Macro Exam 3
Inflation
A general and progressive increase in prices
frictional unemployment
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
Cyclical unemployment is the result of
a slowdown in the economy
CPI (Consumer Price Index)
an index of the cost of all goods and services to a typical consumer
GDP Expenditure Approach
consumption + investment + government spending + net exports
The purchase of a new automobile is included in
consumption expenditures on durable goods.
What is the largest component of spending in the United States?
consumption spending
Workers laid off as a result of a recession suffer
cyclical unemployment
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?
discouraged workers
net exports
exports - imports
actual rate of unemployment
frictional + structural + cyclical
The output of U.S. citizens who work in Canada would be included in the
gross domestic product of Canada
The output of Mexican citizens who work in Texas would be included in the
gross national product of mexico
During a business cycle expansion, total production ________ and total employment ________.
increases;increases
The percent increase in the CPI from one year to the next is a measure of the
inflation rate
The purchase of a new house is included in
investment expenditures
A final good is one that
is purchased by its final user
An example of an intermediate good would be
the bread that goes into a sub sandwich that is sold by Quiznos.
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?
unemployed persons falsely report themselves to be actively looking for a job
Cyclinal unemployment
unemployment caused by economic downturns
structural unemployment
unemployment that arises from a persistent mismatch between the skills or attributes of workers and the requirements of jobs
Real GDP is GDP in a given year
valued in the prices of the base year
real values
values that have been adjusted for the effects of inflation
Total population - 20,000 Working-age population - 15,000 Employment - 1,000 Unemployment - 100 The labor force participation rate for this simple economy equals
(1,100/15,000) × 100.
price index
(cost of market basket in a given year)/ (cost of market basket in base year) x 100
If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is
-3%
The business cycle is measured by two variables:
-changes in real GDP -unemployment rate
What causes inflation?
1. Demand rises faster than supply 2. Rapid increase in the money stock
If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?
2.7%
The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is
5% higher in year 2 than in year 1.
GDP per capita
GDP/population
If the GDP deflator is 142, by how much have prices changed since the base year?
Prices have increased by 42%
You earned $30,000 in 2013, and your salary rose to $80,000 in 2020. If the CPI rose from 82 to 202 between 2013 and 2020, which of the following is true?
The purchasing power of your salary increased between 2013 and 2020.
When prices are rising, which of the following will be true?
The real interest rate will be lower than the nominal interest rate.
Personal income is defined as
national income less retained earnings plus transfer payments and plus interest on government bonds.
The purchase by a household in China of an automobile produced in the United States is included in U.S.
net exports
The stated interest rate on a loan is the
nominal interest rate
real interest rate
nominal interest rate - inflation rate
If the CPI changes from 125 to 120 between 2019 and 2020, how did prices change between 2019 and 2020?
prices decreased by 4%
If real GDP in 2020 (using 2009 prices) is lower than real GDP of 2019, then
prices in 2020 are lower than prices in 2019.
Gross national product (GNP) of the United States is the market value of all final goods and services
produced by citizens of the United States anywhere in the world.
The natural rate of unemployment:
structural (Us) + frictional unemployment (Uf)
When deflation occurs
the real interest rate is greater than the nominal interest rate.
Frictional unemployment is the result of
the search process of matching workers with jobs
U.S. gross national product is defined as
the value of final goods and services produced by residents of the United States, even if the production takes place outside the United States
Why might firms pay wages that are above the equilibrium wage in a market?
to increase the productivity of their workers