate than inflation. d) Tuition rates and inflation cannot be compared with the numbers given. Explain your reasoning:

c) Tuition rates increased at a faster rate than inflation.

The Bureau of Labor Statistics categorizes unemployed people into several groups, including job leavers, job losers, and discouraged workers. Which of these statements is true? a) Discouraged workers are always the fastest growing category. b) During a mild recession, the number of job leavers would probably increase the most. c) When there is a prolonged recession, the number of discouraged workers would grow quite fast. d) In a booming economy, the number of job losers would grow.

c) When there is a prolonged recession, the number of discouraged workers would grow quite fast.

If the inflation rate was 1% in 2014, 3% in 2015, and 2% in 2016, this economy experienced ____ from 2014 to 2015, and ____ from 2015 to 2016. a) disinflation; deflation b) inflation; deflation c) inflation; disinflation d) disinflation; inflation

c) inflation; disinflation

In 2018, the tiny country of Equatorial Guinea had the highest GDP per capita in Africa, according to the CIA's World Factbook. Equatorial Guineas' GDP per capita is over $30,000 per year, which is higher than that of more developed countries, including Morocco, Egypt, and South Africa. However, Equatorial Guinea also has extreme poverty. Half of its population lacks clean drinking water, and it has one of the highest infant mortality rates in the world." How can extreme poverty and a lack of basic necessities be common in a country that has the highest GDP per capita in the region? a) The country has a large population; GDP per capita is low when population size is taken into account. b) The country may not report all of its income actually generated, causing the country to appear poorer than other nations. c) The country faces poverty because the people of the country spend more money on wants than on needs. d) Income is not spread evenly across the country, and its leaders may engage in corrupt activities.

d) Income is not spread evenly across the country, and its leaders may engage in corrupt activities.

GDP and GNP are two different measures of the overall value of production in an economy. Suppose that a country's GDP is much greater than its GNP. What does that mean in terms of investment in and out of the country? a) Investment of domestic companies in other countries is equal to investment of foreign companies in the country. b) Investment of domestic companies in other countries is greater than investment of foreign companies in the country. c) Investment of foreign companies abroad is greater than investment of domestic companies in the country. d) Investment of foreign companies in the country is greater than investment of domestic companies in other countries.

d) Investment of foreign companies in the country is greater than investment of domestic companies in other countries.

Which of the following characteristics about Econoville could be determined based on its GDP? a) The fact that incomes are very equally distributed in Econoville. b) The fact that there is virtually no pollution in Econoville. c) The fact that there are no underground or informal markets in Econoville. d) None of the above can be determined based on Econoville's GDP.

d) None of the above can be determined based on Econoville's GDP.

Suppose Mexico's population grew by 10% over the past two decades, due to increased immigration from Central America. Also, suppose Costa Rica's population grew by 10% over the same period, primarily due to rising life expectancy. a. What would the effect of population growth be on the labor force? a) Population growth will decrease Mexico's labor force and also decrease Costa Rica's labor force. b) Population growth will increase Mexico's labor force and decrease Costa Rica's labor force. c) Population growth will decrease Mexico's labor force and increase Costa Rica's labor force. d) Population growth will increase Mexico's labor force and have a small positive impact on Costa Rica's labor force.

d) Population growth will increase Mexico's labor force and have a small positive impact on Costa Rica's labor force.

Chelsea was a manager at a vinyl records store who recently quit because she felt the recent popularity of vinyl is a current fad that will eventually fade away. She is now actively looking for a job in the hospitality industry. Chelsea is considered: a) cyclically unemployed. b) structurally unemployed. c) not in the labor force. d) frictionally unemployed.

d) frictionally unemployed

According to the circular flow model, income is equal to spending. The money that people spend to purchase goods and services is sales revenues for the business sector. Businesses distribute this income to the inputs (factors) of production. Which of the following are included as inputs (factors) of production? a) Labor, land, capital, and entrepreneurship b) Labor, land, households, and businesses c) Labor, land, the product market, and the resource market d) Labor, land, investment, and capital

labor, land, capital, and entrepreneurship