Macroeconomics exam review 5-7

Do corporate profits calculate GDP

No

unemployment is the result of changes in the business cycle.

cyclical

The _____ economy includes all transactions that are conducted but are not licensed and/or generate income that is not reported to the government.

informal

Structural unemployment

is caused by changes in consumer demand or technology

Cyclical unemployment

is caused by fluctuations in the business cycle

A pimp and a prostitute

not in the labor force

Frictional unemployment

results from workers who voluntarily quit to search for a better position

How is inflation measured?

some prices rise and some fall. Overall everything tends to raise

Problems with the CPI

CPI measures only private goods. CPI tends to overstate overstate inflation because it uses a fixed market basket

If exports for a country are $2 billion and imports are $3 billion, what are net exports?

Net exports are determined by subtracting

What is hyperinflation?

When inflation is increasing at least 100 percent per year

Disinflation

a reduction in the rate of inflation. Prices rise at a decreasing pace.

When people need time to search for new jobs and employers need time to interview and evaluate potential new employees, we are seeing:

Frictional unemployment

GDP PPP

Gross Domestic Product Purchasing Power Parity; the sum value of all goods and services produced in a country valued at prices prevailing in the United States; this value is an attempt to eliminate differences in the value of different currencies

When an economy is recovering from an economic downturn, their economy is likely to undergo:

Short-run growth is common when an economy is recovering from an economic downturn.

adjusting for inflation

Social Security Payments Labor Union Contracts Commercial Rental Agreements

Which of the following countries would have the LOWEST GDP per capita and the LOWEST growth rates?

a country categorized as mostly unfree by the index of economic freedom Nations with the most economic freedom also have the highest per capita GDP and the highest growth rates.

Kayla is a computer engineer who has been laid off as a result of the most recent downturn in the economy. What type of unemployment is Kayla experiencing?

cyclical unemployment

workers are not considered part of the labor force because they have given up looking for work because they think there aren't any good jobs available.

discouraged

in 2005 the inflation level was 3.4% and in 2006 it was 3.2% This is an example of

disinflation

What causes hyperinflation?

excessive government spending over tax revenues and the printing of money. workers are paid frequently, and purchases are made immediately.

Net Exports

exports - imports -5 percent

Government Policy

its ability to borrow and print money. It's good to pump money because it leads to growth in the economy.

Employment + Unemployment =

labor force

Income approach to GDP

less accurate Compensation of Employees 60 percent

Does GDP take into account environmental quality?

No

employed

1 hour per week in a legal job that pay taxes maternity leave or on strike you are considered employed even if its free profit 16 or older

The annualized percent change in real GDP is 4.4%. What is the quarter-to-quarter percent change in real GDP upon which this annualized rate was calculated?

1.1%

If there are 3,000 in the population, 930 are employed, and 70 are unemployed, what is the unemployment rate?

7 percent you divide by employment rate

Which of the following purchases is a fixed investment?

A fixed investment is an investment in structures, equipment, and software. business software

How to Calculate GDP

C+I+G+(X-M) Do not add up Net interest and Corporate profit

What is the capital-to-labor ratio?

Capital-to-labor ratio is the capital employed per worker.

What are cost of services in other countries?

China haircut is cheaper then United states haircuts

Measuring inflation

Consumer price index measures the retail price level. This is very important for jobs. Furthermore, deals with our everyday expenses. Producer price index measures wholesale prices. GDP deflator measures the average price of all items in GDP

Which of the following is a nondurable good?

Dental Floss is a nondurable good?

Suppose the price level is 100 in the year 2014, 130 in the year 2015, and 150 in year 2016. In 2016 this economy is undergoing

Disinflation

Laid of engineer driving Uber part time

Employed

You are on maternity leave

Employed

Helping out on the family for 5 hours/ day employed

Employed needs to be 15 hours a week

Tyler works 20 hours a week on the family farm, but he isn't paid. The Bureau of Labor Statistics would classify him as:

Employed tends to be classified of more then 15 hours of work

gross private domestic investment

Expenditures for newly produced capital goods (such as machinery, equipment, tools, and buildings) and for additions to inventories. 15 percent

GDP per capita

GDP divided by population

A Japanese automaker produces $1 million worth of automobiles in Japan and $2 million worth of automobiles in the United States. How much of that is added into the GNP of the United States?

GNP reflects the market value of all final goods and services produced by resources supplied by U.S. residents, whether the goods were produced domestically or abroad. .

Who benefits and loses from inflation?

If inflation has gone up it's easier to pay back you plug.

Which of the following is a source of productivity growth?

Increasing the capital-to-labor ratio is a source of productivity growth.

What is your biggest concern over the next 5 years inflation or unemployment?

Inflation affects everyone, especially savers. Inflation permanently reduces the value of your life savings

Creating a new technology that makes production line workers more efficient is likely to produce _____ growth.

Long-run growth occurs when an economy finds ways to use existing resources better.

Which of the following is a macroeconomic topic?

Macroeconomics studies economic activity that focuses on the entire economy. The business cycle and its effect on unemployment fall into this category.

Is gambling reported to GDP?

No

Homeless and no hope for finding work

Not in the labor force

Which of the following is NOT considered when measuring GDP per capita?

Per captia means for each person so that means population is out of it

Supply shocks

Price fluctuations on items such as food and oil. It affects the cost of doing business, for food and oil business.

In 2010, The U.S. economy was in poor shape. Unemployment was very high but falling, and growth was barely positive. Which phase of the business cycle does this best describe?

Recovery the key word is barely

For more than 10 years Kenneth has worked at a job fixing machinery used to produce textiles. As more and more clothing manufacturers moved overseas to lower labor costs, his services have been less and less in demand until ultimately he found himself out of a job. What type of unemployment is Kenneth experiencing?

Structural unemployment occurs when there is a change in consumer demand or technology requiring that unemployed people retrain for new jobs.

What is today minimum wage worth in 1983?

Take today CPI=256 and 1983 CPI=100 Divide the two and multiply by 7.25

Which of the following is a fixed investment?

The purchase of a manufacturing plant

Government spending on _____ is considered a contribution to physical capital.

This is a contribution to physical capital.

Does stocks deal with macroeconomics

Yes

deflation

a decline in the price level. Prices on average fall

if the price index is 200, how much did a $4 big mac ( today) cos in the base year?

base CPI= 100 Current CPI= 200 therefore it's $2

demand factors

consumer, confidence, income, wealth. If the economy is good then prices keep going up

Unemployment

describes person not working but able and willing to work and actively seeking a job.

Which of the following is a macroeconomic topic?

how quickly unemployment falls after recessions end macroeconomics does not deal with consumer behavior

A fixed investment is an investment in structures, equipment, and software.

ice cream is a nondurable good

In 2011 the Chinese price level increased by 5.4%. This is an example of:

inflation

Real GDP is the total value of final goods and services produced in a country in one year:

measured using prices in a base year. Real GDP is the total value of final goods and services produced in a country in a year, measured using prices in a base year.

The excludes excise taxes but does include changes in sales promotion programs such as rebate programs and zero- interest loans

producer price index

Government spending on _____ is considered a contribution to human capital.

public education

The part of the business cycle that goes from economic trough to economic peak is known as a(n) _____.

recovery

Government Spending

spending by all levels of government on final goods and services

personal consumption expenditures

the expenditures of households for durable and nondurable consumer goods and services cars are considered consumption 70 percent

Which of the following would tend to cause inflation?

the government increasing the supply of money

Informal Market

the informal market constitutes about 10% of the U.S. Economy, but varies from country to country

Some elderly and disabled Americans depend on Social Security for their primary source of income. The Social Security Act specifies a formula for determining each cost-of-living adjustment (COLA). If there is an increase in the CPI-W, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA. If this happens over several years, there may been no adjustments to Social Security benefits even though there was inflation. If there is no increase in Social Security payments during times of low inflation, you could conclude that:

the purchasing power of recipients has decreased.

Cheryl lost her job as an accountant six months ago and took a job stocking shelves at a local retailer. The Bureau of Labor Statistics would classify her as:

underemployed are those who are forced to take jobs that do not fully, or in some cases use their education

New college grad looking for a first job

unemployed

Assume the U.S. economy shrank about 0.25% quarter to quarter. What is the annualized percent change in real GDP?

−1.0% The annualized rate of change is the quarter rate multiplied by 4.