Macroeconomic Midterm

One way to avoid counting the prices of intermediate goods multiple times in computing the value of GDP is to:

sum the value added of producers of both intermediate and final goods and services.

The real interest rate equals the:

the nominal interest rate minus the inflation rate

Shoe leather costs include the ______ due to the more frequent trips to the bank, the new cash management systems and the expanded employment in banks that inflation causes.

time and effort that are used up

In Econland exports equal 15 percent of total output, while imports equal 20 percent of total output. Econland has a:

trade deficit.

The unemployment rate equals the number of people:

unemployed divided by the labor force.

The fraction of people who would like to be employed, but can't find work is called the:

unemplyment rate

Intermediate goods and services are ______ production and ______ counted in GDP.

used up in the process of; are not

If workers and employers agree to a three-year wage contract under the expectation of 5 percent inflation, and inflation turns out to be 3 percent, then:

workers gain and employers lose.

Inflation was a major problem in the United States during the:

1970s

The unemployment rate in the United States at the peak of the Great Depression was _____ percent.

25

The "true" costs of inflation to an economy include all of the following except:

Higher relative prices.

Major macroeconomic questions include all of the following EXCEPT:

How do monopoly firms set prices and determine quantities to produce?

Which of the following would be studied by macroeconomists?

Inflation in developing countries

The annual percentage rate of change in the price level is the:

Inflation rate

______ is an increase in the price level, while ______ is an increase in the price of one good in comparison to other goods and services.

Inflation; a relative price increase

Who from among the following would be classified as unemployed?

Jack Little, a 21 year old new college graduate actively looking for his first job

Which of the following would increase the consumption component of U.S. GDP?

You purchase a vacation at Disney World in Florida.

The process of converting current dollar values into real terms is called ______, while the process of adjusting nominal quantities to maintain their purchasing power is called ______.

deflating; indexing

A government is running a budget deficit if:

government revenue is less than government spending.

The "true" costs of inflation to an economy include all of the following except:

higher relative prices.

The four categories of final users of GDP are:

households, firms, governments, and the foreign sector.

Inflation-protected bonds guarantee investors:

no real wealth loss in the event of unexpectedly high inflation.

All of the following are nominal quantities except the:

number of houses built in one month.

The standard of living in an economy is best measured by:

output per person

Suppose that the price of chicken rises sharply compared to the price of turkey. In response, consumers buy more turkey and less chicken than they did in the CPI base year. In this situation the CPI will tend to ______ inflation as a result of ______ bias.

overstate; substitution

The CPI is a measure of the:

average level of prices relative to prices in the base year.

The value added by any firm equals the firm's ______ from selling the product minus _______.

revenue; the cost of inputs purchased from other firms

Aggregation allows economists to ______ at the cost of ________.

see the big picture; obscuring the details

After increasing at more than 2 percent per year between 1950 and 1973, the growth rate of average labor productivity _____ between 1973 and 1995, and ____ between 1996 to 2007.

slowed; picked up

The country of Northland produced $1,000 billion of output in one year. The population of Northland was 50 million, of whom 30 million were employed. What was average labor productivity in Northland?

$33,333

Who from among the following would be classified as out of the labor force?

Amanda Pie, a full-time homemaker

Profits, rents, interest, and royalties are examples of:

Capital income

Which of the following would be considered an example of monetary policy?

Provision of additional cash to the banking system.

Government purchases include all of the following except:

Social Security benefits paid by the federal government.

A government decision to privatize a sector of the economy formerly operated by the government is an example of _____ policy.

Structural

The tendency for nominal interest rates to be high when inflation is high and low when inflation is low is known as:

The Fisher Effect

The market interest rate in Alpha is 7 percent, and the market interest rate in Beta is 10 percent; the inflation rate in Alpha is 3 percent, and inflation rate in Beta is 8 percent. Which of the following statements is true?

The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta.

Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. Which expression of the output of this economy is most consistent with the concept of GDP?

This economy produces $7.00 worth of food.

Despite some problems with equating GDP with economic well-being, higher real GDP per person does imply greater economic well-being because it tends to be positively associated with:

better education, health and life expectancy.

A particularly strong expansion is called a(n):

boom

A nation's central bank:

controls the nation's monetary policy.

The value of goods produced, but unsold, in the current period is:

counted in GDP as inventory investment.

Fiscal policy refers to:

decisions to determine the government's budget.

The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate was 15 percent. The nominal price of gasoline _____, and the real price of gasoline _____.

increased; decreased

The value of unpaid work by a homemaker ______ included in GDP and the value of housekeeping services sold in a market ______ included in GDP.

is not; is

GDP excludes important factors that affect people's well-being, such as the value of:

leisure time.

The real wage is the wage:

measured in terms of purchasing power.

The accuracy of the unemployment rate is criticized because:

people who would like to work but have given up trying to find work are not included in the number of unemployed people.

Real GDP measures the ______ of production; nominal GDP measures the ______ of production.

physical volume; current dollar value

Among economists today, the most widely accepted cause of the Great Depression is:

poor economic policymaking.

"U.S. exports will increase as a result of joined CAFTA," is an example of a ______ statement, while "The U.S. should join CAFTA," is an example of a _____ statement.

positive; normative

Deflation is a situation in which the:

prices of most goods and services are falling over time.

Three equivalent ways to measure GDP are total _____, total _____, and total ______.

production; income; expenditure

Depression and lost self-esteem are examples of the ______ costs of unemployment, while the lost income and tax revenue are examples of the ______ costs of unemployment.

psychological; economic