Macro Exam 1 (Ch 8,9,10)
The CPI in 2014 equals _______.
145
Which of the following causes changes in the CPI to overstate the true inflation rate?
All of the above
_________________ decides what goods and services will be produced.
Consumers, firms, and government
National income is
GDP minus depreciation
What effect do labor unions have on the unemployment rate?
Since few non-government workers are unionized, there is no significant effect on the unemployment rate.
How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment rate?
They decrease the opp. cost of job search
What are the four categories of income?
Wages, Interest, Rent, and Profit.
A hypothesis is an economic model is
all of the above
The largest component of gross domestic income is
wages
Real GDP in 2017 equals $___________.
$6,680
Your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is 104?
$70,288
What is the real average hourly wage in 2009?
$8.21
If a 3-month Treasury bill pays 5.5% and the change in the consumer price index (CPI) is 4.7%, what is the real interest rate (the true return to lending)?
0.8%
Consider the data in the table above for a simple economy. The unemployment rate for this simple economy equals.
100/1,100 x 100
In 2011, the value of the GDP deflator is _________ (Enter your response rounded to the nearest whole number.)
115
In 2012, the value of the GDP deflator is __________. (Enter your response rounded to the nearest whole number.)
119
The CPI in 2016 equals _________.
133.75
If real GDP grows by 3% in 2011, 3.2% in 2012, and 2.5% in 2013, what is the average annual growth rate of real GDP?
2.9%
If real GDP equals $11,567 billion in 2006 and $11,916 billion in 2007, and assuming population is constant over those two years, how many years will it take for real GDP per capita LOADING... to double?
23.3
Using the table above, what is the approximate growth rate of real GDP from 2015 to 2016?
3%
As of August 2015, which of the following demographic groups has the highest unemployment rate?
African Americans
Even perfectly anticipated inflation imposes costs. Why?
All of the above
Real GDP per capita LOADING... is often used as a measure of general well-being. While increases in real GDP often do lead to increases in the well-being of the population, why is real GDP not a perfect measure of well-being?
All of the above
When the economy is at full employment,
All of the above
When the economy is at full employment,
All of the above
Which of the following contribute(s) to shorter recessions, longer expansions, and less severe fluctuations in real GDP? (Mark all that apply.)
All of the above
Why in microeconomics can we measure production in terms of quantity, but in macroeconomics LOADING... we measure production in terms of market value?
All of the above
Why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy?
All the above
Potential GDP
B and C only
Suppose the fixed interest rate on a loan is 5.75% and the rate of inflation is expected to be 4.25%. The real interest rate is 1.5%. Suppose now that instead of 4.25%, the inflation rate unexpectedly reaches 5.5%. Who gains and who loses from this unanticipated inflation?
Borrowers gain from a lower real interest rate and Lenders lose from a lower real interest rate
In August 2013, the working-age population of the United States was 245.9 million. The working-age population is divided into those in the labor force (155.5 million) and those not in the labor force (90.4 million). The labor force is divided into the employed (144.2 million) and the unemployed (11.3 million). Those not in the labor force are divided into those not available for work (84.1 million) and those available for work (6.3 million). Finally, those available for work but not in the labor force are divided into discouraged workers (0.9 million) and those currently not working for other reasons (5.4 million).
Both A and B above are true
What can be said about real average hourly earnings and nominal average hourly earnings between 2008 and 2010?
Both real and nominal average hourly earnings increase
Indicate whether each of the following is a final good, an intermediate good, or neither.
Coffee beans purchased by a coffee shop (Intermediate good) One share of Google stock (Neither) A new pick-up truck purchased by a consumer (Final good) A new home purchased by a family (Final good)
The figure above shows the values of the components of GDP for the year 2014. Based on the data shown, which of the following statements regarding the components of GDP are false?
Consumer spending on services is less than the sum of spending on durable and nondurable goods.
What are the four major categories of expenditure?
Consumption, investment, government purchases, and net exports.
What is the general relationship between the business cycle and unemployment and inflation?
During an expansion. unemployment falls and inflation increases
Based on the above table and graph, which of the following statements regarding total production and total income is true?
Each measure of production and income gives a different value for total production and income.
______ the study of the choices people make to attain their goals, given their scarce resources.
Economics
"Paying good wages and keeping your people working for you is good business...Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you."
Efficiency wages
Suppose John Q. Worker is currently unemployed. Each day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of skills, abilities, and interests. If someone asks John Q. what he does for work, he tells them that he is currently "in-between jobs." Which of the following best classifies John Q.'s unemployment status?
Frictionally unemployed
Why is GDP an imperfect measurement of total production in the economy?
GDP does not include household production or production from the underground economy
The table and figure above show GDP measured in terms of the total income received by households. Use the table and figure to help determine which of the following statements about the division of income is false.
Gross domestic income is measured precisely
Use the graph to help determine which one of the following statements regarding flucuations in real GDP is true:
In the first half of the twentieth century, real GDP had much more severe swings than in the second half of the twentieth century.
How does the U.S. economy create and destroy millions of jobs each year?
In the market system, new firms are constantly entering and exiting various industries. and Some businesses are expanding, while others are contracting.
Panel (a) above shows an idealized business cycle. Panel (b) shows an actual business cycle by plotting fluctuations in real GDP during the period from 1999 to 2002. Use the graphs to help determine which one of the following statements is NOT true:
Inconsistent movements in real GDP around the business cycle peak can mean that the beginning and ending of a recession are clear-cut.
Which of the following does NOT lead to long-run economic growth?
Increase in average wages
The BLS uses the establishment survey LOADING... to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage.
It is based on company payroll and not on unverifiable answers and it does not include info about self-employed people.
The following table illustrates the value added LOADING... approach to calculating GDP. Please complete the table.
L.L. Bean - 20 Total Value Added- 36
Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment rate?
Number of unemployed/ Number in labor force x 100
Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?
Click on the graph in the window on the right and select Multiple Time Series to graph the volume of actual and potential GDP for the years 1950 and 2006. For Y1 select Real GDP and for Y2 select Potential GDP. Roll your cursor over the plotted data to identify each series. Use the graph to help determine which one of the following statements regarding real and potential GDP is true.
Potential real GDP increases every year
Using the information above, what is the value of private saving and public saving?
Private saving equals $2 trillion and public saving equals $1 trillion.
Using the information above, what is the value of private saving and public saving?
Private saving equals $2 trillion and public saving equals $2 trillion.
Which of the following can give an early warning of future increases in the price level?
Produce price index
Which of the following can give an early warning of future increases in the price level?
Producer price index
Which of the following would be included in the gross national product (GNP) of the United States?
Production from U.S. firm that operates in Mexico
_____________________ occurs when a good or service is produced at the lowest possible cost. _________________________ occurs when production is in accordance with consumer preferences.
Productive efficiency, allocative efficiency
Firms that act as financial intermediaries LOADING... match households that have excess funds with firms that want to borrow funds. What other key services does the financial system provide to savers and lenders? (Mark all that apply.)
Provides an easy method of exchanging a financial security for money. Allows savers to spread their money among many financial investments. Collects and communicates information about borrowers to savers.
Suppose the base year is 2001. Looking at GDP data from the United States from 2001 to the present, what would be true of the relationship between nominal GDP and real GDP?
RGDP<NGDP because prices are rising
When compared to the Great Depression, the typical length of unemployment in the modern (post-Great Depression-era) U.S. economy is
Relatively brief
Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics degree, what is the best classification of her unemployment status?
Structurally unemployed
Use the graph to help determine which one of the following statements is true:
The average American in the year 2006 could buy nearly eight times as many goods and services as the average American in the year 1900.
Panel (a) shows movements in real GDP for each quarter from the beginning of 1990 through the end of 2006. Panel (b) shows movements in the number of passenger aircraft shipped by Boeing for the same years. Use the graphs above to determine which one of the following statements is true:
The effects of the recession on Boeing are much more dramatic and long-lived than the effects on the economy as a whole.
Use the graph to help determine which one of the following statements regarding unemployment and business cycles is true.
The unemployment rate usually continues to rise even after the recession has ended.
Use the graph to help determine which one of the following statements regarding inflation and business cycles is true. Note: The points on the figure represent the annual inflation rate measured by the change in the consumer price index (CPI) for the year ending in the indicated month.
Toward the end of the 1991-2001 expansion, the inflation rate began to rise.
"A wage rising slower than the rate of inflation is actually falling."
True. If wages are increasing slower than the average price of goods and services, purchasing power falls.
For this data, the base year for calculating GDP is 2000. Use the graph to help determine which one of the following statements regarding nominal and real GDP is FALSE.
When nominal GDP increases, real GDP falls
Microsoft charges a price of $599 for a copy of windows 7. Is this pricing decision rational?
When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.
Which of the following equations sums up the components of Gross Domestic Product (GDP)?
Y=C+I+G+NX
Which of the following goods is directly counted in GDP?
a 12 inch Subway sandwich purchased by a student
Which of the following is an example of human capital?
a college education
In 2015, Ford Motor Company's sales were rising. These events were caused by
an economic expansion
Any model is based on making assumption because
both a and b
A market is a group of ______________ of a good or service and the institution or arrangement by which they come together to trade.
buyers and sellers
Long-run growth in GDP is determined by
capital, labor productivity, and technology
Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a ________________ economy in which the government decides how economic resources will be allocated. Or a society can have a ___________ economy in which the decisions of households and firms interacting in markets allocate economic resources.
centrally planned, market
During the recession phase of the business cycle, production, employment, and income
decrease
The Bureau of Labor Statistics would categorize a person as _________ if they were temporarily away from their job because they were ill.
employed
The labor force equals the number of people
employed plus unemployed
In the United States, who receives the goods and services produced depends largely on _____________.
how income is distributed
"Saving money is not lending. How can it be? When I save my money, I put it in a bank. I don't loan it out to someone else."
incorrect. The supply of loanable funds is determined by household saving.
During the expansion phase of the business cycle, production, employment, and income
increase
During a business cycle expansion, total production ________ and total employment ___________.
increase, increase
Since 1990, real GDP per capita has ___________ and this measure ___________the actual growth in standards of living in the U.S. over this time.
increased, understates
Which of the following is not directly counted in GDP?
intermediate goods
If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is $8.3 billion, the growth rate of real GDP between 2015 and 2016
is 3.75%
Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example,
many times in the past several decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
marginal benefit equals marginal cost
A __________________ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.
mixed
Personal income is
national income minus retained corporate earnings plus government transfer payments and interest on government bonds.
Disposable personal income is
personal income minus personal taxes
Technological progress is affected by
private property, entrepreneurship, new software developments , and investment in capital
A good measure of the standard of living is
real GDP per capita
India's rapid growth can be explained by
reduced regulations and market-based reforms
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls
scarcity
If labor productivity growth slows down in a country, this will
slow down the increase in real GDP per capita
Equity is
the fair distribution of economic benefits
Opportunity cost is
the highest valued alternative that must be give up to engage in an activity.
When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives,
the policies are consistent with economic incentives
The true cost of borrowing and lending is best measured by
the real interest rate
