Macroeconomics Exam 2

In May 2019, there were approximately 68,980,000 people in Japan's labor force. About 1,650,000 people were unemployed. What was the unemployment rate?

2.4%

The table shows statistics for three Canadian cities at several different points in time. What was the number of people (in thousands) in Montreal's labor force in January 2005?

2003.1

Refer to the table, which shows data for Ireland. Based only on the data in this table, in which year(s) did Ireland experience a fall in the standard of living?

2008 and 2009 (GDP per person rises)

Refer to the table below, which shows data for the United Arab Emirates (UAE). Based only on the data in this table, in which year(s) did the UAE experience an increase in the standard of living?

2011 and 2012 (where GDP per person increases)

The table shows statistics for three Canadian cities at several different points in time. What was the number of unemployed people (in thousands) in Toronto in January 2019?

234.2

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 2006?

3.22%

In May 2019, Texas reported a civilian labor force of 14,012,711. The number of employed people was 13,516,387. What was the unemployment rate?

3.5%

Refer to the following table that shows monthly data for Japan. What was the unemployment rate in January 2014?

3.7% (2.4 / (28.1 + 37.6)) x100 = 3.7%

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1991?

4.22% (136.17 - 130.66) / 130.66 x 100 = 4.22%

The moral of the story of the Solow growth model is that:

capital accumulation alone cannot lead to sustainable economic growth.

If a bakery buys a second oven, hires a second baker, buys double the number of ingredients, doubles the size of the bakery, and then produces double the number of cakes, then the bakery is experiencing:

constant returns to scale

Property rights refer to:

control over a tangible or intangible resource

The Great Moderation refers to the:

decreased volatility of the U.S. economy.

Hyperinflation is:

extremely high rates of inflation

Which of the following is a scaled number?

government budget deficit as a percentage of GDP

The higher the minimum wage, as compared to the equilibrium wage, the:

higher the structural unemployment rate.

Which of the following lists the functions of money?

medium of exchange, store of value, unit of account

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

on average, prices went down across the economy.

If you see that inflation between last year and this year is 3%, this means that:

on average, prices went up across the economy by 3%.

Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 1 must be:

output bought by households

Which of the following encourages the development of new ideas and inventions?

patents

The four stages of the business cycle are:

peak, recession, trough, expansion

The GDP deflator is an index that tracks the:

price of all goods and services produced domestically.

Suppose that an economy is in a recession. You would expect to see the unemployment rate:

rise above the equilibrium unemployment rate.

Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will:

rise by 1.5%.

According to Okun's rule of thumb, for every 1% fall in the actual output below potential output, the unemployment rate:

rises by 0.5%.

A constant returns to scale production function means that if all inputs are increased by 75%, this should lead to output:

rising by 75%

What kind of data adiustment removes the effect of sales spikes due to the holiday season?

seasonally adjusted data

An example of a leading indicator is:

stock market

Which of the following is an example of transfer payments?

unemployment benefits

An underemployed person is one who is:

working but whose skills are not fully utilized.

Which of the following is an example of a durable good?

your new car

What is Uganda's real GDP if its nominal GDP is $27.5 billion (in current US$), and the GDP deflator is 163.4?

$16.8 Deflator x 100 = 1.634 Nominal GDP / 1.634 = $16.8

In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars?

$18,865

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the real GDP for last year using this year as the base year?

$185,000 $1850 (this year's price as base year) x 100 (last year's quantity) = $185000

Below is U.S. economic data for 2018. What was total spending?

$20.58 trillion $13.999 + $3.628 + $3.591 + ($2.510-$3.148) = $20.58 trillion

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the nominal GDP for last year?

$250,000 Price x quantity = $50 x 5000 = $250000

In 2010, Canada's GDP was approximately $1,357 billion, and its population was about 34.12 million. What was Canada's approximate GDP per person in 2010?

$39,770 $1357 billion/34.12 million = $39770

Consider the data shown in the table. Assume that the economy produces only barrels of oil. What is the real GDP for this year using last year as the base year?

$4,980,000 $60 (last year's price as base year) x 83000 (last year's quantity) = $4980000

The table below shows data for Central African Republic (CAR). What was this country's real GDP per person in 2010?

$487.95 $2,140,503,193 / 4,386,768 = $486.95

Refer to the table below that shows data for Panama. What was Panama's real GDP per person in the year 2002?

$5,435.17 $17116370199.13 / 3149188 = $5435.17

Based on the following statistics, how much is consumption?

$6.49 trillion Total spending = $11.62 trillion MINUS Investment ($2.56 trillion) and Government spending ($2.95 trillion) PLUS Net exports (-$0.38 trillion) means add 11.62 - 2.56 - 2.95 + 0.38 = 6.49

In 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four-year degree in current dollars?

$8,746 1410 x (251.1 / 40.48) Today's dollars = Another time's dollars x (price level today / price level in another time)

Based on the following statistics, how much are net exports?

-$0.575 trillion $2.357 trillion - $2.932 trillion = -$0.575 trillion

You purchase a certificate of deposit that earns an advertised rate of 1.75% interest per year. What is your real rate of return if the actual inflation rate is 1.9%?

-0.15% Real interest rate = nominal interest rate - rate of inflation 1.75 - 1.9 = -0.15

Refer to the following table. What was the approximate output gap in 1998?

-1.2%

Refer to the table below, which shows data for the United Arab Emirates (UAE). What was the economic growth rate in UAE in 2010?

-5.91% 33893.90 - 36024.06 = -2130.76 -2130.76/36024.06 = -0.0591 = -5.91%

Refer to the following table. What was the approximate output gap in 1974?

-6.5% (100-107) / 107 = -0.065 = -6.5%

You purchase a certificate of deposit and expect an inflation rate of 1.5% over the next year. Your nominal rate of interest is 2.25%. What is your expected real rate of return?

0.75%

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return?

0.85% Real interest rate = nominal interest rate - rate of inflation 2.1 - 1.25 = 0.85

The table shows consumer price index data for the United Kingdom. Based on this information, what is the rate of inflation in 2016?

1%

In 2017, the total population of Africa was estimated to be about 1,250,000,000 people. This number, in billions, is:

1.25

Refer to the following table. What was the approximate output gap in 1999?

1.9%

Consider the following basket of goods: 50 bottles of milk, 100 avocadoes, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. What is the inflation rate between last year and this year?

10.13%

What is Sri Lanka's GDP deflator if its nominal GDP is $88.9 billion (in current US$) and the real GDP is $59.34 billion?

149.8

Suppose a labor market is described by the demand equation, Qd = 60 - 2w, and the supply equation, Qs = -10 + w, where Qd is the quantity demanded of labor, Qs is the quantity supplied of labor, and w is the wage (in dollars). If the government institutes a minimum wage of $25, how many workers will be willing to work in this market?

15,000,000

The table shows statistics for three Canadian cities at several different points in time. What was the number of unemployed people (in thousands) in Montreal in January 2009?

181.6

Consider the data shown in the table. Assume that the economy produces only textbooks. What is the growth rate of real GDP between the two years using last year as the base year?

5% $50 (base year price) x 5000 = $250000 $50 x 5250 = $262500 Increase: $12500 Growth rate: $12500/$250000 = 0.05 = 5%

The table shows statistics for three Canadian cities at several different points in time. What was the unemployment rate in Montreal in January 2019?

6.2% 2059.7 - 1878.1 = 6.2%

Which of the following will fall when the economy is expanding?

Applications for unemployment benefits

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and infant deaths per 1,000 live births. What can explain this relationship?

As real GDP per person rises, maternal and fetal health increase due to better health care, education, sanitation, and nutrition

Refer to the data dashboard shown. Which indicator tells you how fast wages and benefits are rising?

Employment Cost Index

Which economic indicator tells you how fast wages and benefits are rising?

Employment Cost Index

Which of the following shows the medium of exchange function of money?

Daniela goes to the store and purchases roses with U.S. dollars.

Which of the following correctly shows the steps needed to calculate the inflation rate?

Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.

If an economy has a positive output gap of 1.5%, this means:

GDP is 1.5% above potential GDP.

You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions?

GDP rises by $38,000.

Which of the following will probably rise when the economy is in a recession?

Initial unemployment claims

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if: (i) human capital increases. (ii) labor productivity falls. (ii) the capital stock in the country depreciates. (iv) the depreciation rate increases.

I only

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if: (i) more labor is employed. (ii) human capital is reduced. (ii) the dependency ratio rises. (iv) the capital stock stays constant.

I only

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that: (i) all flows of resources are matched by flows of money. (ii) the market value of total output must be equal to total spending. (iii) total spending must equal total income. (iv) all inputs are provided by businesses.

I, II, and III

In order to be considered unemployed, a person must: (i) be part of the working-age population (ii) be actively looking for work. (iii) not have been self-employed. (iv) must be noninstitutionalized.

I, II, and IV

Which of the following is (are) included in investment? (i) military spending (ii) the purchase of an aircraft by a domestic airline (iii) the purchase of $45,000 worth of bonds (iv) the purchase of $32,000 worth of stock (v) social security payments (vi) the construction of a highway by the federal government

II only

What is the difference between spending from a microeconomic standpoint versus spending from a macroeconomic standpoint?

In microeconomics, spending refers to spending by you, or your family, or your company, whereas in macroeconomics, spending refers to the spending by all consumers, all businesses, and the government in the economy.

Which of the following correctly describes the business cycle?

It is the fluctuations of GDP around the potential output.

You have four friends. Which of your friends can be described as "cyclically unemployed"?

Keele, who lost her job after her company lost a lot of customers during an economic downturn

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

Refer to the data dashboard shown. Which indicator is a cross-check on GDP?

Real GDI

Which of the following is a broad indicator?

Real gross domestic income

Which of the following countries enjoyed significant catch-up economic growth in the second half of the twentieth century?

South Korea

The government passes a new investment tax credit initiative. Which input in the production function changes, and what is the effect on economic growth in the country?

The capital stock increases, and economic growth is positively affected.

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP?

They are not counted.

The aggregate production function is represented as:

Y = f(L, H, K).

Which of the following would lead to a slowdown in economic growth?

a reduction in the birth rate coupled with an increase in the retirement rate of a population

A decreasing returns to scale production function is one where increasing all inputs by a certain proportion leads to output rising by:

a smaller proportion

Southeast Asian countries experience high temperatures and high humidity during the monsoon seasons. This makes working conditions difficult. Because air conditioners are expensive and consume a lot of electricity, an alternative air cooler called an Eco-cooler was invented. This device does not use electricity, is made from readily available soda bottles, and works by funneling air into a room. This scenario is an example of:

a technological innovation that can increase labor productivity and thus increase economic growth.

Henry Ford's $5 per day wage is an example of:

an efficiency wage.

A minimum wage that is above the equilibrium wage is:

an example of a price floor

During the Great Recession, the United States Congress increased the length of time that unemployment benefits could be received from 52 weeks to 99 weeks. This change caused:

an increase in the costs for the government.

Which of the following would lead to a slowdown in economic growth?

an increase in the dependency ratio

Consider the labor market shown here. If an efficiency wage of $14 is instituted in this market, the number of workers willing to work will:

increase by 2,000

The equilibrium unemployment rate is also known as the ___ unemployment rate.

long-run

Menu costs are the:

marginal costs of adjusting prices.

Consider the graph of the labor market shown here. If the government mandates a minimum wage of $25, there is a labor:

surplus of 6,000 workers

Along the same aggregate production function, the level of ___ is the same.

technology

Money illusion is the

tendency to focus on nominal values instead of inflation-adjusted values.

Technological advancement is NOT represented by which of the following?

the adoption of an existing technology by new firms

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that:

the equilibrium rate of unemployment is 3.75%.

The real interest rate is the:

the nominal interest rate minus the rate of inflation

An economy's potential output level is:

the output that is possible when all resources are fully employed.