question

macroeconomics is mostly focused on:

answer

the economy as a whole

question

the business cycle depicts:

answer

short-run fluctuations in output and employment

question

The term "recession" describes a situation where:

answer

output and living standards decline

question

What is most closely related to recessions?

answer

negative real growth in output

question

Economies experience a positive growth trend over the long run but experience significant variability in the short run. This is an ________.

answer

advanced economy

question

Real GDP measures the:

answer

value of final goods and services produced within the borders of a country, corrected for price changes

question

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

answer

Nominal GDP would rise, but real GDP would be unchanged

question

Real GDP is preferred to nominal GDP as a measure of economic performance because:

answer

nominal GDP uses current prices and thus may over- or understate true changes in output

question

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas this year:

answer

increased nominal GDP by $20,000 but left real GDP unchanged

question

Why are high rates of unemployment of concern to economists?

answer

There is lost output that could have been produced if the unemployed had been working

question

Unemployment describes the condition where:

answer

a person cannot get a job but is willing to work and is actively seeking work

question

Higher rates of unemployment are linked with:

answer

higher crime rates as the unemployed seek to replace lost income

question

Inflation is defined as:

answer

an increase in the overall level of prices

question

Why are economists concerned about inflation?

answer

Inflation lowers the standard of living for people whose income does not increase as fast as the price level

question

The three statistics that are the main focus for those measuring macroeconomic health are:

answer

real GDP, inflation, and unemployment

question

Modern economic growth refers to countries that have experienced an increase in:

answer

real output per person

question

Before the period of modern economic growth:

answer

rates of population growth virtually matched rates of output growth

question

Which of the following countries would economists say definitively is achieving modern economic growth?

answer

Nigeria experiences a 2.7 percent increase in real GDP per person

question

Which of the following is used to measure directly the average standard of living across countries?

answer

GDP per person

question

Savings are generated when:

answer

current income exceeds current spending

question

When economists refer to "investment," they are describing a situation where:

answer

resources are devoted to increasing future output

question

Which of the following would an economist consider to be investment?

answer

Boeing building a new factory

question

If an economy wants to increase its current level of investment, it must:

answer

sacrifice current consumption

question

Increased present saving:

answer

comes at the expense of reduced current consumption

question

Banks and other financial institutions:

answer

promote economic growth by helping to direct household saving to businesses that want to invest

question

Shocks to the economy occur:

answer

when expectations are unmet

question

Demand shocks:

answer

refer to unexpected changes in the desires of households and businesses to buy goods and services

question

Which of the following is an example of a demand shock?

answer

Consumers become worried about job loss and buy fewer goods and services than expected

question

Supply shocks:

answer

occur when sellers face unexpected changes in the availability and/or prices of key inputs

question

Which of the following is an example of a supply shock?

answer

A dramatic increase in energy prices increases production costs for firms in the economy

question

Which of the following best explains why prices tend to be inflexible even when demand changes?

answer

Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals

question

Which of the following statements best describes price flexibility in the economy?

answer

Prices tend to be sticky in the short run but become more flexible over time

question

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

answer

Bureau of Economic Analysis (BEA)

question

The system that measures the economy's overall performance is formally known as:

answer

national income accounting

question

A nation's gross domestic product (GDP):

answer

is the dollar value of all final output produced within the borders of the nation during a specific period of time

question

A nation's gross domestic product (GDP) can be found by:

answer

summing C + Ig + G + Xn

question

Suppose Smith pays $100 to Jones.

answer

We need more information to determine whether GDP has changed.

question

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:

answer

GDP in 2010 is $500 billion

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 and percentage growth

question

final goods and services refer to

answer

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

question

If intermediate goods and services were included in GDP:

answer

the GDP would be overstated

question

which of the following is a final good or service?

answer

A haircut purchased by a father for his 12 year-old son.

question

Tom Atoe grows fruits and vegetables for home consumption. This activity is:

answer

productive but is excluded from GDP because no market transaction occurs.

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

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is:

answer

$1,200

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

Assume that a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is:

answer

$30

question

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:

answer

$200,000

question

Value added can be determined by

answer

subtracting the purchase of intermediate products from the value of the sales of final products.

question

If depreciation exceeds gross investment:

answer

the economy's stock of capital is shrinking.

question

The concept of net domestic investment refers to:

answer

total investment less the amount of investment goods used up in producing the year's output.

question

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:

answer

net investment is negative

question

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Refer to the information. Positive net investment is occurring in:

answer

economy C only

question

GDP can be calculated by summing:

answer

consumption, investment, government purchases, and net exports.

question

In national income accounting, the consumption category of expenditures includes purchases of:

answer

automobiles for personal use but not houses.

question

Net exports are:

answer

Exports less imports

question

Net exports are negative when:

answer

a nation's imports exceed its exports.

question

Which of the following do national income accountants consider to be investment?

answer

the purchase of a new house

question

National income accountants define investment to include:

answer

any increase in business inventories.

question

Suppose that inventories were $80 billion in 2012 and $70 billion in 2013. In 2013, national income accountants would:

answer

subtract $10 billion from other elements of investment in calculating total investment.

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

If the economy adds to its inventory of goods during some year:

answer

this amount should be included in calculating that year's GDP.

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

In national income accounting, government purchases include:

answer

purchases by federal, state, and local governments.

question

Transfer payments are:

answer

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

question

The value of U.S. imports is:

answer

subtracted from exports when calculating GDP because imports do not constitute production in the United States.

question

In the treatment of U.S. exports and imports, national income accountants:

answer

add exports, but subtract imports, in calculating GDP.

question

government purchases- $15 consumption- $90 gross investment- $20 consumption of fixed capital- $5 exports- $8 imports- $12 using the data, the GDP is:

answer

$121

question

Corporate profits are found by:

answer

summing corporate income taxes, dividends, and undistributed corporate profits.

question

transfer payments are included in

answer

PI (personal investments?)

question

The amount of after-tax income received by households is measured by:

answer

disposable income

question

Nomial GDP is

answer

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

question

Nominal GDP is adjusted for price changes through the use of:

answer

the GDP price index

question

a price index is:

answer

a comparison of the current price of a market basket to a fixed point of reference.

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

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:

answer

inflated to $1,080 billion.

question

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately:

answer

44 percent

question

if nominal GDP rises

answer

real GDP may either rise or fall

question

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. year: units of output: price per unit: 1 20 $4 2 25 $4 3 30 $6 if year 2 is chosen as the base year, the price index for year 1 is:

answer

100

question

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information, we:

answer

cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.

question

In an economy experiencing a persistently falling price level:

answer

changes in nominal GDP understate changes in real GDP.

question

Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?

answer

Goods and services produced in the underground economy.

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

Which of the following best measures improvements in the standard of living of a nation?

answer

growth of real GDP per capita

question

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

year 1: real GDP=$2,000 and population=200 year2: real GDP=$2,100 and population=202 what percentage did real GDP grow by between years 1 and 2?

answer

5%

question

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

answer

14 years

question

Under what circumstances do rates of economic growth understate the growth of economic well-being?

answer

product quality has improved

question

Which of the following statements is most accurate about modern economic growth?

answer

Modern economic growth is characterized by sustained and ongoing increases in living standards.

question

Countries that have experienced modern economic growth have also tended to:

answer

move toward more democratic forms of government.

question

The Industrial Revolution and modern economic growth resulted in:

answer

the average human lifespan more than doubling

question

Economic historians date the start of the Industrial Revolution around the year 1776, when James Watt:

answer

invented and built a more powerful and efficient steam engine.

question

Which of the following economic regions has experienced the least growth in real GDP per capita since 1820?

answer

africa

question

Which of the following economic regions has experienced the most growth in real GDP per capita since 1820?

answer

united states

question

Which of the following statements is most accurate about the prospects for poorer ("follower") countries catching up with richer ("leader") countries?

answer

Catching up is possible as "follower countries" tend to grow faster than "leader countries."

question

Economic growth rates in follower countries:

answer

tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs

question

Strong property rights are important for modern economic growth because:

answer

people are more likely to invest if they don't fear that others can take their returns on investment without compensation.

question

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

answer

Unrestricted trade between nations.

question

Economic growth can be portrayed as:

answer

an outward shift of the production possibilities curve.

question

Suppose that an economy's labor productivity fell by 3 percent and its total worker-hours remained constant between year 1 and year 2. We could conclude that this economy's:

answer

real GDP declined

question

labor productivity is defined as:

answer

total output/worker-hours

question

what is the formula for total output

answer

Total output = worker-hours × labor productivity.

question

If the number of worker-hours in an economy is 100 and its labor productivity is $5 of output per worker-hour, the economy's real GDP:

answer

is $500

question

Suppose total output (real GDP) is $4,000 and labor productivity is $8. We can conclude that:

answer

the number of worker-hours must be 500.

question

The percentage of the working-age population in the labor force (= employed + officially unemployed) is called the:

answer

labor force participation rate.

question

The largest contributor to increases in the productivity of American labor is:

answer

technological advance

question

More than half the growth of real GDP in the United States is caused by:

answer

increases in the productivity of labor.

question

A nation's infrastructure refers to:

answer

public capital goods such as highways and sanitation systems.

question

Economies of scale refer to:

answer

the fact that large producers may be able to use more efficient technologies than smaller producers.

question

human capital refers to:

answer

the skills and knowledge that enable a worker to be productive.

question

What percentage of the U.S. adult population has at least a high school education (as of 2012)?

answer

88%

question

What percentage of the U.S. adult population has a college or post-college education (as of 2012)?

answer

31%

question

network effects are:

answer

increases in the value of a product to each user, including existing users, as the total number of users rises.

question

The fundamental invention underpinning the 1995-2012 rise in the average rate of productivity growth is the:

answer

microchip

question

(Consider This) Over the past several decades, the percentage of women in the paid U.S. workforce has:

answer

increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.

question

Recurring upswings and downswings in an economy's real GDP over time are called:

answer

business cycles

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

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

answer

capital goods

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

A recession is defined as a period in which:

answer

real domestic output falls.

question

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

answer

expansion

question

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

answer

prices are sticky in the short-run

question

unemployed= 7 million total population= 145 million employed= 95 million discouraged workers= 3 million what is the unemployment rate?

answer

6.9%

question

The United States' economy is considered to be at full employment when

answer

about 4-5 percent of the labor force is unemployed.

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

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

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

Part-time workers who want full-time work are counted as:

answer

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

question

Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is:

answer

6%

question

the unemployment rate is the

answer

percentage of the labor force that is unemployed.

question

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would:

answer

decline

question

Susie has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipates that a new job will be available. We can say that Susie is faced with:

answer

structural unemployment

question

A college graduate using the summer following graduation to search for a job would best be classified as:

answer

a part of frictional unemployment.

question

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called:

answer

structural unemployment

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

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result:

answer

the official unemployment rate will remain unchanged.

question

The government agency responsible for collecting and reporting unemployment data is the:

answer

Bureau of Labor Statistics.

question

At the economy's natural rate of unemployment:

answer

the economy achieves its potential output.

question

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

answer

25%

question

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

answer

Cyclical unemployment.

question

The GDP gap measures the difference between:

answer

actual GDP and potential GDP

question

A large negative GDP gap implies:

answer

a high rate of unemployment

question

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is:

answer

$510 billion

question

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, real GDP is:

answer

$360 billion

question

Assume the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is:

answer

8%

question

Full-employment output is also called:

answer

potential output

question

For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of:

answer

Okun's law

question

Inflation means that:

answer

prices on average are rising, although some particular prices may be falling.

question

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

answer

deflation of 3.33%

question

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:

answer

11%

question

demand-pull inflation

answer

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

question

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

answer

demand-pull inflation

question

Inflation initiated by increases in wages or other resource prices is labeled:

answer

cost-push inflation

question

Cost-push inflation may be caused by:

answer

a negative supply shock

question

real income is found by:

answer

dividing nominal income by the price index (in hundredths).

question

Real income can be determined by:

answer

deflating nominal income for inflation.

question

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

answer

rise by about 15%

question

Cost-push inflation:

answer

reduces real output

question

Cost-of-living adjustment clauses (COLAs):

answer

tie wage increases to changes in the price level.

question

During a period of hyperinflation:

answer

people tend to hold goods rather than money.

question

Inflation is undesirable because it:

answer

arbitrarily redistributes real income and wealth.

question

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is:

answer

3%

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