Macroeconomics Exam 2

The labor force includes:

employed workers and persons who are officially employed.

Transfer payments are:

excluded when calculating GDP because they do not reflect current production.

The immediate determinant of the volume of output and employment is the:

level of total spending

The consumer price index (CPI)

measure changes in the prices of a market basket of some 300 goods and services purchased by urban consumers.

The GDP may be defined as the:

monetary value of all final domestic goods and services produced within a nation in a given year

The total income earned in any given year by American resource suppliers is measured by:

national income

In calculating GDP, governmental transfer payments such as social security or unemployment compensation are:

not counted

Demand-pull inflation

occurs when total spending exceeds the economies ability to provide output at the existing price level

The natural rate of unemployment

rate of unemployment occurring when the economy is at its potential output.

A recession is defined as a period in which

real domestic output falls

Official unemployment statistics

understate unemployment because "discourage workers" are not counted as unemployed.

Structural Unemployment

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

real per capita GDP will increase

when Real GDP increases at a faster rate then population increase.

Nominal GDP during a particular year is $280 and real GDP is $160. the implicit price delegator for that year is:

175

If real GDP is a particular year is $80 billion and nominal GDP id $240 billion the price index for that year is:

300

GDP includes:

Final, but not intermediate, goods.

Kimberly 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. Kimberly presently is

Frictionally Unemployed

The term "real GDP" refers to:

GDP data which have been adjusted for changes in the price level.

Anne Kasperson works in her own home as a full-time caretaker and homemaker. Officially she is:

Not in the labor force.

The ABC Corporation issued $25 million in new common stock in 1995. it used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment:

Of $18 million has occurred

Given that resources are Scarce:

Opportunity costs are experienced whenever choices are made.

The wealth or real balances effect indicates that

a higher price level decrease the real value of many financial assets and therefore reduce spending

The phase of the business cycle where real domestic output declines is called:

a recession

A price index is:

a comparison of the price of a market basket from a fixed point go reference

Frictional unemployment

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.

Which of the following id a final good to service?

A haircut

Net exports are a negative figure when:

A nations's imports exceed it exports.

Cyclical unemployment

A type of unemployment caused by insufficient total spending (or by insufficient aggregate demand).

If the unemployment rate is 9% and the natural rate of unemployment is 5.5% then the:

Cyclical unemployment rate is 3.5%.

The GDP deflator:

Includes all goods comprising the nation's domestic output.

Professor Shields grows tomatoes for home consumption. This activity is:

Productive but is excluded from GDP because no market transaction occurs.

Economic growth is often measured by increases in real GDP. Historically in the United States:

Real GDP has risen in more year than is has fallen since 1900.

Consumption if fixed capital (depreciation) can be determined by:

Subtracting net investment from gross investment.

Which of the following is not considered to be investments?

The purchase of 100 shares of AT&T by retires business executive.

The united states economy is considered to be at "full employment" when:

about 5.5-6.0% of the labor force is unemployed

the interest-rates effect suggest that

an increase in the price level will increase the demand for money, increase interest rate and decrease consumption and investment spending.

The consumer price index has been criticized because it fails to account for:

changed spending patterns, quality improvements, new products, and price discounting.

The largest component of total expenditures is:

consumption

Real GDP measures:

current output at base year prices

If the consumer price index falls from 150 to 100 during a particular period:

deflation of about 33 percent has occurred.

The foreign purchases effect suggest that an increase in the american price level relative to other countries will

do none of the above

The aggregate demand curve is:

downsloping because of the interest rate, wealth or real balances and foreign purchases effects.

the production of durable goods is more variable than the production of nondurable goods because:

durable purchases are postponable and producers of durable have monopoly power

The term "final goods and services" refers to:

goods and services purchased by ultimate users, as opposed to resale or further processing.

GDP differs from NDP in that:

gross investment is used in calculating GDP and net investment is used in calculating NDP

Which of the following best defines disposable income?

income received by households less personal taxes

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation

The Value of American imports is:

subtracted from exports when calculating GDP because imports do not entail production in the United States.

If intermediate goods and services were included in GDP:

the GDP would be overstated

Real GDP is:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation

Nominal GDP is:

the sum of all monetary transactions involving final goods and services that occur in the economy in a year

The phase of the business cycle where real domestic output is at a minimum is called

the trough