question

People over age 16 in an economy willing and able to work, is known as the?

answer

Labor Force

question

True/False, Explain. The unemployment rate is calculated by dividing the number of unemployed people by the labor force.

answer

True except you need to multiply by 100 to make it a rate

question

The unemployment rate is the number of people:

answer

looking for a job divided by the labor force.

question

Underemployment includes:

answer

people who are working part time, or not using all their skills at a full-time job.

question

True/False, Explain. Does the unemployment rate include those underemployed?

answer

No it does not

question

Every month the U.S. government releases a set of statistics about conditions in the labor market. Included in these statistics is the unemployment rate. Which agency of the government prepares these statistics?

answer

Bureau of Labor Statistics in the Labor Department.

question

The U.S. government reported in July 2004 that there were 75.6 million people not in the labor force; 147.9 million in the civilian labor force, and 139.7 million employed. Based on these numbers, how many people were counted as unemployed?

answer

The unemployed are the labor force minus the employed, or 147.9-139.7 = 8.2

question

The U.S. government reported in July 2004 that there were 75.6 million people not in the labor force; 147.9 million in the civilian labor force, and 139.7 million employed. Based on these numbers, what was the labor-force participation rate?

answer

The labor-force participation rate is the labor force divided by the noninstitutionalized population 16 and above, or 147.9 /(75.6+147.9) = 66.2%.

question

The U.S. government reported in July 2004 that there were 75.6 million people not in the labor force; 147.9 million in the civilian labor force, and 139.7 million employed. Based on these numbers, what was the unemployment rate?

answer

The unemployment rate is the unemployed divided by the labor force, or 8.2/147.9 = 5.5%.

question

True/False, Explain. Cyclical unemployment is caused by fluctuations in economic activity.

answer

True by definition

question

Cyclical unemployment is defined as unemployment that results from:

answer

fluctuations in economic activity.

question

Unemployment caused by recession is called:

answer

cyclical unemployment.

question

Structural unemployment is caused by:

answer

people losing a job when their skills become obsolete due to technological innovations.

question

What is Structural unemployment?

answer

Structural unemployment is unemployment caused by economic restructuring making some skills obsolete.

question

Technological change can result in:

answer

structural unemployment

question

Workers at a car-manufacturing plant are let go because automated machinery has been installed that requires fewer employees to operate. What type of unemployment describes the workers' situation?

answer

Structural unemployment.

question

Frictional unemployment is a result of:

answer

people quitting a job just long enough to look for and find another one.

question

The unemployment that occurs when people first enter the labor force or are in the process of changing jobs, is called:

answer

frictional unemployment.

question

The lowest sustainable rate of unemployment that policy makers believe is achievable under existing conditions is:

answer

called the target rate of unemployment.

question

Another term for what the text calls the "target rate of unemployment" is

answer

the natural rate of unemployment.

question

True/False, Explain. If the economy were producing at its potential output, then the unemployment rate would be less than the target rate of unemployment.

answer

False. Potential output is the output that would materialize at the target rate of unemployment. If output is at potential, unemployment would be at the target rate.

question

Okun's rule of thumb states that a

answer

1% change in unemployment will cause income to change in the opposite direction by 2%.

question

Real gross domestic product is best defined as:

answer

the market value of all final goods and services produced in an economy stated in the prices of a given year.

question

Per capita real output is best defined as the market value of all final goods and services produced in an economy in:

answer

the prices of a given (base) year divided by the population.

question

If a country's real GDP and population are, respectively, $500 billion and 200 million, then its per capita real output is:

answer

$2,500. To compute per capita real GDP, divide a country's real GDP ($500 billion) by its population (200 million.)

question

Per capita real output would be certain to increase if

answer

Per capita real output is real GDP divided by population. If the numerator increases and the denominator decreases, the fraction must increase.

question

Between 1990 and 2001, both Finland and France had average annual population growth rates of 0.4 percent. The growth rate of real GDP in the two countries in the same time period, however, was 3 percent in Finland and 1.8 percent in France. From this we can conclude that:

answer

France's per capita GDP grew less rapidly than Finland's per capita GDP. Per capita GDP equals the ratio of a country's real GDP to its population. If both countries' populations are growing at the same rate, then the country with the faster growth rate in real GDP will see its per capita GDP increase more rapidly.

question

The trend (secular) growth rate is the:

answer

average rate of growth in real output over many years.

question

U.S. economic growth in output since about 1890 has averaged:

answer

2.5 to 3.5 percent.

question

The region of the world that has achieved the lowest secular trend per capita growth rate since 1820 is:

answer

Africa.

question

The region of the world or country that has achieved the highest secular trend per capita growth rate since 1950 is:

answer

Japan.

question

Fluctuations around the long-term growth rate are called:

answer

business cycles.

question

The business cycle is:

answer

the term used to describe fluctuations in output around its long-term trend.

question

Business cycles are generally considered in:

answer

the short-run framework.

question

Issues of growth are generally considered in:

answer

the long-run framework.

question

The short-run business cycle framework focuses primarily on factors:

answer

affecting demand.

question

The long-run growth framework focuses primarily on factors:

answer

affecting supply.

question

Policies that affect aggregate expenditures are primarily relevant to:

answer

the short-run business cycle framework.

question

Policies that affect work, capital accumulation, and technological change are primarily relevant to:

answer

to the long-run growth framework.

question

Which of the following statements best characterizes the Classical view of business cycles?

answer

Fluctuations in business activity are to be expected and should be accepted just as changes in he seasons are accepted.

question

Which of the following statements best characterizes the Keynesian view of business cycles?

answer

Expansions and contractions of the business cycle are symptoms of underlying problems and should be dealt with.

question

How do you measure a business cycle?

answer

A business cycle is measured peak to peak or trough to trough.

question

Where is an expansion? (Graph)

answer

An expansion occurs when output rises.

question

Where is a recession? (Graph)

answer

A recession is a prolonged decline in output.

question

Where is peak? (Graph)

answer

A peak is the highpoint in the business cycle.

question

What is true regarding inflation?

answer

Inflation is a continual rise in the general price level.

question

A price index in its base year:

answer

is always equal to 100.

question

A price index in years beyond the base year:

answer

can be less than, greater than, or equal to 100.

question

The price index that includes the widest number of goods and services is the:

answer

The GDP deflator- The GDP deflator is used to measure inflation for aggregate output, the widest measure of goods in the list.

question

The price index that measures the average rate of change in the prices received by domestic producers of goods and services is called the:

answer

PPI.

question

The likely reason that the CPI receives more attention in the media than the GDP deflator is because:

answer

it is more relevant to consumers. The CPI receives more attention than the GDP deflator because it measures changes in just consumer prices. The GDP deflator measures changes in the prices of all final goods and services.

question

True/False, Explain. Inflation redistributes income from people who do not raise their prices to people who do raise their prices.

answer

True. An example is the lender who lends money but then experiences unexpected inflation. The rate of return on the loan is lower than desired and the borrower can repay the loan with dollars that are worth less than before.

question

If the CPI in year 2 equals 110 and the CPI in year 3 equals 121, it can be concluded that consumer prices:

answer

The change in consumer prices between year 2 and year 3 equals the percentage change in the CPI during this period, or [(121-110)/110]*100 = 10%.

question

In 1969, the United States CPI was 37 (1982 = 100) and in 2003 it was 184. By what percent did prices increase in the United States between 1969 and 2003?

answer

The rise in prices is calculated as the change in the price index divided by the price index in the previous year multiplied by 100 or [(184-37)/37]*100 = 397%.

question

Nominal output is best defined as a measure of the:

answer

value of output at prices in the current year.

question

Economists call the measure of GDP, after the effects of inflation have been removed:

answer

Real GDP is GDP without the effects of inflation.

question

Real output is:

answer

GDP after the effects of inflation have been removed. Real output reflects quantities produced in an economy, and therefore removes the effect of inflation on nominal output.

question

True/False, Explain. If the price level doubles and real output doesn't change, then nominal output also doubles.

answer

True. Nominal output is defined with respect to current prices and thus moves proportionately when the price level changes.

question

If nominal output is $4.4 trillion and the GDP deflator is 110, then real output is:

answer

$4 Trillion Real output equals the ratio of nominal output and the GDP deflator.

question

One reason expectations of inflation are important from a macroeconomic point of view is that people:

answer

seem to notice increases in the cost-of-living more when those increases were anticipated.

question

Inflation is undesirable because:

answer

Inflation distorts the information value of prices by making it more difficult to identify relative price changes. Inflation redistributes income from those who cannot raise their prices to those who do and can raise their prices.

question

Inflation is a problem for all of the following reasons except:

answer

Inflation does not make a society poorer because higher prices imply that while people pay more when they buy goods and services, they also earn more when they sell these goods and services.

question

A situation in which the price level increases at an extremely high rate is called:

answer

hyperinflation.

question

What is national income accounting and why is it useful?

answer

National income accounting is a set of rules and definitions for measuring economic activity in the aggregate economy. It is useful because it enables us to measure and analyze how much the nation is producing and consuming. It also provides us with the terminology needed to analyze the macro economy. Without these national accounting variables, we would have no way to measure, analyze and discuss the aggregate economy.

question

National income accounting:

answer

provides a way of measuring total or aggregate production. National income accounting was developed in order to help economists measure national production and consumption.

question

The National Income Accounts 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

Define "GDP".

answer

GDP or gross domestic product is the total market value of all final goods and services produced in an economy in a one-year period. It is a flow concept that includes the production of all residents whether they are citizens or not.

question

True/False, Explain. How can DGP be calculated without "double counting"?

answer

True. This reflects the national income accounting identity: production equals income. The two ways to avoid double counting in calculating GDP are: 1) count only the value of final output (output sold directly to consumers) and, 2) use the value added approach.

question

GDP is a:

answer

flow concept and refers to the market value of final output.

question

True/False, Explain. To compute GDP, you must add up the value of all the goods and services produced in a country in a year.

answer

Adding up the value of all goods and services produced would double count intermediate goods. Only the value of final goods and services should be summed when computing GDP.

question

GNP is the:

answer

aggregate final output of the citizens and businesses of an economy in a one year period.

question

The difference between gross domestic product (GDP) and gross national product (GNP) is that GDP:

answer

measures the economic activity that occurs within a country while GNP measures the economic activity of all the people and businesses of a country.

question

Which of the following equations is the correct equation for GDP?

answer

GDP = C + I + G + X - M. The sum of consumption (C), investment (I), government purchase(G), and net exports (X-M) equals total expenditure or GDP.

question

Net domestic product (NDP) equals:

answer

consumption + investment + government purchases + net exports - depreciation.

question

Net domestic product (NDP):

answer

is a better measure of output than gross domestic product because it controls for depreciation.

question

While net domestic product (NDP) is theoretically a better measure of economic activity than gross domestic product (GDP), GDP is used more frequently because:

answer

depreciation, which is included in NDP but not GDP, is difficult to measure.

question

Suppose Smith pays $100 to Jones.

answer

We need more information to determine whether GDP has changed.

question

Suppose the value of your home increases from $100,000 to $125,000. If you continue to live in your home, the increase in its value:

answer

adds nothing to GDP.

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

The circular flow of income implies that:

answer

firm expenditures equal household income.

question

The income approach to measuring GDP:

answer

uses factors payments made by businesses to households to estimate GDP.

question

What are the four expenditure components of GDP and what is included in each of these components?

answer

The four expenditure components of GDP are (a) Consumption (C), payments by households for goods and services. (b) Investment (I); business spending on equipment, structures, and inventories and household spending on new owner-occupied housing. (c) Government purchases (G), government payments for goods and services and investment in equipment and structures. And (d) Net exports; exports minus imports. Personal

question

GDP is $7 trillion. If consumption is $3.5 trillion, investment is $1.4 trillion, and government purchases are $2.1 trillion, then:

answer

exports are equal to imports. GDP = Consumption + Investment + Government purchases + Exports - Imports. Rewritten, Net exports = GDP - Consumption - Investment - Government purchases.

question

Comparisons of per capita gross domestic product (GDP) between countries:

answer

do not necessarily provide a good measure of relative living standards.

question

The size of underground economies differs across countries. In Greece it has been estimated to be as big as 30% of GDP, in Spain 25%, in Italy 20%, and in the United States, about 7%. Given this information, official GDP measures understate true economic activity the most in:

answer

Since Greece has the reportedly largest relative underground economy, official statistics underestimate Greek production the most.

question

Define real and nominal GDP and explain why the growth of real GDP is more important to society than the growth in nominal GDP?

answer

Nominal GDP is total output produced in an economy at existing prices. Real GDP is nominal GDP adjusted for changing prices. The growth in real GDP is more important because it reflects growth in actual production. Nominal GDP could rise with an inflation without real output having risen at all.

question

In 1997, Hungary's population was 10 million and its GDP was $45 billion so its per capita output was:

answer

$4,500. Per capita output is obtained by dividing GDP by the population.

question

Which of the following transactions would be included in GDP?

answer

Peter buys a newly constructed house.

question

Mr. Scoobertini owns a store specializing in soccer jerseys. In 2008, he purchased $150,000 worth of jerseys from manufacturers, employed one worker for $40,000, purchased $20,000 worth of supplies from an office supply store, and sold jerseys for $280,000. Based on this information, what was the value added at Alejandro's store in 2008?

answer

$70,000

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 $1200 to kids attending the prom. The total contribution to GDP of this series of transactions is:

answer

$1200

question

In the second quarter (3-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. Explain:

answer

Prices must increase by more than the decrease in output, so that nominal GDP is still increasing.

question

If nominal GDP rises:

answer

real GDP may either rise or fall.

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