Macroeconomics Midterm 2

6.5%

An economy has a population of 226,500 people, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is

They both increase

Assume dairy farmers saw high profits the previous year and expanded their herds. Consider the market for milk. Ceteris paribus, what happened to dairy farmers' willingness-to-produce milk and to the amount of producer surplus, assuming demand held steady and the market sells at the equilibrium price?

true

At times, there are conflicts between market outcomes that are efficient and outcomes that society deems fair.

20,000

(Figure: Determining Surplus 6) Using the graph, we can calculate the maximum possible consumer surplus as

triangle ijk

(Figure: Determining Surplus) In the graph, which shape represents producer surplus?

shortage of 600 units

(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a maximum price of $25, there is a

$75

(Figure: Understanding Price Ceilings and Floors) In the graph, which price would NOT allow for a binding price ceiling?

second and third quarter 2016

(Table Macroeconomic Data for Econoland) Look at the table. When is Econoland experiencing a double-dip recession?

$7,692 billion

(Table) According to the table, nominal GDP for 2013 is approximately

$7,552 billion

(Table) According to the table, real GDP for 2014 is approximately

100

(Table) According to the table, the GDP deflator for 2012 is

140

(Table) According to the table, the number of people in the labor force is

inflation

(Table) The associated table provides a hypothetical bundle of goods. If 2014 is the base year, the economy is experiencing _____ in 2017.

consumer spending is a smaller share of the total spending in macland, suggesting that the consumers are saving a larger share of their income

(Table) When you look at the table, what evidence do you see that suggests which country has the highest savings rate?

short run fluctuation in macroeconomics activity

The "business cycle" refers to

true

The Census Bureau surveys households for employment status, while the Department of Labor focuses on the payrolls of businesses and government agencies to determine employment totals.

false

The French term for "let it be" is ceteris paribus.

producer price index

The broadest measure of inflation is the

false

The nonaccelerating inflation rate of unemployment is a measure of the natural rate of inflation.

durable, nondurable, services

The three types of consumption are

Efficiency

Wages set high to discourage employee turnover are called _____ wages

bacon purchased at the grocery store

What is an example of a final good?

are rising but at a declinning rate

When an economy is going through disinflation, prices

debtors

Which group is helped by inflation?

supporting the macroeconomics theory of the political power

Which is NOT a main use of the national income and product accounts?

A mismatch of information

Which is one of the four major reasons markets fail?

imported mangoes

Which item is NOT included in the GDP deflator?

refrigerator

Which item would be considered a durable good?

national defense

Which of these would be considered a public good?

a hamburger purchased by hungry restaurant patron

Which one of these would be included in GDP calculations?

an unpaid family employee working 10 hours a week

Which person would NOT be considered employed?

buyers have inadequate information about products

Which situation could keep a market from ending up in equilibrium?

alama lives next to a freeway and the noise wakes her up every morning, against her wishes, at six

Which situation involves an external cost?

disinflation

Which term describes a situation in which there is a reduction in the rate of inflation from 4% to 3% per year?

jaslyn is paid for her to work at coordinator at woman's shelter

Which transaction would be included in the national income and product accounts?

unemployed

Zach has been laid off from his job as an aircraft worker. He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is

false

Deadweight loss is found by subtracting producer surplus from consumer surplus.

consumer surplus and producer surplus

Deadweight loss reduces

false

Disinflation is a decline in overall prices throughout the economy.

false

During a deflationary period, prices will increase at a decreasing rate

false

External costs increase deadweight loss, while external benefits reduce deadweight loss.

false

Figure: Determining Surplus and Loss) In the graph, if the government sets a maximum price of $12, there is a shortage of 40 units.

false

For the purposes of calculating the unemployment rate, part-time workers are not counted as employed.

deflation

From 1999 to 2002, the Japanese inflation rate was, respectively, -0.3%, -0.6%, -0.7%, and -0.7%. During this time, the Japanese economy underwent

final goods and services produced in the united states by labor and porperty

Gross domestic product is the total market value of all

the government printing money to finance budget deficits

Hyperinflation is usually caused by

2013s inventory changes

If a car is produced in Detroit in 2013 but not sold until 2014, it should be included in _____ GDP, and its value should be counted in _____.

a binding

If a price ceiling is set below the market price, it is

public goods

If there is only one provider of electricity in a city, that market is likely to fail due to

the current population

In the United States, the Census Bureau computes the unemployment rate from

no, it is not a public good because there are only limited number of seats on each bus, which can fill up

Jamestown offers a free community bus service to anyone wishing to use it. Is this service a public good?

frictionally unemployed

Jennifer did not work during college. She just obtained a bachelor's degree in marketing, and is now looking for a marketing job in the retail industry. Jennifer is considered

true

Joyce is an accountant. Sarah, her hair stylist, cuts and perms her hair in exchange for having her taxes done. This is an example of an economic transaction that is NOT included in the national income and product accounts

true

Kendra has just signed a three-year lease. The next day, she learns that the inflation rate has increased more than expected. This unanticipated inflation benefits Kendra

true

Kyle is working part-time as a bartender while he auditions for his dream job as a member of a ballet company. According to the Bureau of Labor Statistics, Kyle is employed

price floors

Laws used to keep market prices from falling are called

true

Marci is 11 years old. She walks her neighbors' dogs for cash. Her income from this service is probably part of the informal economy.

the market has not provided a socially optimal amount of good and services

Market failure means that

price gouging

Merchants' raising prices of necessary goods during a crisis or disaster is known as

expansion

Suppose an economy has historically grown at a rate of 2.25%. The economy is currently growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

consumer surplus is greater than producer surplus

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $65

false

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $68, consumer surplus is $4.

creditors gain at the expense of debtors

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%

-10.7%

Suppose the market basket of goods costs $10,000 in 2009, the base period, and that same basket of goods now costs $11,200. What is the percentage change in the cost of goods between the base period and the current period?

the effectiveness of the price will be reduced

Suppose the market for an agricultural crop has an effective price floor. Then poor weather causes the market supply to decrease. What impact does this have on the effectiveness of the price floor in the market, ceteris paribus?

reduce the problem as asymmetric information

many communities require that an inspector evaluates a house before it can be sold. This requirement

an external benefits

Car tracking GPS systems make it easier for police to catch a car thief who has stolen your car. These locks represent _____ to other car owners because they enable the police to capture a thief that might steal their cars.

lack of competition

if there is only one provider of electricity in a city, that market is likely to fail due to

econia because G/GDP is larger

(Table) When you look at the table, which government purchases do you see that represent a larger share of economic activity in which country?

true

(Figure: Determining Surplus 2) In the graph, consumer surplus is $15.

$15

(Figure: Determining Surplus 2) In the graph, consumer surplus is equal to

false

(Figure: Determining Surplus 3) In the graph, producer surplus is $280

$80 is transferred from consumers to produce

(Figure: Determining Surplus and Loss) Consider the graph. If the price is raised from $8 to $12, a surplus of

true

(Figure: Determining Surplus and Loss) In the graph, if the government sets a minimum price of $12, this is an example of a binding price floor.

false

(Figure: Determining Surplus and Loss) In the graph, if the government sets a price of $5, this is an example of an effective price floor.

$120, $170

(Figure: Determining Surplus and Loss) In the graph, producer surplus is _____ in equilibrium and _____ at a price of $12.

consumer surplus decreases, producer surplus increase, and total surplus decreases

(Figure: Market in Equilibrium) The market in the figure is at equilibrium. If the price rises to $5, what happens to consumer surplus, producer surplus, and total surplus?

false

(Figure: Understanding Price Ceilings and Floors) In the graph, a maximum price of $90 would allow for a binding price ceiling.

recession

(Table Macroeconomic Data for Econoland) Look at the table. What stage of the business cycle would the NBER declare Econoland to be in during the fourth quarter of 2014?

115

(Table) According to the table, the number of people in the labor force is

$1,365

(Table) According to the table, what is this country's GDP?

$1770 billion

(Table) According to the table, when using the expenditure approach, GDP is

macroland because its consumption purchases per capita is higher

(Table) Look at the table of data for two countries. Which statement correctly identifies the country in which consumers are better off on average and why?

114

(Table) Suppose the Bureau of Labor Statistics collects the data presented in the following table If 2010 is the base year, then the consumer price index for 2012 is

$640.50

(Table) The associated table provides a hypothetical bundle of goods and their respective prices for three different years. If 2014 is the base year, the cost of the market basket in 2017 would be

$709.75

(Table) The associated table provides a hypothetical bundle of goods. If 2014 is the base year, the value of nominal GDP in 2017 would be

108.97

(Table) The associated table provides a hypothetical bundle of goods. If 2014 is the base year, the value of the CPI in 2017 would be

true

A lack of competition results in deadweight loss.

false

A price ceiling usually results in a surplus and a misallocation of resources

false

A trough in the business cycle usually means that the economy is operating at its capacity

always equal to 100

The GDP deflator for the base year is

imports

The GDP deflator is an index that includes prices of all of these EXCEPT

the standard of living of the citizens of Pittsburgh has increase, even though the improvement in the environmental was not reflected in the GDP

At one time, Pittsburgh, Pennsylvania, was known for its poor air quality. Locals said that a man wearing a white shirt when he walked into the city would have a black shirt when he left. Since that time, the city has greatly reduced its air and water pollution. As a result of cleaner air and water

$40,000

Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is

low mortgage interest rate provide an incentive for potential homeowners to buy now

Consider the market for new homes. Ceteris paribus, which event will cause consumer surplus to increase, assuming the market sells at the equilibrium prices?

true

Cyclical unemployment can be mitigated by keeping the economy on a steady, low-inflationary, solid growth path

incorrect; adjusting for price change, his salary is less than his dad's salary

Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 while the consumer price index the year his dad started work was 110.8, Dave is

true

Dylan quits his job in Topeka, Kansas, and moves to Austin, Texas, to get involved in live music. He is unemployed for three months while he looks for a new job. Dylan is frictionally unemployed.

the value of the output of a factory in macroland that is owned by company whose headquarters are located in econland

Econoland and Macroland are neighboring countries. Which of these would be included in the GNP of Econoland but NOT in Econoland's GDP?

true

Escalator clauses are important in times of rising inflation because they protect the real value of wages

true

Full employment is considered to be the equivalent of the natural rate of unemployment

false

GDP per capita fully reflects the standard of living of a typical citizen of a country

true

GDP per capita is found by dividing GDP by population.

outside the united states by US citizens, inside the united states by foreign citizens

GNP includes output produced _____, but it does NOT include output produced _____.

structural

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, they are experiencing _____ unemployment.

$140

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals

producers can gain at consumers' expense

If the price of a good is higher than the equilibrium price

teh rate of inflation id four times as large in Merryland as in Berryland

In 2009, a market basket of goods and services cost $100 in Merryland while the same basket cost $200 in Berryland. In 2010, the cost in Merryland was $150 and in Berryland, the cost was $225. Based on the given information, which statement is TRUE?

false

Jasmine works in her family's boutique 16 hours a week and is considered an unpaid family member. Since she is not paid for her services, she is not in the labor force.

$25 and producer surplus $5

Jason purchased a new printer for $150, although he was willing to pay $175. The minimum price acceptable to the seller, Jasmine, was $145. The results of this transaction are a consumer surplus of

Jennifer's purchasing power will decline by 2%

Jennifer received news that she is getting a 5% raise. However, the Bureau of Labor Statistics just reported that prices are rising by 7%. Based on the given information, which of these statements is TRUE?

$44,000

Jill has an escalator clause in her labor contract that gives her a raise equal to the change in the consumer price index (CPI). Last year she earned $40,000 and the CPI was 100. If the CPI this year is 110, her new salary is

is creating external benefits for their neighbors

Jill plants flowers in her yard to supply a local florist. Her neighbor is enjoying the flowers. Therefore, Jill

false

Most economic analyses focus on questions regarding equity.

100%

Most economists define hyperinflation as an inflation rate greater than _____ a year.

Robert is not part of labor force

Robert lost his job and now takes care of his children while his wife works. He would take a job similar to the one he lost if it were offered, but he is not actively seeking work. How is Robert categorized in the unemployment figures?

true

Shortcomings of the national income and product accounts include ignoring nonmarket transactions, such as the value of your labor within your own home (e.g., the value of cooking your own dinner).

structural

Since the invention of automatic teller machines, many bank tellers have lost their jobs. This is an example of _____ unemployment.

shift by food manufactures from the use of corn syrup to cane sugar

Suppose a price floor is set on cane sugar that is approximately three times the equilibrium price. One of the effects is a(n)

3%

Suppose an economist breaks the unemployment rate into the following components: frictional (2%), structural (1%), and cyclical (4%). Based on these estimates, the natural rate of unemployment is

150

Suppose in 2010 the cost of purchasing a basket of goods was $100. That same basket cost $150 in 2011. If 2010 is the base year, the consumer price index for 2011 is

false

Suppose that a customer's willingness-to-pay for a product is $5, and the seller's willingness-to-sell is $2. If the negotiated price is $4, consumer surplus is $2.

external cost

Synthetic clothing releases fibers during the washing process, which then end up poisoning rivers, lakes, and oceans. Fish and other wildlife consume the microfibers, accumulating toxins in their bodies that can become concentrated as they travel up the food chain. The production of synthetic clothing is an example of market failure due to

true

The gap between the demand curve and the market price is called consumer surplus.

positive externalities (external benefits)

The government often provides funding for the arts when markets do not do so sufficiently. This funding is to overcome which market failure?

actively seeking work

The key to being counted as unemployed by the Bureau of Labor Statistics is to be

false

The lack of easy entry into a market tends to depress prices.

$41,667

What is Mike's new salary if he earned $40,000 last year, the consumer price index increased from 120 to 125, and his salary is adjusted by the rate of inflation annually?

$13,636 billion

What is real GDP in 2010 dollars if nominal GDP in 2014 is $15,000 billion; the GDP deflator in 2014 is 110; and the GDP deflator in 2010 was 100?

an external benefit

When LeBron James rejoined the Cleveland Cavaliers in 2014, Fox Sports Ohio was able to raise its rates for advertising on its cable TV channel. This situation is an example of

I only

Which of these would be considered frictional unemployment? I. Alisha has taken a job at a different company in order to accept a promotion. She quit her current job but has one month off until she starts her new job. II. John has lost his job as a book binder, as the demand for e-books has replaced demand for traditional books. III. Melissa quit her full-time job to become a full-time student in order to pursue her Ph.D.

consumer surplus

the difference between the demand curve and the market price line is called