Macro Econ: Exam 2 (8-10)
Consider the following data for Tyrovia, a country that produces only two products: guns and butter. Year Guns Produced Price of Guns Butter Produced Price of Butter 2013 80 $5 40 $4 2020 90 6 60 10 Real GDP for Tyrovia for 2020 using 2013 as the base year equals
$690.
Total Population 20,000 Working−Age Population 15,000 Employment 1,000 Unemployment 100 Consider the data in the table above for a simple economy. The unemployment rate for this simple economy equals
(100/1100)*100
Total Population 20,000 Working−Age Population 15,000 Employment 1,000 Unemployment 100 Consider the data in the table above for a simple economy. The labor force participation rate for this simple economy equals
(1100/15000)*100
Suppose the working−age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have full−time employment; 20 have part−time employment; 20 do not have employment, but are actively looking for employment; and 10 would like employment but do not have employment and are not actively looking for employment. The official unemployment rate as calculated by the U.S. Bureau of Labor would equal
(20/100)*100
Consider the following values of the consumer price index for 1996, 1997, and 1998: Year CPI 1996 157 1997 161 1998 163 The inflation rate for 1997 was equal to
2.5 percent.
If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?
8 years and 9 months
Consider the data shown below for Vicuna, a country that produces only two products: oranges and shirts. Year Oranges Produced Price of Oranges Shirts Produced Price of Shirts 2019 1,800 $0.90 110 $30.00 2020 2,000 1.00 110 35.00 Real GDP for Vicuna for 2019 using 2020 as the base year equals
$5,650.
Stage of Production Seller Buyer Price 1 Steel Mill Auto Manufacturer $10,000 2 Auto Manufacturer Auto Dealer 18,000 3 Auto Dealer Consumer 25,000 Refer to the table above showing three stages of production of an automobile. The value added by the automobile dealer equals
$7,000
2017 2020 Product Quantity Price Quantity Price Movies 20 $6.00 30 $7.00 Burgers 100 2.00 90 2.50 Bikes 3 1,000.00 6 1,100.00 A very simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table. What is real GDP in 2020, using 2017 as the base year?
$6,360
Nominal Average Hourly Earnings CPI (1982-1984=100) 1965 $2.65 32 2010 22.59 219 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. The real average hourly earnings for 1965 in 1982-1984 dollars equal
$8.28.
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2020, then the value of your grandfather's salary in 2020 dollars is approximately
$84,775.
If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?
2.7%
If real GDP per capita doubles between 2007 and 2022, what is the average annual growth rate of real GDP per capita?
4.7%
In the circular flow diagram, ________ supply the factors of production, and ________ goods and services.
households; buy
During a business cycle expansion, total production ________ and total employment ___________.
increases; increases
The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but ______ quality increases. This causes the CPI to ______ the cost of the market basket.
not; overstate
If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.
risen; risen
Which of the following transactions would be included in the official calculation of GDP?
You buy a new iPod.
Which of the following is an example of human capital?
a college education
Which of the following describes situations in which the person is hurt by inflation?
a person paid a fixed income during an inflationary period
An example of a transfer payment is
a welfare payment.
Suppose that in 2020, all prices in the economy double and that all wages and salaries also double. In 2020, you
are no better off or worse off than you were in 2019 as the purchasing power of your salary has remained the same.
When actual inflation is less than expected inflation
borrowers lose and lenders gain.
Which of the following would be the best measure of the cost of living?
consumer price index
The real wage equals the nominal wage ________ the CPI, all times 100.
divided by
Which of the following would most likely suffer the least from the costs of inflation?
persons whose incomes rise more rapidly than inflation
A good measure of the standard of living is
real GDP per capita.
The period between a business cycle peak and a business cycle trough is called
recession.
Human capital refers to which of the following?
the accumulated knowledge and skills workers acquire from education and training or from their life experiences
Potential GDP refers to
the level of GDP attained when all firms are producing at capacity.
Product Quantity Price Shoes 40 $60 DVDs 100 18 Tomatoes 2,000 1 Ketchup 300 4 Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals
$6,400.
The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?
$66,565
Gross Domestic Product is calculated by summing up
the total market value of final goods and services produced in the economy during a period of time.
Gross domestic product understates the total production of final goods and services because of the omission of
the underground economy.
Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,
the unemployment rate increased.
Jack just received a promotion at work and now works 50 hours per week instead of 35. As a result,
neither the unemployment rate nor the labor force participation rate changed.
Jack lost his job six months ago, and he's been actively looking for a new job ever since. The Bureau of Labor Statistics would classify Jack as
unemployed.
Nominal GDP is GDP in a given year
valued in the prices of that year.
Real GDP is GDP in a given year
valued in the prices of the base year.
Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as
not in the labor force.
Caroline is an artist. She purchases canvases, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much market value does Caroline add?
$1,425
2017 2020 Product Quantity Price Quantity Price Camera 100 $10 120 $12 Legal services 50 15 45 20 Books 200 40 210 45 A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table. What is real GDP in 2020, using 2020 as the base year?
$11,790
Monthly expenditures for a family of 4 in 2019 averaged $1,400. In 2020, the cost of the same purchases was $1,500. If 2019 is the base year, what was the CPI in 2020?
107
Consider the following data on nominal GDP and real GDP (values are in billions of dollars): Year Nominal GDP Real GDP 2019 $14,078 $13,254 2020 14,441 13,312 The GDP deflator for 2020 equals
108.5.
Assume the market basket for the consumer price index has two products—bread and milk—with the following values in 2013 and 2020 for price and quantity: Base Year (2013) 2020 Product Quantity Price Price Milk 50 $1.20 $1.50 Bread 100 1.00 1.10 The Consumer Price Index for 2020 equals
116
Assume the market basket for the consumer price index has two products—meat and potatoes—with the following values in 2013 and 2020 for price and quantity: Base Year (2013) 2020 Product Quantity Price Quantity Price Meat 100 $10 120 $12 Potatoes 200 2 180 3 The Consumer Price Index for 2020 equals
129
Consider the following data on nominal GDP and real GDP (values are in billions of dollars): Year Nominal GDP Real GDP 2017 $7,400 $7,537 2018 7,813 7,813 2019 8,301 8,165 2020 8,760 8,516 The base year used in calculating real GDP is
2018.
Product Quantity (2016) Price (2016) Expenditure (2016) Price (2020) Expenditure (on base year quantities) (2020) Hair cuts 6 $50 $300 $70 $420 Backpacks 4 25 100 30 120 Tacos 100 1 100 5 500 Total $500 $1,040 Suppose an economy has only three goods and the typical family purchases the amounts given in the table. If 2016 is the base year, then what is the CPI for 2020?
208
Real GDP (Billions of 2000 dollars) 2017 $8,700 2018 8,875 2019 9,000 2020 9,280 Using the table, what is the approximate growth rate of real GDP from 2019 to 2020?
3%
If real GDP in a small country in 2019 is $8 billion and real GDP in the same country in 2020 is $8.3 billion, the growth rate of real GDP between 2019 and 2020 is
3.75%.
Assume the average annual CPI values for 2019 and 2020 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years?
3.86
2017 2020 Product Quantity Price Quantity Price Camera 100 $10 120 $12 Legal services 50 15 45 20 Books 200 40 210 45 A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table. What is the GDP deflator in 2017 if 2020 is the base year?
87
Scott is a woodworker and charges $125 an hour for his time manufacturing custom−made wood products. For his wife's birthday, he designs and creates an intricate bird'seye maple jewelry box that takes him 15 hours to complete. By how much and in what direction does GDP change as a result of his efforts?
GDP is not affected by Scott's production of the jewelry box.
Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?
GDP will decrease.
Which of the following equations correctly measures GDP in an economy?
GDP = C + I + G + NX
The purchase by a household in China of an automobile produced in the United States is included in
U.S. net exports.
Which of the following goods is directly counted in GDP?
a 12 inch Subway sandwich purchased by a student
Which of the following transactions represents the purchase of a final good?
Your father buys a new John Deere riding lawn mower.
During the expansion phase of the business cycle, which of the following eventually increases?
all of the above
Investment, as defined by economists, would not include which of the following? Ford
buys U.S. government bonds.
The factors of production include
capital
Workers laid off as a result of a recession suffer
cyclical unemployment.
The underground economy can be described as
economic activity that is hidden from the government to avoid taxes or because the activity is illegal.
The labor force equals the number of people
employed plus unemployed.
The natural rate of unemployment is the amount of unemployment
equal to frictional plus structural unemployment.
A transfer payment is a payment by the government to an individual
for which the government does not receive a good or service in return.
Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ________ unemployment in the near future.
frictional
Which of the following is not an example of a transfer payment?
health insurance payments to an army private
Legalizing all forms of illegal activities
increases GDP and reduces the size of the underground economy.
The percent increase in the CPI from one year to the next is a measure of the
inflation rate.
Which of the following is not directly counted in GDP?
intermediate goods
If the quantity of goods and services produced in the economy decreases
it may be possible for nominal GDP to increase.
Real GDP will increase
only if the quantity of final goods and services produced rises.
The Bureau of Labor Statistics would categorize a retiree who is not working as _________.
out of the labor force
If real GDP increases we know for sure that
output has risen.
The broadest measure of the price level that includes all final goods and services is
the GDP deflator.
If cyclical unemployment is eliminated in the economy, then
the economy is considered to be at full employment.
Discouraged workers are
workers who have stopped looking for work because they believe there are no jobs for them.
