question

If macroeconomic policy has been successful over time, it is likely that the economy has not seen:

answer

any severe recessions.

question

The term human capital describes:

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the improvement in labor created by education and knowledge that is embodied in the workforce.

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Real GDP tends to understate our economic well-being because it:

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excludes the value of leisure.

question

One of the most important types of infrastructure that a government can provide is:

answer

basic health measures such as a clean water supply and disease control.

question

The threat of future inflation:

answer

makes people reluctant to lend money for long periods.

question

If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as the base is:

answer

115.

question

Which of the following is an example of an intermediate good?

answer

tires purchased from Goodyear by General Motors for newly produced electric cars.

question

You read in the newspaper that the CPI in 2011 was 120. You conclude that a typical market basket in 2011 would have cost:

answer

20% more than the same market basket purchased in the base year.

question

What do a rubbernecking traffic jam and the paradox of thrift have in common?

answer

In both cases, individual behavior has large negative consequences for the whole of society.

question

Technological change:

answer

increases total factor productivity.

question

What is long-run economic growth, and why is it so important for a nation's economy?

answer

Long-run economic growth is the sustained rise in the quantity of goods and services the economy produces. When long-run growth per capita is rising, each person's share of the nation's output is rising. This is the key to higher wages and a rising standard of living.

question

Many impoverished nations struggle with diseases like malaria. How would reduction or elimination of malaria contribute to long-run economic growth?

answer

We might consider a healthier population to be an improvement in the nation's infrastructure and in human capital, both of which increase long-term productivity. If the nation's public health system is better equipped to prevent and cure illnesses, its population can be more productive. A working adult who is healthier misses fewer days of work and is thus more productive. A healthier child misses fewer days of school and thus acquires a better education and is a more productive adult.

question

When inflation rises quickly:

answer

lenders will be hurt and borrowers will benefit.

question

Real GDP is the same as:

answer

inflation-adjusted GDP.

question

The modern tools of macroeconomic policy are:

answer

fiscal policy and monetary policy.

question

For each of the following transactions, explain why they would or would not be counted in the GDP of the United States. a. American auto producer Ford builds a factory in Alberta, Canada. b. You buy a blueberry muffin at your local coffee shop. c. A Ford dealership in Ohio has 15 unsold new 2011 model cars at the end of 2011.

answer

a. No. This is investment spending but not in the United States, so it does not count in U.S. GDP. b. Yes. This is consumer spending. c. Yes. These unsold cars would be counted as unsold inventory in investment spending.

question

Economic recessions tend to be ___________, and economic expansions tend to be ___________.

answer

short; long.

question

If output is growing at 5% annually, how many years will it take for output to quadruple?

answer

28 years.

question

The nominal interest rate equals the:

answer

real interest rate plus the rate of inflation.

question

If a country has a trade deficit, does it indicate that the country has a serious problem?

answer

No. Trade deficits occur when a country's investment spending is higher than its level of saving.

question

Structural unemployment consists of people who are unemployed because of:

answer

more people seeking jobs in a labor market than there are jobs available at the current wage rate.

question

Workers today are more productive than workers in the past because:

answer

workers now have more physical capital embodying better technology.

question

Explain the difference between shoe-leather costs of inflation and menu costs of inflation.

answer

Shoe-leather costs are the costs of spending valuable time and resources to search for lower prices or making more trips to and from the bank. A menu cost is the cost of frequently changing and posting new prices of goods and services.

question

Which of the following questions is appropriate to the study of microeconomics? A) How does the aggregate price level affect overall consumer spending? B) How does the level of interest rates affect investment spending? C) How much will Sony charge for the new game system to be introduced later this year? D) How does the GDP affect overall government spending?

answer

How much will Sony charge for the new game system to be introduced later this year?

question

If the actual unemployment rate is 7% and the natural rate of unemployment is 5%, then the cyclical unemployment rate is:

answer

2%.

question

Economists say that long-run economic growth is almost entirely due to:

answer

rising productivity.

question

Consider an economy that produces only two goods: DVDs and DVD players. If 10 DVDs are sold at $20 each and 5 DVD players are sold at $100 each, then nominal GDP is:

answer

$700.

question

If the CPI changes from 120 to 125 between December 2009 and December 2010, the:

answer

inflation rate for 2010 is 4.2%.

question

According to the Rule of 70, if a country's real GDP per capita grows at an annual rate of 2% instead of 3%, it will take _____ for that country to double its level of real GDP per capita.

answer

11.67 additional years.

question

In a typical business cycle, the peak is immediately followed by the:

answer

recession.

question

A person who is not working and is not looking for work is:

answer

not counted in the unemployment statistics.

question

An open economy:

answer

trades goods and services with other countries.

question

The inflation-adjusted measure of aggregate output typically used by economists is called:

answer

real gross domestic product.

question

A jobless recovery is considered:

answer

a period when real GDP is rising but the level of unemployment is not decreasing.

question

The formula for the Rule of 70, where n is number of years and r is growth rate, is expressed as:

answer

n × r = 70.

question

Nation A's real GDP increased from $100 billion to $106 billion from 2010 to 2011. Nation A's population grew from 50 million to 51 million from 2010 to 2011. The annual growth rate in real GDP per capita in nation A was approximately:

answer

4%.

question

In the United States, recessions are typically associated with:

answer

a decrease in the percentage of Americans with health insurance.

question

The reason the dollar value of only final goods and services are counted in GDP is that:

answer

if we counted the value of all goods, we would count inputs, like the value of steel in a new automobile, more than once.

question

Which of the following statements is true? A) Those who are not working but who have looked for work in the past year are unemployed. B) The labor force is the total number of people working plus those who are unemployed. C) The unemployment rate is the number of people unemployed expressed as a percentage of the population. D) The labor force is the same as the population.

answer

The labor force is the total number of people working plus those who are unemployed.

question

Rising high school graduation rates are an example of an increase in:

answer

human capital.

question

Anna recently moved to Boston because her husband, Joe, was to begin a new job as an economics professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is:

answer

frictionally unemployed.

question

When the unemployment rate is very low, most of the unemployment tends to be:

answer

frictional.

question

The official unemployment rate reported by the government may tend to understate the amount of unemployment because it:

answer

excludes discouraged workers, who are not actively seeking employment.

question

Explain what is meant by the paradox of thrift.

answer

During uncertain economic times, nervous consumers spend less and save more. This thriftiness can actually worsen the economy because it stifles consumption and leads to reduced spending overall.

question

Enchanté Inc., a designer clothing company, buys $400 worth of silk from a silk trader and $30 worth of accessories from Accessories R Us to produce each dress. If the value added by Enchanté is equal to $200, then according to the value-added approach, the price of the designer dress should be:

answer

$630.

question

A negative slope of the labor demand curve occurs because:

answer

employers are willing to hire more people at lower wages.

question

Which of the following will not increase the productivity of labor?

answer

an increase in the size of the labor force.

question

If we add up all of the values added at every stage of production for a good, we will get:

answer

the final value of the good.

question

Long-run economic growth is:

answer

higher in countries with a strong rule of law and political stability.

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