macro exam 1

Use the following table to answer the next question. The base year is 2007. Hot Dogs Baseballs Bottles of Soda Year Price Quantity Price Quantity Price Quantity 2005 $2.00 100 $5.00 50 $2.00 100 2006 4.00 100 5.00 100 2.00 150 2007 6.00 100 5.00 100 2.00 200 2008 8.00 150 8.00 200 4.00 200 2009 10.00 200 10.00 200 4.00 250 Real GDP (constant dollars) for 2009 equals _____.

$2,700

If the average level of nominal income in a nation is $44,000 and the Consumer Price Index is 175, the average real income would be about

$25,143.

Use the following table to answer the next question. GDP figures are in billions of dollars. Year Nominal GDP Real GDP Price Index 1 5,200 4,800 -- 2 5,500 -- 112 3 5,750 5,000 -- What was real GDP in year 2?

$4,911 billion

Use the following table to answer the next question. The following national income data for an economy is in billions of dollars. Consumption $5,100 Investment 1,100 Transfer payments 1,050 Government purchases 1,400 Exports 850 Imports 950 Net foreign factor income 20 GDP for this economy is _____.

$7,500 billion

Assume that the real GDP of a developing nation increases from $120 billion to $140 billion while its population expands from 100 to 110 million. As a result, real GDP per capita has increased by about _____.

$72 per person

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was expected to be 4%, the bank would most likely charge the firm an annual interest rate of

10%.

Answer the next question on the basis of the following information about the hypothetical economy of Asland. All figures are in millions. Unemployed 7 Total population 145 Employed 95 Discouraged workers 3 The labor force in Asland is

102 million

Average Price per Unit Product Quantity Year 1 Year 2 A 10 $10 $ 8 B 15 20 22 C 8 50 55 Using year 1 as the base year, the country's Consumer Price Index in year 2 is

106.25.

Consumers in an economy buy only three general types of products: A, B, and C. Changes in the prices of these items over a period are shown below: Average Price per Unit Product Quantity Year 1 Year 2 A 10 $10 $8 B 15 20 22 C 8 50 55 Using year 1 as the base year, the country's price index in year 2 is _____.

106.3

Use the following table to answer the question below. GDP figures are in billions of dollars. Year Nominal GDP Real GDP Price Index 1 5,200 4,800 -- 2 5,500 -- 112 3 5,750 5,000 -- What is the GDP price index in year 1?

108.3

Answer the next question on the basis of the following information about a hypothetical economy. Full-time employed = 80 Part-time employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer price index = 110 The unemployment rate is

12.5%

Year Hot Dogs Price Quantity Baseballs Price Quantity Bottles of Beer Price Quantity 2005 $ 2.50 100 $ 2.50 50 $1.00 100 2006 4.00 100 5.00 100 2.00 150 2007 5.00 100 5.00 100 2.00 200 2008 8.00 150 8.00 200 4.00 200 2009 10.00 200 10.00 200 4.00 250 The Consumer Price Index for the year 2008 is

171.5.

Year Units of Output Price per Unit 1 8 $2 2 10 3 3 15 4 4 18 5 5 20 6 If year 2 is the base year, the Consumer Price Index for year 5 is

200.

Use the following table to answer the next question. Year Real GDP Population 2008 $20,000 200 2009 40,000 400 2010 60,000 400 2011 70,000 500 Real GDP per capita is highest in which year?

2010

Consider the following data for a nation. Year Nominal GDP Price Index 1 $35 90 2 40 100 3 45 110 4 48 120 5 56 140 The country's real GDP declined between years

3 and 4.

A person's real income will increase by 3% if her nominal income increases by

5% while the price index rises by 2%.

If the Consumer Price Index was 170 in one year and 180 in the next year, then the rate of inflation is approximately

5.9%.

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?

6%

Use the following table to answer the next question. The base year is 2007. Year Hot Dogs Price Quantity Baseballs Price Quantity Bottles of Beer Price Quantity 2005 $ 2.50 100 $ 2.50 50 $1.00 100 2006 4.00 100 5.00 100 2.00 150 2007 5.00 100 5.00 100 2.00 200 2008 8.00 150 8.00 200 4.00 200 2009 10.00 200 10.00 200 4.00 250 Inflation for the year 2008 is

71%.

If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be

8%.

Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year. Year Units of Output Price per Unit 1 8 $2 2 10 3 3 15 4 4 18 5 5 20 6 If year 2 is the base year, then the percentage increase in real GDP from year 2 to year 4 is _____.

80%

The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is

9 million

GDP does not include which of the following activities?

Couples remodeling their own homes (with their own labor).

Which of the following statements is correct?

For a given real interest rate, the nominal interest must increase if expected inflation increases.

If a country's imports of goods and services exceeds its exports, _____.

GDP is less than the sum of consumption, investment, and government purchases

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is cyclically unemployed?

George

In year 1, the Consumer Price Index was 120 and the average nominal income was $30,000. In year 2, the Consumer Price Index was 125 and the average nominal level of income was $32,000. What happened to real income from year 1 to year 2?

It rose by $600.

If labor market institutions change so that it becomes easier to find a job, and unemployed people are unemployed for smaller durations of time, what would happen to the natural rate of unemployment?

It would decrease.

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual is frictionally unemployed?

Mollie

The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month but still has not gotten a job offer. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work. Which individual(s) would be included in the calculation of the natural unemployment rate?

Mollie and Jeanette

In the second quarter (three-month period) of 2016, U.S. nominal GDP increased but U.S. real GDP declined. What can we conclude?

The price level rose by more than nominal GDP.

The purchase of a computer by a person for household use would be counted in what category of GDP?

The purchase is always counted as consumption.

Suppose Canada has a population of 30 million people and a labor force participation rate of 2/3. Furthermore, suppose the natural rate of unemployment in Canada is 7%. If the current number of unemployed people is 2 million people, what can we conclude about Canada's economy?

The unemployment rate is above the natural rate of unemployment.

Suppose Canada has a population of 30 million people and a labor force participation rate of 2/3. Furthermore, suppose the natural rate of unemployment in Canada is 7%. If the current number of unemployed people is 1.4 million people, what can we conclude about Canada's economy?

There is no cyclical unemployment present in the economy.

Recently a teachers' union argued that the standard of living of teachers working for the school district was falling. The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining. Could the union statement be correct?

Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income.

In calculating the unemployment rate, part-time workers are

counted as employed because they are receiving payment for work

Some economists prefer to use the term business fluctuations rather than business cycles to describe the historical growth record in the United States because

cycles imply regularity while fluctuations do not

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

cyclical

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would

decline

Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as

employed

For a given amount of nominal income, the real income will

fall if the price level rises.

Real income will rise from one year to the next if nominal income

falls and the price level falls faster.

Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is

frictionally unemployed

Part-time workers who want full-time work are counted as

fully employed and therefore the official unemployment rate may understate the level of unemployment

If the actual rate of unemployment is above the natural rate of unemployment, then potential GDP is

greater than actual GDP.

Use the following graph to answer the next question. The graph suggests that the GDP price index during the period shown was generally _____.

increasing

The natural rate of unemployment

is equal to the total of frictional and structural unemployment.

Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unexpected inflation occurs in the economy, then

lenders are hurt, but borrowers benefit.

"Full employment" refers to the situation when there is

no cyclical unemployment.

Suppose the total monetary value of all final goods and services produced in a particular country during 2010 is $500 billion, and the total monetary value of final goods and services sold is $450 billion. We can conclude that _____.

nominal GDP in 2010 is $500 billion

Full-time homemakers and retirees are classified in the BLS data as

not in the labor force.

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result, the

official unemployment rate will remain unchanged

A GDP price index of 130 in year 2 means that _____.

prices in year 2 are on average 30% higher than in the base year

Nominal GDP differs from real GDP because _____.

real GDP results from adjusting for changes in the price level

Use the following table to answer the next question. Year 1 2 3 4 5 6 Price Index 100 95 105 125 125 120 If output increases by 8% from year 5 to year 6, then in that period _____.

real GDP will rise faster than nominal GDP

Which phase of the business cycle would be most closely associated with an economic contraction?

recession

For a person to keep his real income steady at a certain level from one year to the next, his nominal income must

rise as fast as the price index.

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is

structural

Which measure of inflation would include consumer goods and capital goods?

the GDP Price Index

The service a homeowner performs when she mows her yard is not included in GDP because _____.

this is a nonmarket transaction

GDP excludes most nonmarket transactions. Therefore, GDP tends to _____.

underestimate the amount of production in the economy

Official unemployment statistics

understate unemployment because discouraged workers are not counted as unemployed

A worker would be hurt least by inflation when the

worker is protected by a cost-of-living adjustment clause in an employment contract.

Use the following table to answer the next question. The following national income data for an economy is in billions of dollars. Consumption $5,100 Investment 1,100 Transfer payments 1,050 Government purchases 1,400 Exports 850 Imports 950 Net foreign factor income 20 What are the net exports for this economy?

−$100 billion