question

Economic growth is best defined as an increase in:

answer

either real GDP or real GDP per capita.

question

Real GDP per capita is found by

answer

dividing real GDP by population.

question

Real GDP per capita

answer

can grow either more slowly or more rapidly than real GDP

question

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will:

answer

remain constant.

question

For a nation's real GDP per capita to rise during a year:

answer

real GDP must increase more rapidly than population.

question

Growth is advantageous to a nation because it:

answer

lessens the burden of scarcity.

question

The number of years required for real GDP to double can be found by

answer

dividing 70 by the annual growth rate

question

At an annual growth rate of 7 percent, real GDP will double in about:

answer

10 years.

question

The Industrial Revolution and modern economic growth resulted in

answer

the average human lifespan more than doubling.

question

Which of the following institutional structures is most likely to promote growth?

answer

A well-enforced system of patents and copyrights

question

Which of the following institutional arrangements is most likely to promote growth?

answer

Unrestricted trade between nations.

question

Free trade:

answer

encourages growth by promoting the rapid spread of new inventions and innovations

question

An outward shift of a nation's production possibilities curve

answer

neither ensures a nation of an increase in real GDP nor of an increase in real GDP per capita.

question

Labor productivity is measured by

answer

real output per worker hour.

question

Which of the following is the largest contributor to the growth of labor productivity in the United States?

answer

technological advance

question

Between 1995 and 2009, the U.S. productivity rate:

answer

grew substantially compared to prior years, leading some economists to predict a long-lasting resurgence of productivity growth.

question

Which of the following is a true statement?

answer

Economists who support economic growth say that it is the most practical route to the higher standards of living that the vast majority of people desire.

question

Proponents of economic growth claim that rising living standards can lead to environmental improvements as people can afford to care more about the environment.

answer

True

question

In the United States, business cycles have occurred against a backdrop of a long-run trend of:

answer

rising real GDP.

question

As it relates to economic growth, the term long-run trend refers to

answer

the long-term expansion or contraction of business activity that occurs over 50 or 100 years.

question

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are:

answer

capital goods and durable consumer goods.

question

The phase of the business cycle in which real GDP declines is called:

answer

a recession.

question

The phase of the business cycle in which real GDP is at a minimum is called:

answer

the trough.

question

The production of durable goods varies more than the production of nondurable goods because

answer

durables purchases are postponable.

question

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

answer

expansion

question

Which of the following is not seen by economists as an underlying cause of business cycle fluctuations?

answer

All of these are identified as causes of business cycle changes

question

Most economists agree that the immediate cause of most business cycle variation is:

answer

an unexpected change in the level of total spending

question

Innovations such as the microchip and the Internet lead to business cycle variations because

answer

significant innovations occur irregularly and unexpectedly.

question

Kara voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kara presently is

answer

frictionally unemployed.

question

According to the Bureau of Labor Statistics, to be officially unemployed a person must

answer

be in the labor force

question

The natural rate of unemployment is:

answer

that rate of unemployment occurring when the economy is at its potential output

question

The labor force includes

answer

employed workers and persons who are officially unemployed

question

The unemployment rate of

answer

teenagers is much higher than that of adults

question

Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is

answer

not in the labor force

question

Official unemployment statistics

answer

understate unemployment because discouraged workers are not counted as unemployed

question

The presence of discouraged workers

answer

may cause the official unemployment rate to understate the true amount of unemployment.

question

Part-time workers are counted as

answer

fully employed and therefore the official unemployment rate may understate the level of unemployment.

question

The natural rate of unemployment is the

answer

full-employment unemployment rate.

question

The unemployment rate is the

answer

percentage of the labor force that is unemployed

question

Cyclical unemployment results from

answer

a deficiency of spending on goods and services

question

Structural unemployment

answer

may involve a locational mismatch between unemployed workers and job openings

question

Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

answer

Structural and frictional unemployment.

question

The type of unemployment associated with recessions is called:

answer

cyclical unemployment

question

In the depth of the Great Depression, the unemployment rate in the United States was about

answer

25 percent

question

Unanticipated inflation benefits debtors at the expense of creditors

answer

True

question

If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent

answer

False

question

Full-employment output is also called:

answer

potential output

question

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

answer

deflation of 3.33 percent.

question

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about:

answer

1.6 percent.

question

The annual rate of inflation can be found by subtracting

answer

last year's price index from this year's price index and dividing the difference by last year's price index

question

Demand-pull inflation:

answer

occurs when total spending in the economy is excessive

question

The phrase "too much money chasing too few goods" best describes

answer

demand-pull inflation

question

Cost-push inflation

answer

moves the economy inward from its production possibilities curve

question

Cost-push inflation may be caused by

answer

a negative supply shock

question

The National Income and Product Accounts (NIPA) help economists and policymakers to

answer

follow the long-run course of the economy to determine whether it has grown or stagnated

question

The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the

answer

Bureau of Economic Analysis

question

A nation's gross domestic product (GDP)

answer

is the dollar value of all final output produced within the borders of the nation.

question

A nation's gross domestic product (GDP):

answer

can be found by summing C + Ig + G + Xn.

question

National income accountants can avoid multiple counting by

answer

only counting final goods.

question

Gross domestic product (GDP) measures and reports output

answer

in dollar amounts

question

Final goods and services refer to

answer

goods and services purchased by ultimate users, rather than for resale or further processing

question

The value added of a firm is the market value of

answer

a firm's output less the value of the inputs bought from others.

question

Value added refers to

answer

the difference between the value of a firm's output and the value of the inputs it has purchased from others

question

GDP can be calculated by summing

answer

consumption, investment, government purchases, and net exports

question

In national income accounting, consumption expenditures include purchases of:

answer

automobiles for personal use, but not houses

question

In national income accounting, consumption expenditures include

answer

consumer durable goods, consumer nondurable goods, and services

question

Net exports are

answer

exports less imports

question

Net exports are negative when

answer

a nation's imports exceed its exports

question

National income accountants define investment to include

answer

any increase in business inventories.

question

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is:

answer

$210 billion

question

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion. GDP in year 2 is:

answer

$190 billion.

question

The smallest component of aggregate spending in the United States is:

answer

net exports

question

In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:

answer

not counted

question

The largest component of total expenditures in the United States is:

answer

consumption

question

Government purchases include government spending on

answer

government consumption goods and public capital goods

question

Transfer payments are

answer

excluded when calculating GDP because they do not reflect current production.

question

The largest component of national income is

answer

compensation of employees

question

National income measures:

answer

the total of all sources of private income plus government revenue from taxes on production and imports

question

Which of the following best defines disposable income?

answer

income received by households less personal taxes

question

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is

answer

300

question

GDP excludes

answer

the market value of unpaid work in the home.

question

The growth of GDP may understate changes in the economy's economic well-being over time if the

answer

quality of products and services improves

question

Environmental pollution is accounted for in:

answer

none of these

question

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result:

answer

GDP will tend to increasingly understate the level of output through time

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