Practice Exam 1

The price for a movie ticket in the U.S. in 1967 was $1.20. The CPI in 1967 was 32.9 and the CPI in 2012 was 227.8. What is the value of a movie ticket purchases in 1967 in 2012 dollars?

$8.31

What is the difference between GDP and GNP?

Both values are measures of productivity but GDP is based on borders while GNP is based on citizenship.

The substitution bias in the consumer price index refers to the idea that consumers [ Select ] ["change", "do not change"] the quantity of products they buy in response to price increases, and the CPI does not reflect this and [ Select ] ["overestimates", "underestimates"] the cost of the market basket.

change, overestimates

During a business cycle expansion, total production ________ and total employment ________.

increases, increases

When the government runs a budget deficit, we would expect to see that

investment will fall.

If real GDP in a small country in 2017 is $8 billion and real GDP in the same country in 2018 is $8.3 billion, the growth rate of real GDP between 2017 and 2018

is 3.75%.

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

discouraged workers

Macroeconomics seeks to understand

economic growth, business cycles, and inflation.

The advice to "retrain" would be most appropriate for which of the following types of unemployment? Group of answer choices

structural unemployment

Upon graduation from college, you find that the economy is in recession and the unemployment rate is relatively high. Nonetheless, most Americans in this situation would continue along their career paths looking for a new job because

high unemployment rates usually do not last for very long.

If inflation has occurred overtime, then the GDP deflator must be Group of answer choices

higher than the GDP deflator in the base year.

What are the three main types of unemployment?

structural, frictional, cyclical

During recessions usually

the inflation rate decreases and the unemployment rate increases.

Monthly expenditures for a family of four in 2010 averaged $1,200. In 2016, the cost of the same purchases was $1,600. If 2010 was the base year, what was the CPI in 2016?

133

Suppose that the working-age population of a frictional economy falls into the following categories: 90 are retired; 60 have full-time employment; 20 have part-time employment; 20 do not have employment but are actively looking for employment; and 10 would like to be employed but do not have a job and are not actively looking for employment. The official unemployment rate would equal

20%

If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from

23.3 years to 17.5 years

If the real interest rate is 5 percent and the nominal interest rate is 8 percent, then the rate of inflation is

3 percent

Which of the following is a true statement about real and nominal GDP?

If real GDP increases from one year to the next, we know that production of goods and services has risen.

Which of the following is true about the consumer price index?

It assumes that consumers purchase the same amount of each product in the market basket each month.

Paul is an active U.S. marine officer currently stationed in San Diego. Mary gave up looking for a job 45 days ago after sending out thirty resumes and only receiving one interview. Tom is not working because he is at home and taking care of his two children. How would each person be classified by the BLS?

Paul: not in working-age population; Mary: not in the labor force; Tom: not in the labor force

You earned $30,000 in 2009, and your salary rose to $80,000 in 2018. If the CPI rose from 82 to 202 between 2009 and 2019, which of the following is true?

The purchasing power of your salary increased between 2009 and 2018

Which of the following is an example of human capital?

a college education

Suppose in 2018, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2018?

none of them would be included (the value of the house in 2018 minus depreciation, the value of the house in 2003, the value of the house in 2018

Full employment is not considered to be zero unemployment, because

people do not find jobs instantaneously.