Macroeconomics Professor Knight Exam 2: Pearson Quiz Questions

Depreciation

gross investment - net investment

_____ is an example of U.S. consumption expenditure.

Your purchase of a flight on American Airlines

Household production, such as baking bread at home, is not included in GDP because it

does not involve a market transaction

Goods and services such as environmental quality, leisure time, and household production are not included in GDP because they are not

bought in markets.

Gross domestic product is _____

the market value of all final goods and services produced within a country in a given time period.

An intermediate good is _______

an item that is produced by one firm, bought by another firm, and used as a component of a final good or service

An example of an intermediate good is

wheat sold to a baker to make more bread

A final good is

an item that is bought by its final user during a specified time period

An example of a final good is

bread sold to a consumer

As measured, GDP omits which of the following?

illegal sales of goods and services, changes in the amount of leisure time and household production of goods and services

The firm that printed your textbook bought the paper from XYZ Paper Mills.

This purchase of paper​ ______ part of GDP because the paper is​ ______ good.

is not; an intermediate

The firm that printed your textbook bought the paper from XYZ Paper Mills.

The value of the paper is counted in GDP as​ ______.

part of the value of the textbook

What is investment?

The purchase of new plant, equipment, and buildings and the additions to inventory

Which of the following is an example of investment?

A. a student increasing his human capital by attending college

Your answer is not correct.

B. a person's annual medical checkup

C.the purchase of new teapots by Aunt Pittypat's Tearoom

This is the correct answer.

D. a person depositing $ 100 a week to her savings account

C.

Although imperfect, which of the following is used as a measure of the standard of living?

real GDP/population

Students who leave school in the spring and look for work are one source of _______

frictional unemployment

Which of the following statements illustrates structural unemployment?

A. Jen quit her current job and found another one with a better pay scale.

B. Many women quit jobs to raise their kids.

C. Dell laid off many employees when the​ company's profits dropped during the recession.

D. Outsourcing resulted in many job losses in the mid 2000s.

D.

Which of the following statements is a discouraged worker?

A. Ned is available to work and has been sending job applications whenever he sees any suitable opportunity.

B. Rachel does not find her current job profile interesting and is looking for alternate opportunities.

C. Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.

D. Nick is changing his job because he has had differences with his​ co-workers in his current company.

C.

An unemployed person _______

wants work, has made specific efforts to find a job within the previous four weeks, or is waiting to be called back to a job from which he or she has been laid off, or is waiting to start a job within 30 days

A person is not in the labor force if they are ______

in the working-age population but neither employed or unemployed

The inflation rate is calculated as ____

[(CPI this year - CPI last year)/ CPI last year] x 100

When the CPI rises slowly,

the inflation rate is low

In June 2015​, the U.S. unemployment rate was 5.2 percent. In June 2017​, the unemployment rate was 4.4 percent.

Predict what happened to the labor force between June 2015 and June 2017 if unemployment was constant.

If unemployment remained constant between June 2015 and June 2017​, then the labor force​ ______.

increased

If we count marginally attached workers as unemployed​ ______.

the labor force participation rate rises

In October 2009​, the U.S. unemployment rate was 10.0 percent. In October 2011​, the unemployment rate was 8.9 percent.

Predict what happened to unemployment between October 2009 and October 2011​, if the labor force was constant.

If the labor force remained constant between October 2009 and October 2011​, then the number unemployed​ _______.

decreased

The four main ways in which CPI is an upward-biased measure of the price level are through

the new goods bias, the quality change bias, the commodity substitution bias, and the outlet substitution bias

Choose the correct statement.

A.

Changes in relative prices lead consumers to change the items they​ buy, and the CPI reflects this substitution.

B.

When the quality of a good improves over​ time, the CPI does not include the portion of the price rise attributable to the higher quality in its calculation.

C.

The CPI calculation assumes that everyone shops at discount stores and no one shops at convenience stores.

D.

When relative prices change and people substitute to the lower priced good comma the CPI ignores the substitution and the CPI overstates inflation.

D.

Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during _______ and decreases during

a recession; an expansion

A person is in the labor force if that person is _____

either employed or unemployment

If real GDP and aggregate expenditure are less than equilibrium​ expenditure, what happens to​ firms? inventories? How do firms change their​ production? And what happens to real​ GDP?

Firms' inventories decrease so they increase production, and real GDP increases.

An increase in income taxes _________, everything else remaining the same.

makes the multiplier smaller

If real GDP and aggregate expenditure are greater than equilibrium​ expenditure, what happens to​ firms? inventories? How do firms change their​ production? And what happens to real​ GDP?

​Firms' inventories increase

so they decrease production, and real GDP decreases

The multiplier means that an increase in investment results in _______ aggregate expenditure that is _________ the increase in investment

increase; larger than

The multiplier is greater than 1 because the change in autonomous expenditure leads to

more induced expenditure

Which components of aggregate expenditure are influenced by real GDP?

consumption expenditure and imports

The three main types of markets for financial capital are

loan markets, bond markets, and stock markets

The loanable funds market is

the aggregate of all the individual financial markets

Economic growth is

the expansion of production possibilities

Real GDP growth rate=

[(Real GDP in current year- Real GDP in previous year)/ Real GDP in previous year] x 100

The government budget surplus _______ the supply of loanable funds.

increases

A government budget surplus _______

lowers the real interest rate, decreases private saving, and increases investment

A government budget deficit _______ the demand for loanable funds.

increases

A government budget deficit

raises the real interest rate, increases private saving, and decreases investment

Use the Rule of 70 to calculate the growth rate that leads to a doubling of real GDP per person in 20 years.

The Rule of 70 states that the number of years it takes for the level of any variable to​ ______ is approximately​ ______.

double; 70 divided by the annual percentage growth rate of the variable

If real GDP per person doubles in 20​ years, then the annual growth rate of real GDP per person is​ ______ percent a year.

3.5

The ________ , the greater is the amount that a household decides to save.

greater a household's disposable income and the smaller a household's expected future income

An increase in the population _______ the real wage rate and ________ the equilibrium quantity of labor

decreases; increases

Potential GDP ________ and potential GDP per hour of labor ________

increases: decreases

If a government has a budget deficit, it must

borrow in the loanable funds market

For a government to add to the supply of loanable funds, it must

have a budget surplus

What are the two broad sources of potential GDP growth?

growth of the supply of labor and the growth of labor productivity

The three main types of markets