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Macroeconomics

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Exam 2 Chapters 8, 9, 10
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Frage 1

Frage
If real GDP in a small country in 2005 is $8 billion and the real GDP in the same country in 2006 is $8.3 billion, the growth rate of real GDP between 2005 and 2006
Antworten
  • is 3.75%
  • is 3.6%
  • is 3.0%
  • cannot be determined from the information given.

Frage 2

Frage
According to the "Rule of 70", how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is 5%?
Antworten
  • less than 1 year
  • 14 years
  • 5 years
  • 35 years

Frage 3

Frage
The quantity of goods and services that can be produced by one worker or by one hour of work is
Antworten
  • labor productivity
  • technology
  • real GDP
  • human capital

Frage 4

Frage
What two factors are the keys to determining labor productivity?
Antworten
  • technology and the quantity of capital per hour worked
  • the growth rate of real GDP and interest rate
  • the average level of education of the workforce and the price level
  • the business cycle and the growth rate of real GDP

Frage 5

Frage
Human capital refers to which of the following?
Antworten
  • manufactured goods that are used to produce other goods and services
  • the accumulated knowledge and skills workers acquire from education and training or from their life experiences
  • the quality of good and services that can be produced by one worker or by one hour of work
  • physical that is made by human laborers, not machines

Frage 6

Frage
On difference between stocks and bonds is that
Antworten
  • stocks represent ownership in companies, while bonds represent ownership in banks.
  • stocks usually issued in electronic form, while bonds are usually issued in paper form.
  • stocks so not involve a promise to repay the purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond.
  • stocks are financial securities, while bonds are labor market securities.

Frage 7

Frage
In addition to matching households that have excess funds with firms that want to borrow funds, what three key services does the financial system provide for savers and borrowers?
Antworten
  • risk-sharing, liquidity, and information
  • information, profit, and interest
  • high risk, high profit, and low savings
  • bonds, stocks, and mutual funds

Frage 8

Frage
In a closed economy, which of the following components of GDP is NOT included?
Antworten
  • consumption
  • government spending
  • net exports
  • investment

Frage 9

Frage
In a closed economy, which of the following equations reflects investment? (Y=GDP, C= Consumption, G=Government purchases, T=Taxes, and TR=Transfers)
Antworten
  • Y - C - G
  • C + G - T
  • Y - T + TR
  • Y - C - T

Frage 10

Frage
Under which of the following circumstances would the government be running a deficit?
Antworten
  • G= $7 trillion T= $10 trillion TR= $3 trillion
  • G= $7 trillion T= $7 trillion TR= $0
  • G= $5 trillion T= $7 trillion TR= $1 trillion
  • G= $5 trillion T= $5 trillion TR= $1 trillion

Frage 11

Frage
Inflation tends to________during the expansion phase of the business cycle and________during a recession phase of the business cycle.
Antworten
  • increase; increase further
  • increase; decrease
  • decrease; decrease further
  • decrease; increase

Frage 12

Frage
Consider the following data for a simple economy: Total Population 20,000 Working-Age Population 15,000 Employment 1,000 Unemployment 100
Antworten
  • (100/1,000) X 100
  • (100/20,000) X 100
  • (100/15,000) X 100
  • (100/1,100) X 100

Frage 13

Frage
Total Population 20,000 Working-Age Population 15,000 Employment 1,000 Unemployment 100 Refer to the table above. The unemployment rate for this simple economy equals
Antworten
  • (1,100/20,000) X 100
  • (1,000/15,000) X 100
  • (1,000/1,100) X 100
  • (1,100/15,000) X 100

Frage 14

Frage
Cyclical employment is the result of
Antworten
  • a slowdown in the economy
  • the ups and downs in inflation
  • the search process of matching workers with jobs
  • frictional unemployment equals zero

Frage 15

Frage
Economist consider full employment to occur when
Antworten
  • everyone who wants a job has a job
  • all existing unemployment is either frictional unemployment or structural unemployment
  • frictional unemployment and structural unemployment equals zero
  • frictional unemployment equals zero

Frage 16

Frage
Which of the following would be the best measure of the cost of living?
Antworten
  • real GDP per person
  • GDP deflator
  • real GDP
  • Consumer Price Index

Frage 17

Frage
The consumer price index is the
Antworten
  • ratio of the dollar amount necessary to buy the market basket of goods in that year divided by the dollar amount necessary to buy of goods in the base year.
  • ratio of the dollar amount necessary to buy a basket of goods typically consumed in the current period divided by the dollar amount necessary to buy the market basket of goods in the base year.
  • cost of a basket of goods typically consumed in the current period.
  • the cost of a basket of goods typically consumed in the base year.

Frage 18

Frage
Consider the following values of the consumer price index for 2002 and 2003. Year CPI 2002 180 2003 184 The inflation rate for 2003 equals
Antworten
  • 184 percent
  • 2.2 percent
  • 4.0 percent
  • 18.4 percent

Frage 19

Frage
The real interest rate equals the nominal interest rate_______the inflation rate.
Antworten
  • times
  • divided by
  • minus
  • plus

Frage 20

Frage
Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate inflation.
Antworten
  • less than 7 percent
  • greater than 7 percent
  • equal to 7 percent
  • equal to 0 percent

Frage 21

Frage
Assume the market basket for the consumer price index has two products--meant and potatoes--with the following values in 2000 and 2006 for price and quality: Base Year Product Quality Price (2000) Product Quality Price (2006) Meat 100 $10 Meat 120 $12 Potatoes 200 $2 Potatoes 180 $3 The Consumer Price Index for 2006 equals
Antworten
  • 125
  • 141
  • 129
  • 135

Frage 22

Frage
Full employment is not considered to be zero unemployment, because
Antworten
  • of cyclical unemployment
  • some people do not want a job
  • even though there are enough jobs, the search process of matching workers with jobs and the mismatch between skills and job requirements prevent individuals from immediately finding jobs.
  • there are not enough jobs for everyone who wants one.

Frage 23

Frage
Gross domestic product in the economy is measured by the
Antworten
  • total number of goods and services produced in the economy
  • total number of services produced in the economy
  • dollar value of all final goods and services produced in the economy
  • total number of goods produced int eh economy

Frage 24

Frage
How are intermediate goods treated in the calculation of GDP?
Antworten
  • Their value is not counted separately, but included as part of the value of the final good for.
  • Their value is counted separately, and their value is also included as part of the value of the final good for which they are an input.
  • They are included only if they are imported.
  • Their value is counted separately, but not included as part of the value of the final good for which they are an input.

Frage 25

Frage
Investment spending includes spending on
Antworten
  • transfer payments
  • food
  • changes in business inventories
  • stocks

Frage 26

Frage
In a small economy, gross investment in 2009 is $1,500, consumption spending is $6,000, net investment is $200, government spending is $1,500, exports are $2,000 and imports are $1,000. What is the GDP for the economy in 2009?
Antworten
  • $10,700
  • $10,300
  • $10,200
  • $10,000

Frage 27

Frage
GDP is not a perfect measure of well-being because
Antworten
  • GDP is not adjusted for pollution.
  • GDP is adjusted for increases in drug addiction .
  • GDP is adjusted for changes in crime rates.
  • the value of leisure is included in GDP.

Frage 28

Frage
The underground economy can be described as
Antworten
  • production of infrastructure that spurs growth in the rest of the economy.
  • production of intermediate goods and services.
  • economic production that includes mining.
  • economic activity that is hidden from the government to avoid taxed or because the activity is illegal.

Frage 29

Frage
The measure of production that values production using current prices is called
Antworten
  • underground GDP
  • real GDP
  • nominal GDP
  • value-added GDP

Frage 30

Frage
Given the information, what can we say has happened in the economy from 2008 and 2009? 2008 2009 Nominal GDP $10,000 $12,000 Real GDP $9,500 $10,500
Antworten
  • The price level has risen.
  • The price level has remained constant.
  • The price level has fallen.
  • Not enough information is available to determine what has happened to prices.

Frage 31

Frage
If real GDP increases we know for sure that
Antworten
  • prices have risen
  • output has risen
  • prices have remained constant
  • prices have risen but output has remained constant

Frage 32

Frage
If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years.
Antworten
  • 270%
  • 50%
  • 5%
  • 2.7%

Frage 33

Frage
Gross national product is defined as
Antworten
  • the value of final goods and services produced within the United States, by United States residents.
  • the value of final goods and services produced outside of the United States.
  • the value of final goods and services produced by residents of the United States even if the production takes place outside of the United States.
  • the value of final goods and services produced within the United States.

Frage 34

Frage
Disposable personal income is
Antworten
  • national income minus depreciation.
  • personal income minus indirect business taxes.
  • national income minus personal taxes.
  • personal income minus personal taxes.

Frage 35

Frage
National income is
Antworten
  • NNP minus income taxes.
  • GDP minus depreciation.
  • GNP plus depreciation.
  • GDP minus sales taxes.

Frage 36

Frage
What are the four major categories of expenditure?
Antworten
  • Labor, capital, natural resources, and entrepreneurship.
  • Final goods, intermediate goods, production, and income.
  • Wages, interest, rent, and profit.
  • Consumption, investment, government purchases, and net exports.

Frage 37

Frage
What is GDP an imperfect measurement of total production in the economy?
Antworten
  • GDP does not include household production or production form the underground economy.
  • The official measure of GDP does not include intermediate goods and services.
  • GDP measures total income paid to the factors of production, not production
  • The BEA does not include the value of new houses in GDP

Frage 38

Frage
What are the four categories of income?
Antworten
  • wages, salaries, interest, and dividends
  • consumption, investment, government purchases, and net exports
  • wages, interest, rent, and profit
  • labor , capital, natural resources, and entrepreneurship

Frage 39

Frage
Suppose the base year is 2001. Looking at GDP data from the United States from 2001 to the present, what would be true of the relationship between nominal GDP and real GDP?
Antworten
  • RGDP = NGDP because prices are stable.
  • RGDP < NGDP because prices are rising.
  • RGDP > NGDP because prices are falling.
  • The relationship is uncertain without more information on prices.

Frage 40

Frage
Real GDP per capita is often used as a measure of general well-being. While increases in real GDP often do lead to increases in the well-being of the population, why is real GDP not a perfect measure of well-being?
Antworten
  • The costs of pollution are not included.
  • The value of leisure is not included
  • GDP does not include crime rates or income distribution
  • All of the above

Frage 41

Frage
Personal income is
Antworten
  • national income minus retained corporate earnings plus government transfer payments and interest on government bonds.
  • national income minus income taxes.
  • equal to the value of all final goods and services produced within a country's borders during one year.
  • national income plus government transfer payments.

Frage 42

Frage
The largest component of gross domestic income is
Antworten
  • rent.
  • profits.
  • wages.
  • interests.

Frage 43

Frage
Coffee beans purchased by a coffee shop are a
Antworten
  • intermediate good.
  • neither.
  • final good.

Frage 44

Frage
Johnny is currently "in-between" jobs. What type of unemployment fits Johnny's status?
Antworten
  • Structurally unemployed
  • Seasonally unemployed
  • Cyclically unemployed
  • Fictionally unemployed

Frage 45

Frage
Which of the following makes changes in the CPI overstate the true inflation rate?
Antworten
  • Increase in quality bias
  • New product bias
  • Substitution bias
  • All of the above

Frage 46

Frage
Which of the following best describes a current trend in the labor force participation rate?
Antworten
  • It is increasing for men and decreasing for women.
  • It is decreasing for both men and women.
  • It is increasing for both men and women.
  • It is decreasing for men and increasing for women.

Frage 47

Frage
How does the U.S. economy create and destroy millions of jobs each year? (Mark all that apply.)
Antworten
  • Some businesses are expanding, while others are contracting
  • In the market system, new firms are constantly entering and exiting various industries.
  • The federal government determines that certain industries are obsolete and closes firms.
  • When unemployment is high, the federal government hires more workers to offset the effects of unemployment.

Frage 48

Frage
IF a 3-month Treasury bill pays 5.5% and the change in the consumer price index (CPI) is 4.7%, what is the real interest rate (the true return to lending)?
Antworten
  • 4.7%
  • 10.2%
  • 5.5%
  • 0.8%

Frage 49

Frage
Your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2008 if the CPI in 2008 is 215 and the CPI in 1984 is 104?
Antworten
  • $34,000
  • $70,288
  • $16,447
  • $73,100

Frage 50

Frage
Having happy workers increases business. This is an example of
Antworten
  • Structural unemployment
  • Union contracts
  • Market strategies
  • Efficiency wages

Frage 51

Frage
Even perfectly anticipated inflation imposes costs. Why?
Antworten
  • A)Some wages will fail to keep up with the anticipated inflation.
  • B)Menu costs
  • C)Paper money loses it purchasing power by the rate of inflation.
  • A and C only.
  • All of the above

Frage 52

Frage
Consider the following table: Nominal Average Year Hourly Earnings CPI 2008 $16 202 2009 $17 207 2010 $18 209 What is the real average hourly wage in 2009?
Antworten
  • $8.61
  • $7.92
  • $8.21
  • $17.42

Frage 53

Frage
Consider the following table: Nominal Average Year Hourly Earnings CPI 2008 $16 202 2009 $17 207 2010 $18 209 What can be said about real average hourly earnings and nominal average hourly earnings between 2008 and 2010?
Antworten
  • Real average hourly earnings decreased and nominal average hourly earnings increased.
  • Both real and nominal average hourly earnings decreased.
  • Real average hourly earnings increased and nominal average hourly earnings decreased.
  • Both real and nominal average hourly earnings increased.

Frage 54

Frage
Indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling."
Antworten
  • True. If wages are increasing slower that the average price of goods and services, purchasing power increases.
  • True. If wages are increasing slower that the average price of goods and services, purchasing power falls.
  • False. A higher wage decreases purchasing power regardless of inflation.
  • False. A higher wage increases purchasing power regardless of inflation.

Frage 55

Frage
Indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling."
Antworten
  • True. If wages are increasing slower that the average price of goods and services, purchasing power increases.
  • True. If wages are increasing slower that the average price of goods and services, purchasing power falls.
  • False. A higher wage decreases purchasing power regardless of inflation.
  • False. A higher wage increases purchasing power regardless of inflation.

Frage 56

Frage
Indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling."
Antworten
  • True. If wages are increasing slower that the average price of goods and services, purchasing power increases.
  • True. If wages are increasing slower that the average price of goods and services, purchasing power falls.
  • False. A higher wage decreases purchasing power regardless of inflation.
  • False. A higher wage increases purchasing power regardless of inflation.

Frage 57

Frage
When the economy is at full employment,
Antworten
  • all remaining unemployment is either frictional or structural.
  • the nature rate of unemployment prevails.
  • the unemployment rate is greater than zero.
  • All of the above.

Frage 58

Frage
Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment rate?
Antworten
  • Number of unemployed ________________________ x 100 Working-age population
  • Number of unemployed ________________________ x 100 Number of employed
  • Number in labor force ________________________ x 100 Number of unemployed
  • Number of unemployed ________________________ x 100 Number in labor force

Frage 59

Frage
The true cost of borrowing and lending is best measured by
Antworten
  • the inflation rate.
  • the three-month U.S. Treasury bill rate.
  • the nominal interest rate.
  • the real interest rate.

Frage 60

Frage
Which of the following can give an early warning of future increases in the price level?
Antworten
  • Consumer price index
  • Producer price index
  • GDP deflator
  • All of the above

Frage 61

Frage
Which of the following can give an early warning of future increases in the price level
Antworten
  • Consumer price index
  • Producer price index
  • GDP deflator
  • All of the above

Frage 62

Frage
As of September 2011, which of the following demographics groups has the highest unemployment rate?
Antworten
  • Asians
  • African Americans
  • Hispanics
  • Whites

Frage 63

Frage
What effect do labor unions have on the unemployment rate?
Antworten
  • By increasing the wage above market equilibrium, labor unions considerably increase the unemployment rate.
  • By increasing the wage above market equilibrium, labor unions considerably decrease the unemployment rate.
  • Labor unions can significantly increase the unemployment rate when members go on strike.
  • Since few non-government workers are unionized, there is no significant effect on the unemployment rate.

Frage 64

Frage
What factors would cause the U.S. labor productivity to be nearly six times higher than Russian labor productivity?
Antworten
  • The size of the civilian labor force in larger in Russia, causing diminishing returns to set in.
  • The size of the civilian labor force is larger in the U.S.
  • The U.S. has more capital available per worker and higher levels of technology.
  • Russia overall has a smaller capital stock

Frage 65

Frage
During a recession, unemployment would be expected to
Antworten
  • increase
  • decrease
  • stay the same

Frage 66

Frage
during a recession, durable goods production, such as automobiles, would be expected to
Antworten
  • increase
  • decrease
  • stay the same

Frage 67

Frage
During a recession, the inflation rate would be expected to
Antworten
  • stay the same
  • decrease
  • increase

Frage 68

Frage
The most important factor in explaining increases in real GDP per capita in the long run is increase in productivity.
Antworten
  • True
  • False

Frage 69

Frage
When tax revenue exceeds government spending (government purchases and transfer payment) there is a
Antworten
  • budget surplus
  • balanced budget
  • budget deficit

Frage 70

Frage
When tax revenue equals government spending there is a
Antworten
  • balanced budget
  • budget surplus
  • budget deficit

Frage 71

Frage
When tax revenue is less than government spending there is a
Antworten
  • budget deficit
  • a balanced budget
  • budget surplus

Frage 72

Frage
Which of the following expressions shows the investment-saving equality?
Antworten
  • S=Y+T-TR-G
  • S=Y+T-C-G
  • S=Y-C-G
  • S=Y+TR-C-T

Frage 73

Frage
Which of the following is not a loanable fund?
Antworten
  • Real estate
  • Bank certificates of deposit
  • Bonds
  • Mutual fund shares

Frage 74

Frage
Households supply loanable funds because of the
Antworten
  • wage income earned from working in the financial markets.
  • rent income they receive as resource owner.
  • interest income received from the borrowers
  • profit income earned from running a money-lending business

Frage 75

Frage
Businesses demand loanable funds because
Antworten
  • firms need to borrow funds for new projects, such as building new factories or carrying out new projects
  • households charge a much higher rate of interest than the going rate of interest in the loanable funds market.

Frage 76

Frage
What is the general relationship between the business cycle and unemployment and inflation?
Antworten
  • During an expansion, unemployment and inflation increase.
  • During an expansion, unemployment falls and inflation increase.
  • During an recession, unemployment and inflation increase.
  • During an recession, unemployment and inflation decrease.

Frage 77

Frage
The rule of 70 is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double.
Antworten
  • True
  • False

Frage 78

Frage
Crowding out occurs when governments must borrow funds which cause interest rates to rise and thus private investment is reduced.
Antworten
  • True
  • False

Frage 79

Frage
Two key factors that cause labor productivity to increase over time are
Antworten
  • quantity of capital per hour worked
  • level of technology
  • quantity of labor per hour worked
  • decline in unionization
  • slacking of labor laws

Frage 80

Frage
Which of the following will NOT lead to economic growth?
Antworten
  • Technological change
  • Increase in the capital stock
  • Increase in average wages
  • Improved labor productivity

Frage 81

Frage
Which of the following is most likely to lead to sustained long-run growth?
Antworten
  • increases in labor productivity
  • increases in the labor participation rate
  • exploitation of natural resources
  • transfer of workers from agricultural to industrial sectors

Frage 82

Frage
During the expansion phase of the business cycle, production, employment, and income
Antworten
  • increase
  • decrease

Frage 83

Frage
During the recession phase of the business cycle, production, employment, and income
Antworten
  • increase
  • decrease

Frage 84

Frage
Firms that act as financial intermediaries match households that have excess funds with firms that want to borrow funds. What other key services does the financial system provide to savers and lenders?
Antworten
  • allows savers to spread their money among many financial investments.
  • provides an easy method of exchanging a financial security for money.
  • collects and communicates information about borrowers to savers.
  • insures investments against decreasing in value.

Frage 85

Frage
Long-run growth in GDP is determined by
Antworten
  • capital, labor productivity, and technology
  • capital, labor productivity, and government expenditures
  • consumption, investment, and government expenditures
  • consumption, investment, and technology

Frage 86

Frage
Technological progress is affected by
Antworten
  • private property rights
  • new software developments
  • population growth
  • investment in capital
  • entrepreneurship

Frage 87

Frage
Potential GDP
Antworten
  • measures the maximum that a firm is capable of producing
  • increases over time as the labor force grows.
  • increases over time as technological change occurs

Frage 88

Frage
Which of the following contribute(s) to shorter recessions,longer expansions, and less severe fluctuations in real GDP?
Antworten
  • monetary policy
  • unemployment insurance
  • a service-based economy

Frage 89

Frage
Business cycle: alternating periods of economics expansion and economic recession.
Antworten
  • True
  • False

Frage 90

Frage
Long-run economic growth: the process by which rising productivity increases the average standard of living.
Antworten
  • True
  • False

Frage 91

Frage
The best measurement for the standard of living is
Antworten
  • GDP per person
  • real GDP per capita

Frage 92

Frage
This is the equation of growth of real GDP: Real GDP 2012 - Real GDP 2011 --------------------------------------------- x 100 Real GDP 2011
Antworten
  • True
  • False

Frage 93

Frage
Rule of 70= the number of years to double. 70 ---------------- Growth rate
Antworten
  • True
  • False

Frage 94

Frage
The quantity of goods and services that can be produced in one hour of work or by one worker
Antworten
  • labor productivity
  • capital
  • potential GDP

Frage 95

Frage
The quantity of goods and services that can be produced in one hour of work or by one worker
Antworten
  • labor productivity
  • capital
  • potential GDP

Frage 96

Frage
Manufactured goods that are used to produce goods and services.
Antworten
  • capital
  • Financial markets

Frage 97

Frage
The level of real GDP attained when all firms are producing at capacity.
Antworten
  • Potential GDP
  • Labor productivity

Frage 98

Frage
Markets where financial securities such as stocks and bonds are bought and sold.
Antworten
  • financial markets
  • financial intermediaries

Frage 99

Frage
The system of financial markets and financial intermediaries through which firms gain funds from households.
Antworten
  • Financial system
  • Financial market

Frage 100

Frage
Firms such as banks, mutual funds, pension funds, and insurance companies, that barrow funds from savers and lend then to borrowers.
Antworten
  • Financial intermediaries
  • Financial advisors

Frage 101

Frage
The interaction of borrowers and lenders that determines the market interest rate and quantity of loanable funds exchanged.
Antworten
  • Market for loanable funds
  • Crowding out

Frage 102

Frage
A decline in private expenditures as a result of an increase in Government purchases.
Antworten
  • Crowding out
  • Crowding in

Frage 103

Frage
During a recession, durable goods decrease and undurable goods don't change because they are essential.
Antworten
  • True
  • False
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