Test 2

Actual real GDP will be above potential GDP if (firms are producing below capacity, firms are producing at capacity, firms are producing above capacity, inflation is rising)

Firms are producing above capacity

GDP is not a perfect measure of well-being because (the value of leisure is included in GDP, GDP is not adjusted for pollution, GDP is adjusted for changes in crime rates, GDP is adjusted for increases in drug addiction)

GDP is not adjusted for pollution

The increased generosity of unemployment insurance programs in Canada as compared to the US should (decrease the duration of unemployment in Canada as compared to the US, increase the duration of unemployment in Canada as compared to the US, have no impact on the duration of unemployment in Canada, raise the duration of unemployment in the US)

Increase the duration of unemployment in Canada as compared to the US

The nominal interest rate equals the real interest rate ----- the inflation rate. (times, divided by, plus, minus)

Plus

What is the investment in a closed economy if you have the following economic data? Y=$10 trillion C=$5 trillion TR=$2 trillion G=$2 trillion ($2 trillion, $3 trillion, $5 trillion, cannot be determined without information on taxes (T))

$3 trillion

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 is 1964 and 219 in 2016, then the value of your grandfather's salary in 2016 dollars is approximately ($84,775; $63,830; $37,200; $26,280)

$84,775

Suppose that real GDP for 2015 was $10,000 billion and real GDP for 2016 was $9,500 billion. What is the rate of growth of real GDP between 2015 and 2016? (-10%, -5%, -2%, -1%)

-5%

If the GDP deflator rises from 185 to 190, what is the rate of inflation between the 2 years (270%, 50%, 5%, 2.7%)

2.7%

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, 28.0 years to 21.0 years, 11.2 years to 10.8 years, 23.3 years to 20.6 years)

23.3 years to 17.5 years

Imagine that you borrow $1,000 for one year and at the end of the year you repay $1,100. If the inflation rate was 7%, what was the rel interest rate you paid? (17%, 10%, 7%, 3%)

3%

If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is (5%, 5.2%, 8%, 10%)

5%

If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2016, we would say that in the year 2016, the average American could buy ------ times as many goods and services as the average American in 1950. (1/8, 4, 8, 12)

8

Which of the following is an example of a worker experiencing frictional unemployment? (A worker quits his job at the Post Office to find more interesting work, a computer programmer loses her job because it is outsourced to India, an employee is laid off because the economy is suffering a recession, a United Airlines pilot loses her job because of lack of demand for air travel)

A worker quits his job at the Post Office to find more interesting work

Labor unions cause unemployment because the union contract wage is set (below the market wage, causing a shortage of labor, below the market wage, causing a surplus of labor, above the market wage, causing a surplus of labor, above the market wage, causing a shortage of labor)

Above the market wage causing a surplus of labor

In the United States in 2013, the Bureau of Economic Analysis began counting spending by firms and individuals on developing entertainment products as investment. This change will (take away from GDP, add to GDP, not change GDP)

Add to GDP

Which of the following would be the best measure of the cost of living? (Real GDP, real GDP per person, GDP deflator, consumer price index)

Consumer price index

To calculated GDP by the expenditure method, one must add (wages, rents, interest, and profits; consumption spending, investment spending, government spending, and net exports; consumption spending, investment spending, government spending, and exports; labor, natural resources, entrepreneurship, and capital.)

Consumption spending, investment spending, government spending, and net exports

The response of investment spending to an increase in the government budget deficit is called (expansionary investment, private dissaving, crowding out, income minus net taxes)

Crowding out

Which of the following increases labor productivity? (an increase in the aggregate hours of work, decreases in the availability of computers and factory buildings, inventions of new machinery, equipment, or software, a decline in the health of the population)

Inventions of new machinery, equipment, or software

A final good is one that (is used in the production of another good, is a natural resource used to produce a good, is purchased as an input in the production process, is purchased by its final user)

Is purchased by its final user

If inflation increases unexpectedly, then (borrows pay a higher real interest rate than they expected, lenders receive a lower real interest rate than they expected, lenders gain and borrowers gain, neither borrowers nor lenders lose)

Lenders receive a lower real interest rate than they expected

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about (one-half to one percentage point, one to two percentage points, one quarter percentage point, one and one-half percentage points)

One-half to one percentage point

The Bureau of Labor Statistics would categorize a retiree who is not working as (employed, unemployed, a discouraged worker, out of the labor force)

Out of the labor force

Full employment is not considered to be zero unemployment, because (some cyclical unemployment always exists, some people do not want a job, there are not enough jobs for everyone who wants one, people do not find jobs instantaneously)

People do not find jobs instantaneously

If the CPI changes from 125 to 120 between 2015 and 2016, how did prices change between 2015 and 2016? (Prices increased by 5%, Prices decreased by 5%, Prices increased by 25%, Prices decreased by 4%)

Prices decreased by 4%

If prices are rising on average, then (real GDP will always be equal to nominal GDP, real GDP will be greater than nominal GDP in the years after the base year, real GDP will be less than nominal GDP in the years before the base year, real GDP will be greater than nominal GDP in the years before the base year)

Real GDP will be greater than nominal GDP in the years before the base year

The period between a business cycle peak and a business cycle trough is called (expansion, recession, diffusion, recalculation)

Recession

What does the PPI measure? (The average change in the prices paid for all goods produced in the economy over a given year, the average of the prices received by producers of goods and services at all stages of the production process, the level of production of goods and services generated in the economy in a given year, the difference between the price consumers pay for goods and services and the prices producers pay for goods and services)

The average of the prices received by producers of goods and services at all stages of the production process

Liquidity refers to (the ease with a stock can be traded for a bond, the ease with which a financial security can be traded for cash, the number of times a dollar changes hands in the creation of GDP in an economy, the number of shares of stock a corporation issues)

The ease with which a financial security can be traded for cash

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause (the unemployment rate to decrease, the labor force participation rate to decrease, the number of discouraged workers to increase, no change in the unemployment rate)

The labor force participation rate to decrease

The nominal interest rate will be less than he real interest rate when (the rate of inflation is positive but decreasing, the rate of inflation is positive and increasing, the rate of inflation is negative, the real interest rate is negative)

The rate of inflation is negative

When deflation occurs, (the real interest rate is greater than the nominal interest rate, the nominal interest rate is greater than the real interest rate, the nominal interest rate is equal to the real interest rate and inflation is negative, the nominal interest rate is equal to the real interest rate and inflation is positive)

The real interest rate is greater than the nominal interest rate

Gross domestic product is calculated by summing up (the total quantity of goods and services in the economy, the total quantity of goods and services produced in the economy during a period of time, the total market value of final goods and services produced in the economy during a period of time.)

The total market value of final goods and services produced in the economy during a period of time

Which of the following explains the changes in the US adult male labor force participation rate since 1948? (More men are joining the military as compared to the past, More men are retiring later in life as compared to the past, fewer men consider themselves discouraged workers as compared to the past, younger men are remaining in school longer as compared to the past)

Younger men are remaining in school longer as compared to the past