TEST 2 (Chpts. 4-7)
The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013. The average household spent $30 on juice and $24 on cloth in 2013 when the price of juice was $2 a bottle and the price of cloth was $4 a yard. In 2014, juice is $4 a bottle and cloth is $8 a yard. Calculate the CPI basket and the percentage of the household's budget spent on juice in 2013.
-The CPI basket is 15 bottles of juice and 6 yards of cloth. -The percentage of the household's budget spent on juice in 2013 is 55.5 percent.
-Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. -Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
-final; a base; -final; that same
https://imgur.com/0K1Kxh6 1) What was the growth rate of real GDP in Atlantis in 2017? 2) What was the growth rate of real GDP per person in Atlantis in 2017?
1) The growth rate of real GDP in Atlantis in 2017 is 8 percent. 2) The growth rate of real GDP per person in Atlantis in 2017 was 7 percent.
Which of these will cause the quantity of goods and services that can be produced by one worker, or in one hour of work, to increase?
A technological change
Choose the correct statement. A. If there is a shortage of labor, the real wage rate rises to eliminate the shortage. B. The demand for labor is the relationship between the quantity of labor demanded and the money wage rate. C. The real wage rate is the number of dollars that an hour of labor earns D. The real wage rate is the money wage rate multiplied by the price level.
A. If there is a shortage of labor, the real wage rate rises to eliminate the shortage.
Choose the correct statement. A. Most economists believe that the Ricardo-Barro effect holds in the loanable funds market. B. According to the Ricardo-Barro effect, rational taxpayers know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller. C. According to the Ricardo-Barro effect, a budget deficit raises the real interest rate. D. According to the Ricardo-Barro effect, a government budget deficit leads to the crowding-out effect.
According to the Ricardo-Barro effect, rational taxpayers know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller.
https://imgur.com/lDrxmWr According to the graph, at what point does the economy begin a period of recession?
After the peak
Choose the correct statement. A. The largest contribution to labor productivity growth comes from human capital. B. Growth in average hours per work increase labor productivity. C. The fundamental source of labor productivity growth is physical capital. D. Most technologies are embodied in physical capital.
D. Most technologies are embodied in physical capital.
Choose the correct statement. A. Real GDP must increase every year. nothing B. Real GDP is just a more precise name for GDP. nothing C. We measure the change in production by comparing nominal GDP in one year with nominal GDP in another year. D. To isolate the increase in production from the rise in prices comma we distinguish between real GDP and nominal GDP.
D. To isolate the increase in production from the rise in prices comma we distinguish between real GDP and nominal GDP.
Which of these factors can cause the natural rate of unemployment to change?
Demographic changes
Which of these factors inhibit economic growth?
Discouraging international trade
If real GDP is $1,000,000, exports are $200,000, imports are $300,000, and aggregate labor hours are 100,000, labor productivity is _____.
$10 per hour
During a year, a firm's net investment is $3,200 and depreciation is $800. The firm's gross investment is ______.
$4,000
If the CPI was 207 in 2007 and 225 in 2011, what pay raise would someone who earned $50,000 in income in 2007 have to receive in order to keep her purchasing power constant in 2011?
$4,348
The U.S. GDP per person in 2016 was approximately __________.
$52,000
The real wage rate is $_____ when the money wage rate is $2,000 and the price level is $25.
$80
CPI = ______.
(Cost of CPI basket at current-period prices divided by Cost of CPI basket at base-period prices) times 100
Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?
-0.3 percent
If the inflation rate is 6 percent and the nominal rate of interest is 4 percent, then the real interest rate is __________.
-2 percent
During the past decade, a nation's average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was __________.
-3.0 percent
In 2017, a country's exports were $2,260 billion and imports were $2,757 billion. The value of net exports in 2017 was ________ billion dollars.
-497
https://imgur.com/nLCMduR The table provides information about the nominal interest rate and the CPI inflation rate in the United States for the past five months. -What was the real interest rate in August 2018? -Did the real interest rate increase or decrease between April and August?
-In August 2018, the real interest rate was 1.2 percent. -Between April 2018 and August 2018, the real interest rate decreased.
The real interest rate is:
The nominal interest rate minus the inflation rate.
What is the present value of $500, three years in the future if the interest rate is 1 percent?
The present value of $500, three years in the future if the interest rate is 1 percent is $485.30.
When the economy is at full employment, which types of unemployment remain?
Frictional and structural
Joe has a term deposit that pays 8 percent a year and its value after two years will be $5,000. What is the present value of Joe's term deposit?
The present value of Joe's term deposit is $4,286.69.
Which of the following is included in the economist's definition of investment?
The purchase of new machines, factories, or houses
https://imgur.com/Yuf0dck The figure shows the circular flow model. During 2014, flow A was $13.3 trillion, flow B was $9 trillion, flow D was $3 trillion, and flow E was negative $ 0.7 trillion. Calculate GDP and government expenditure.
GDP is $13.3 trillion. Government expenditure is $2 trillion.
1) When the unemployment rate is greater than the natural unemployment rate, the output gap is _______. 2) When the unemployment rate is less than the natural unemployment rate, the output gap is _______.
HW5 Q8...lol idk 1) Negative; Positive 2)
Lori is a student who teaches golf on Saturdays. In a year she earns $35 comma 000 after paying her taxes. At the beginning of 2017, Lori owned $2 comma 000 worth of books, DVDs, and golf clubs and she had $3 comma 000 in a savings account at the bank. During 2017, the interest on her savings account was $120 and she spent a total of $25 comma 000 on consumption goods and services. There was no change in the market values of her books, DVDs, and golf clubs. How much did Lori save in 2017? What was her wealth at the end of 2017?
HW7 Q2 (idk this)
https://imgur.com/VzRWZ0j In which year did the standard of living increase and in which year did the standard of living decrease? Explain
The standard of living increased in 2007 because real GDP per person increased; The standard of living decreased in 2008 and 2009 because real GDP per person decreased
If the government begins running a budget surplus, what impact will the surplus have on the loanable funds market?
The supply of loanable funds will increase.
How would a reduction in income tax rates affect the loanable funds market?
The supply of loanable funds would increase.
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. -Choose the correct statement about the cars assembled by Toyota in Kentucky.
Household expenditure on the cars is part of U.S. consumption expenditure and expenditure made by Toyota on building the assembly plant in Kentucky is recorded as U.S. investment.
Which of these groups is included in the labor force?
The unemployed
Which of these determines the supply of loanable funds?
The willingness of households and governments to save
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. -Choose the correct statement about the wings of the new Boeing 787 Dreamliner.
The wings appear as imports in U.S. GDP.
Which of these are included in the labor force?
Those who are employed and those who are unemployed
Tom took out a $4,000 loan to buy a boat at an interest rate of 4 percent a year. He plans to repay the loan after 2 years. How much will he have to pay?
Tom will have to pay $4326.
What is the impact of unanticipated inflation?
Unanticipated inflation creates arbitrary redistributions of income.
Which one of these groups is most hurt by unanticipated inflation?
Wealthy people who hold cash in their wall safes
Of the eight categories in the CPI market basket, which three categories make up more than 70% of the basket?
Housing, transportation, and food
Which of these terms refers to the accumulated knowledge and skills workers acquire from education and training, or with life experiences?
Human capital
Which of these factors does not contribute to economic growth?
Nationalization of foreign investments
The process by which competition for profits leads to technological progress and perpetual economic growth best fits which growth theory?
New growth theory
https://imgur.com/GfOm7mI What is nominal GDP in 2016 and in 2017?
Nominal GDP in 2016 is $36. Nominal GDP in 2017 is $39.
The core inflation rate is the annual percentage change in the _____ price index _____ the prices of food and energy.
PCE; excluding
The role of technological progress in determining economic growth can be described by which statement?
Per capita output will rise when we discover new and more effective uses of capital and labor.
Which of these government policies can help economic growth?
Promoting higher rates of saving
Which measure of GDP represents changes in the quantity of goods and services produced in the economy, holding prices constant?
Real GDP
https://imgur.com/Y8TUIey An economy produces only digital cameras, chocolate bars, and watches. The table gives the quantities produced and prices in 2015 and 2016. The reference base year is 2015. -What is real GDP in 2016 in terms of the reference base-year prices?
Real GDP in 2016 in terms of reference base-year prices is $48.
Which phase of the business cycle is characterized by decreasing levels of real GDP?
Recession
Which of these will ensure that an economy experiences labor productivity growth?
Technological change
Which of these factors contributes to economic growth?
Technological progress
The people on Coral Island buy only juice and cloth. The CPI basket contains the quantities bought in 2013 (the reference base year). The average household spent $60 on juice and $30 on cloth in 2013 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In 2014, juice is $4 a bottle and cloth is $6 a yard. Calculate the CPI and the inflation rate in 2014.
The CPI in 2014 is 6.
How can the change in U.S. wealth differ from U.S. saving?
The change in wealth includes changes in the prices of assets owned and saving excludes these items.
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. -Explain where these activities appear in Japan's National Income and Product Accounts.
When the wings are sent to the United States, their value appears as Japanese exports in calculating Japan's GDP.
Choose the correct statement. A. The CPI calculation assumes that everyone shops at discount stores and no one shops at convenience stores. B. When the quality of a good improves over time, the CPI does not include the portion of the price rise attributable to the higher quality in its calculation. C. The commodity substitution bias injects an upward bias into the CPI. D. Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution.
The commodity substitution bias injects an upward bias into the CPI.
If technological change increases the profitability of new investment to firms, which of these will occur?
The demand for loanable funds will increase.
Tens of thousands of young illegal immigrants applied to a program that could allow them to remain in the United States and work legally. "So many opportunities are going to open up now," said one Mexican student, who boasts a 3.95 GPA and hopes to study law. -With 2 million illegal immigrants eligible to apply to the youth program, how might U.S. real GDP change in the coming years? Explain why.
With 2 million illegal immigrants eligible to apply to the youth program, U.S. real GDP will increase if unreported income previously earned by these immigrants becomes reported income.
A sustained decrease in the average level of prices in the economy is __________.
called deflation
An increase in the real interest rate will:
cause a movement along the demand curve for loanable funds
The four price indexes that are alternatives to the CPI are ______.
chained CPI, personal consumption expenditure deflator, GDP deflator, and core PCE
The natural unemployment rate _______.
changes as frictions and structural change occur in the economy
A decline in investment spending as a result of an increase in government spending and borrowing is known as:
crowding out
If increases in government budget deficits cause investment spending to fall it is known as __________.
crowding out
Real GDP growth rate = [(Real GDP in ______ yearminusReal GDP in ______ year) divided by Real GDP in ______ year ] times 100.
current; previous; previous
At full employment, __________.
cyclical unemployment is zero
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
decrease; capital
The decline in capital's value over a period of time is known as __________.
depreciation
In measuring changes in the standard of living of a country, economists rely heavily on comparisons over time of real GDP per person because:
despite its well-known flaws, it is the best means we have of comparing the performance of an economy over time
If the minimum wage is set above the market-determined equilibrium wage, the natural unemployment rate will be __________.
higher than it would be without a minimum wage
A mortgage is a legal contract that gives ownership of a _____ to the _____ in the event that the _____ fails to meet the agreed loan payments (repayments and interest).
home; lender; borrower
The flow of funds from __________ into the financial system makes it possible for government and firms to borrow.
households
The aggregate production function is the relationship that tells us ______, when all other influences on production remain the same.
how real GDP changes as the quantity of labor changes
The graph shows the loanable funds market. During the 1990s, the invention and use of fiber-optic technologies required billions of dollars to be spent laying new cables under the oceans and launching communications satellites. -Draw a curve that shows the effect of this event. Label it. -Draw a point to show the new equilibrium quantity of loanable funds and real interest rate.
https://imgur.com/4MJZMnx
Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries. -Draw a labor supply curve and a labor demand curve for Mexico. Label the curves LS0 and LD0. -Draw a point at the equilibrium quantity of labor and the equilibrium real wage rate. Label it 1. -Now suppose the United States returns millions of illegal immigrant workers to their home countries. -Draw a curve that shows the effect of this return of workers in Mexico. Label it. -Draw a point at the new equilibrium quantity of labor and the equilibrium real wage rate. Label it 2.
https://imgur.com/8tjsNIb
The graph shows demand for loanable funds curve. Suppose the real interest rate rises. Draw either an arrow along the demand curve showing the direction of change or a new demand curve.
https://imgur.com/A7XzMzE
Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries. -Draw a labor supply curve and a labor demand curve for the United States. Label the curves LS0 and LD0. -Draw a point at the equilibrium quantity of labor and the equilibrium real wage rate. Label it 1. -Now suppose the United States returns millions of illegal immigrant workers to their home countries. -Draw and label a curve that shows the effect of this return of workers. -Draw a point at the new equilibrium quantity of labor and the equilibrium real wage rate. Label it 2.
https://imgur.com/T2HEz44
-Draw a labor supply curve and a labor demand curve. Label them LS0 and LD0. -Draw a point the equilibrium quantity of labor and the equilibrium real wage rate. Label it 1. -Draw and label a curve that shows the effect of an increase in labor productivity. -Draw a point at the new equilibrium quantity of labor and the equilibrium real wage rate. Label it 2.
https://imgur.com/YPGYUXV
The left graph shows an economy's labor market. Draw a point that shows equilibrium in the labor market. The right graph shows the economy's production function. Draw a point on the production function that shows potential GDP in this economy.
https://imgur.com/j9pO2A9
The graph shows the production function of an economy. Currently, the full-employment quantity of labor is 200 billion hours a year. Population increases and the new full-employment quantity of labor is 300 billion hours. -Draw an arrow that shows the effect of this increase in population. -Draw a point at the new value of full-employment and potential GDP. Label it B.
https://imgur.com/zL9pNtl
The fundamental source of labor productivity growth is ______.
human capital
Unanticipated deflation __________.
hurts borrowers
A federal government budget deficit will __________.
increase the demand for loanable funds and increase the equilibrium interest rate
A government budget deficit _______ loanable funds
increases the demand for
A government budget surplus _______ loanable funds.
increases the supply of
An increase in the population ______ the equilibrium quantity of labor, ______ and potential GDP.
increases; increases
An increase in labor productivity ______ the real wage rate and ______ the equilibrium quantity of labor.
increases; increases;
The only way that the standard of living of the average person in a country can increase is by:
increasing production faster than population growth
A sustained increase in the overall level of prices is known as:
inflation
People are more likely to accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate because ______.
inflation decreases the real wage rate gradually and a cut in the nominal wage decreases the real wage rate suddenly
If the inflation rate is low, steady, and anticipated, __________.
inflation may not be a major problem
The percentage rate of change in the price level is the definition of the:
inflation rate
The firm that printed your textbook bought the paper from XYZ Paper Mills. -This purchase of paper ______ part of GDP because the paper is ______ good.
is not; an intermediate
The growth rate of GDP in current prices does not provide information about how quickly the economy is really growing because _______.
it combines price growth and production growth, and price growth does not represent growth in the economy
If inflation is anticipated, __________.
it costs less to society than if unanticipated
The key proposition of new growth theory that makes growth persist is that ______ is not subject to diminishing returns.
knowledge capital
The unemployment rate is the percentage of the people in the _____ who are unemployed.
labor force
The ratio of the labor force to the adult population is known as the:
labor force participation rate
Net worth is the total market value of what a financial institution has _____ minus the market value of what it has _____.
lent; borrowed
If the government is attempting to spur investment spending it should adopt policies that are designed to:
lower interest rates
The __________ the interest rate, the more investment projects firms can profitably undertake, and the __________ the quantity of loanable funds they will demand.
lower, greater
The unemployment rate in the United States is usually __________ than the unemployment rates in most European countries, partly because the United States has __________ generous benefits for the unemployed.
lower, less
An increase in the population _______ the real wage rate.
lowers
Inflation ______ the real wage rate, everything else remaining the same because _______.
lowers; the real wage rate is calculated as (Nominal wage rate divided by CPI) times 100
A government budget surplus _______ the real interest rate, decreases ______.
lowers; private saving, and increases investment
In calculating the CPI, the __________.
market basket does not include large equipment purchased by firms
Gross domestic product (GDP) is best defined as the __________.
market value of the final goods and services produced within a country in a given time period
The GDP is a measure of the __________.
market value of the final goods and services produced within a country in a given time period
The CPI is a _______.
measure of the average of the prices paid by urban consumers for a fixed basket of consumer goods and services
The consumer price index __________.
measures the average of prices paid by urban consumers for a fixed basket of consumer goods and services
When the economy goes into recession, the output gap is _______.
negative
The stated rate of interest on a loan is the __________.
nominal interest rate
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
The labor force is the number of people employed plus the _____.
number unemployed
The chained CPI ______.
overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities
Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products.
overstates
Wealth is the value of all the things that people _____.
own
A stock is a certificate of _____ and claim to the _____ that a firm makes.
ownership; profits
The firm that printed your textbook bought the paper from XYZ Paper Mills. -The value of the paper is counted in GDP as ______.
part of the value of the textbook
According to new growth theory, the growth of real GDP per person _______.
persists indefinitely
Once the preconditions for growth are in place, the influences on the pace of labour productivity growth are _______.
physical capital growth, human capital growth, and technological advances
Aggregate expenditure in the United States is equal to consumption expenditure plus investment ______.
plus government expenditure plus net exports
The output gap is the difference between __________.
potential GDP and actual GDP
Net present value is the _______.
present value of all the future flows of money that arise from a financial decision minus the initial cost of the decision
The sum of _____ is called national saving.
private saving and government saving
Americans work longer hours than those in most other rich nations. Americans also produce more per person during the year, but only part of the U.S. productivity growth can be explained by the longer hours Americans work. Americans also create more wealth per hour of work. U.S. employees worked an average of 1,804 hours in 2006, compared to 1,564.4 for the French, but far less than the 2,200 hours that Asians worked. But the Asian countries the average labor productivity is lower. -Workers in developing Asian economies who work more hours than Americans are not the world's most productive workers because ______.
productivity depends on how much real GDP each hour of labor can produce
When the real interest rate rises, the ______ because the ______ is the opportunity cost of loanable funds.
quantity of loanable funds demanded decreases; real interest rate
The federal government deficit and mounting debt _______.
raise the real interest rate, decrease investment, and slow economic growth
A government budget deficit _______ the real interest rate, increases ______.
raises; private saving, and decreases investment
The output gap is the gap between _______.
real GDP and potential GDP
The GDP per person is computed by dividing a country's:
real GDP by its population
Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of:
real GDP per capita
By measuring ______, we can see that the economy of Singapore has caught up to and surpassed the economy of the United States, but that the economy of Mexico has not.
real GDP per person
Neoclassical growth theory is the proposition that _____ grows because technological change induces saving and investment that make _____ grow.
real GDP per person; capital per hour of labor
Classical growth theory is the view that the growth of _____ is temporary and that when it rises above the subsistence level, a population explosion _____.
real GDP per person; eventually brings it back to the subsistence level
New growth theory holds that _____ grows because of the choices people make in the pursuit of profit and that growth will _____.
real GDP per person; persist indefinitely
The crowding-out effect is the tendency for a government budget deficit to raise the _____ and _____ investment.
real interest rate; decrease
The aggregate production function is a relationship that tells us how _____ changes as the quantity of _____ changes when all other influences on production remain the same.
real GDP; labor
The history of hyperinflations includes __________.
recent events. Hyperinflations have occurred in recent times as well as the pas
The risk that a borrower, also known as a creditor, might not _____ is called credit risk or default risk.
repay a loan
The demand for loanable funds increases and the supply of loanable funds increases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises, falls, or remains the same; increases
The demand for loanable funds increases and the supply of loanable funds decreases. As a result, the equilibrium real interest rate ______ and the equilibrium quantity of loanable funds ______.
rises; increases, decreases, or remains the same
The defining characteristic of long-run economic growth is:
rising productivity
The supply of loanable funds is determined by the _________. The supply of loanable funds changes when _______.
saving decisions of households, which are influenced by the real interest rate, disposable income, expected future income, wealth, and default risk; disposable income, expected future income, wealth, or default risk change
What is the Ricardo-Barro effect and how does it modify the crowding-out effect? -According to the Ricardo-Barro effect, when a government budget deficit occurs today, ______.
saving increases, the supply of loanable funds increases, and the real interest rate does not change
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.
structural unemployment
Real GDP is calculated by _______.
summing together the value of the year's production using the prices of the reference base year
State the financial decision rule: If the net present value is positive _______ and if the net present value is negative _______.
take the action; do not take the action
According to neoclassical growth theory, the growth of real GDP per person stops when _______.
technology stops advancing
If Americans still worked sixty hour weeks, as they did in 1890, __________.
the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher
The factors that might make the natural unemployment rate change include _______.
the age distribution of the population, the scale of structural change, the real wage rate, and unemployment benefits
In the long run, the amount of investment a firm can make is dependent on:
the amount of household savings
The cycle of short-term ups and downs in the economy is called:
the business cycle
Net taxes are taxes paid to the government minus _____.
the cash transfers received from governments
Economic growth is _______.
the expansion of production possibilities
The four main ways in which the CPI is an upward-biased measure of the price level are through _______.
the new goods bias, the quality change bias, the commodity substitution bias, and the outlet substitution bias
The demand for loanable funds is the relationship between _____ demanded and the _____ when all other influences on borrowing plans remain the same.
the quantity of loanable funds; real interest rate
The supply of loanable funds is the relationship between _____ supplied and the _____ when all other influences on lending plans remain the same.
the quantity of loanable funds; real interest rate
The two broad sources of potential GDP growth are growth of ______ and growth of ______.
the supply of labor; labor productivity
The point where economic activity bottoms out in a full business cycle is known as:
the trough
The amount by which _____ is called net investment.
the value of capital increases
Real GDP is __________.
the value of final goods and services produced in a given year when valued at the prices of a reference base year
The unemployment rate is never zero, even at full employment because _______.
there are always new workers entering the labor market to search for work, workers leaving one job to search for another job, and workers who have been laid off and are searching for another job
According to theory regarding labor productivity growth, workers will be more productive if __________.
they have more human capital
Potential GDP is determined by ______.
the full-employment quantity of labor
If the consumer price index was 73 in 1979 and 225 in 2011, then prices in 2011 were on average:
three times as high as 1979
The natural rate of unemployment is the __________.
unemployment rate an economy will experience when real GDP equals potential GDP
The net present value is the _______ flows of money from a financial decision minus _____ .
value today of all future; the initial cost of the decision
According to new growth theory, ______.
growth can persist indefinitely
A firm that pays an efficiency wage is paying a wage that is __________ the current market wage.
higher than
Which of these persons is officially unemployed?
A non-working individual who has looked for a job in the past week
Which of these is not a shortcoming of GDP as a measure of standard of living?
It only counts final goods and services and not intermediate goods.
What is the relationship between investment and real interest rates, all other things being equal?
Lower interest rates stimulate investment.
The Current Population Survey reported the following situations in July 2017: -Sarah works 10 hours a week at McDonald's. She is available to work more hours but hasn't looked for extra work. -Kevin spent the first six months of 2017 actively searching for a job but he didn't get hired. He believes there are no jobs, so he has given up looking. 1) How will the unemployment rate change if Sarah quits and starts to search for a full-time job? 2How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very popular?
1) The unemployment rate will rise if Sarah quits and starts to search for a full-time job. 2) The labor force participation will rise if Kevin starts creating football apps in his garage and they turn out to be very popular.
https://imgur.com/nybLexj 1) Calculate U.S. GDP in 2018. 2) I calculated real GDP by summing the components of aggregate _____, so I used the _____ approach.
1) U.S. GDP in 2018 is $ 20412 billion. 2) expenditure; expenditure
1) The quantity of labor demanded is the number of labor hours _______ during a given period. 2) The quantity of labor supplied is the number of labor hours _______ during a given period.
1) hired by all the firms in the economy 2) that all the households in the economy plan to work
1) The inflation rate is the percentage change in the _____ from one year to the next. 2)Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
1) price level 2) price level; falling; negative
1) The demand for labor is the relationship between the quantity of labor demanded and the ______. 2) The supply of labor is the relationship between the quantity of labor supplied and the ______.
1) real wage rate 2) real wage rate
https://imgur.com/J2lF5rJ The table shows items of income and expenditure in the United States in 2014. 1)Calculate GDP. 2)There is sufficient information given in the table to calculate GDP using the _______ approach. 3) What items would you need in addition to the items given in the table to complete your calculation of GDP using the income approach?
1)GDP in the United States in 2014 equals $17044 billion. 2)There is sufficient information given in the table to calculate GDP using the expenditure approach. 3) indirect taxes less subsidies
If a country's real GDP is growing at a rate of 5 percent per year, how long will it take for the real GDP to double?
14 years
If the cost of a market basket of goods in 1992, the base year, is $200, and the cost of the same market basket is $300 in 2008, what is the CPI in 2008?
150
Hyperinflation is an inflation rate of _____ or higher that grinds the economy to a halt and causes a society to collapse.
50 percent a month
-If the annual interest paid on a $500 loan is $25, the nominal interest rate is _____ percent per year. -If the nominal interest rate is 5 percent per year and the inflation rate is 2 percent a year, the real interest rate is _____ per year.
5; 3
According to the rule of 70, if a nation's per capita real GDP doubled during the past 10 years, then its average annual rate of economic growth over that period was approximately __________.
7 percent
Which of these is a financial institution?
A commercial bank
What is the relationship between real interest rates and investment, other things being equal?
A negative relationship
Which of the following goods and services would be excluded from personal consumption expenditures in the Bureau of Economic Analysis (BEA) statistics?
A new house
Choose the correct equation. A.Net investment - Gross investment = Depreciation B.Net investment + Depreciation equals Gross investment C.Net investment - Depreciation = Gross investment D.Net investment = Gross investment + Depreciation
B.Net investment + Depreciation equals Gross investment
Which of these are financial instruments that represent promises to repay a fixed amount of funds?
Bonds
How does the Bureau of Economic Analysis of the U.S. Department of Commerce measure GDP?
By adding the value in dollar terms of all the final goods and services produced domestically.
The IMF projects that China's real GDP per person will be 57,163 yuan in 2017 and 60,334 yuan in 2018 and that India's real GDP per person will be 98,028 rupees in 2017 and 104,191 rupees in 2018. By maintaining their current growth rates, which country will be first to double its standard of living and when will that happen?
By maintaining their current growth rates, India will be the first to double its standard of living, and that will occur in 11.1 yrs.
Who in the following statements is a discouraged worker A. Ned is available to work and has been sending job applications whenever he sees any suitable opportunity. B. Rachel does not find her current job profile interesting and is looking for alternate opportunities. C. Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer. D. Nick is changing his job because he has had differences with his co-workers in his current company.
C. Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.
Americans work longer hours than those in most other rich nations. Americans also produce more per person during the year, but only part of the U.S. productivity growth can be explained by the longer hours Americans work. Americans also create more wealth per hour of work. U.S. employees worked an average of 1,804 hours in 2006, compared to 1,564.4 for the French, but far less than the 2,200 hours that Asians worked. But the Asian countries the average labor productivity is lower. -Identify and correct a confusion between levels and growth rates of productivity in the news clip.
Changing the number of hours employed changes the level of productivity, but it does not change the growth of productivity.
Which is the largest component of GDP?
Consumption
Which of these statements about interest rates and inflation is true?
If there is zero inflation, the nominal interest rate is equal to the real interest rate.
In 2018 Brazil's real GDP is growing at 1.7 percent a year and its population is growing at 0.7 percent a year. If these growth rates continue, in what year will Brazil's real GDP per person be twice what it is in 2018?
If these growth rates continue, Brazil's real GDP per person will be twice what it is in 2018 in 2088.
Which of these government policies can help economic growth?
Improving the quality of education
Government policies can help to reduce the levels of frictional and structural unemployment, but they can also help to increase them. Which of these policies can cause an increase in the levels of frictional and structural unemployment?
Increasing the minimum wage
Which of the following are not counted as final goods and used in the GDP calculation?
Intermediate goods
Which of these is most likely to increase productivity?
Investments in research and development
https://imgur.com/ZaYHgWO What was the unemployment rate in August 2018?
In, August comma 2018, the unemployment rate in the United States was 3.9 percent.
A share of stock is __________.
a certificate of ownership and claim to the firm's profits
Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.
a discouraged worker
The effect of the United States returning millions of workers to their countries of origin is _____ the U.S. PF and _____ in potential GDP.
a movement down along; a decrease
The effect of the United States returning millions of workers to their home countries is _____ Mexico's production function and _____ in potential GDP.
a movement up along; an increase
According to classical growth theory, the growth of real GDP per person stops when _______.
a population explosion eventually occurs and real GDP per person returns to the subsistence level
An increase in labor productivity results in ______.
an increase in the demand for labor
The growth rate is the _____ of a variable - the change in the level expressed as a percentage of the initial level.
annual percentage change
Labor market equilibrium occurs _______.
at the real wage rate at which the quantity of labor demanded equals the quantity of labor supplied
The price level is the _____.
average level of prices
https://imgur.com/csRllpC According to the graph, which period of time is the economy generally considered to be in an expansion phase of the business cycle?
between points A and C.
The total amount spent _____ is called gross investment.
both buying new capital and replacing depreciated capital
As the value of a country's real GDP increases, the country is likely to:
devote more resources to pollution reduction
In new growth theory ______.
discoveries result from choices
The best measure of the income households actually have available to spend is:
disposable personal income
Real GDP per person is real GDP _____.
divided by the population
The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70 _____ by the annual percentage _____.
divided; growth rate of the variable
Real GDP ______.
does not include a measure of household production or underground economic activity
An increase in labor productivity increases potential GDP because ______.
employment increases and a given amount of employment produces more real GDP
Economic growth is the _____.
expansion of production possibilities
A typical business cycle can be described by the sequence ______.
expansion, peak, recession, trough
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
The loanable funds market is the aggregate of all the individual _____ markets.
financial
A financial institution is a firm that operates on both sides of the markets for _____: It _____ in one market and _____ in another.
financial capital; borrows; lends
GDP equals aggregate income and also equals aggregate expenditure because _______
firms pay out as incomes (aggregate income) everything they receive from the sale of their output (aggregate expenditure)
The consumer price index is an index computed using prices of a __________.
fixed basket of goods and services purchased by the typical consumer
The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.
frictional unemployment
The unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees, is called:
frictional unemployment
The "normal or natural" underlying level of unemployment in the economy is the __________.
full employment rate of unemployment
The financial capital markets exist in order to __________.
funnel household savings to firms
The _______, the greater is the amount that a household decides to save.
greater a household's disposable income and the smaller a household's expected future income
Question Facts -An Apple iPod sells in the United States for $299. -A Japanese firm, Toshiba, makes the hard disk and display screen, which cost $93. -Other components produced in South Korea cost $25. -Other components produced in the United States cost $21. -The iPod is assembled in China at a cost of $5. -The costs and profits of retailers, advertisers, and transportation firms in the United States are $75. Calculate: 1) Profit on iPod 2)US Exports, Imports, and Consumption Expenditure 3)Japan exports 4) SK exports 5) China Imports and Exports 6) iPod's contribution to world GDP
-Apple's profit on an iPod is $80. -These transactions are recorded in the national income and product accounts as follows: -The United States has exports of $21, imports of $144, and consumption expenditure of $299. -Japan has exports of $93. -South Korea has exports of $25. -China has imports of $139 and exports of $144. -An iPod makes a contribution of $299 to world GDP.
On January 1, 2017 Terry's Towing Service owned 8 tow trucks valued at $720,000. During 2017, Terry's bought 10 new trucks for a total of $1,000,000. At the end of 2017, the market value of all the firm's trucks was $1,432,000. -What was Terry's gross investment? -Calculate Terry's depreciation, and net investment.
Terry's gross investment was $1,000,000. Terry's depreciation was $288,000. Terry's net investment was $712,000 dollars.
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
available; willing; not made; four
The Consumer Price Index is a measure of the _____ of the prices paid by _____ consumers for a fixed market basket of consumption goods and services.
average; urban
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
The preconditions for labor productivity growth are ______.
firms, markets, property rights, and money
An increase in labor productivity _______ potential GDP and ______ potential GDP per hour of labor.
increases; increases
The working-age population is the total number of _____ aged _____ years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.
people; 16
The labor force participation rate is the percentage of the _____ who are members of the labor force.
working-age population
