ECON TEST 3

If the total expenditures of a typical family equaled €40,000 per year in 2019 and the exact same basket of goods and services cost €45,000 in the year 2020, the family's cost of living:

The correct answer is: increased by 12.5 percent.

If both the lender and borrower agree on an 8 percent interest rate, both expect a 4 percent inflation rate, and inflation turns out to be 4 percent, then ______ by the inflation.

neither the borrower nor the lender is hurt

Assume the minimum wage exceeds the market-clearing wage. If there is an increase in the supply of labor then the number of workers who are unemployed will ______, and the number of workers who are employed will _______.

increase, not change

The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 2018, the base year, the typical consumer purchased 10 books for $20 each and 200 hamburgers for $1 each. In 2020, the typical consumer purchased 12 books for $23 each and 300 hamburgers for $1.15 each. The consumer price index for 2020 on Planet Econ equals

1.15

a.A long-term mismatch between the skills of some workers and the jobs available is a principal cause of ______ unemployment.

structural

The CPI in year 1 equaled 1.55. The CPI in year 2 equaled 1.64. The rate of inflation between years 1 and 2 was ______ percent.

5.8

The country of Northland produced $1,000 billion of output in one year. The population of Northland was 50 million, of whom 45 million were employed. What was average labor productivity in Northland?

$22,222

As a result of a war in the country of Omega, refugees flee to the country of Alpha to seek employment. Holding other factors constant, the influx of refugees will ______ the real wage in Alpha and ______ employment in Alpha.

decrease; increase

Increasing the capital available to the workforce, holding other factors constant, tends to ______ total output while ______ average labor productivity.

increase; increasing

Kenan's Barber Shop cut 3,000 heads of hair in 2019 and 3,100 in 2020. The price of a haircut was $7 in 2019 and $8 in 2020. If 2019 is the base year, what was Kenan's contribution to real GDP in 2019?

$21,000

An example of a government policy to increase physical capital formation is

the construction of an interstate highway system.

As the real wage decreases, the quantity of labor demanded ______ and the quantity of labor supplied _______.

increases; decreases

For a given nominal interest rate, an unexpectedly low inflation rate ______ the real interest rate.

increases

Which of the following is a real quantity?

The current wages paid to factory workers

b.

The current price of a barrel of oil

c.

The number of tons of steel produced in 2019

d.

The cost of a new car

The number of tons of steel produced in 2019

If average labor productivity increases, real GDP per person

may increase or decrease depending on the change in the share of population employed.

In Econland 500,000 of the 2 million people in the country are employed. Average labour productivity in Econland is €15,000 per worker. Real GDP per person in Econland totals:

€3,750.

Because of diminishing returns to capital, there is a limit to the increases in average labor productivity that can be gained from additional or improved

physical capital.

Which of the following is an example of cyclical unemployment?

Dora lost her job when the textile mill closed. She does not have skills to work in another industry and has been unemployed for over a year.

b.

Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up.

c.

Jim had a job as an engineer, but quit when his wife was transferred to another state. He looked for a month before finding a new job that he liked.

d.

George is an unskilled worker who mows lawns in the summer, but is unemployed the rest of the year.

The correct answer is: Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up.

If workers received a 5 percent wage increase and the rate of inflation was 3 percent, then their real wage

increased

Which of the following would increase the investment component of U.S. GDP?

a.

You purchase a new washing machine produced in France.

b.

You purchase a new washing machine produced in the U.S.

c.

A laundromat in Chicago purchases a new washing machine produced in the U.S.

d.

A laundromat in Mexico purchases a new washing machine produced in the U.S.

A laundromat in Chicago purchases a new washing machine produced in the U.S.

If total output increases from €100 billion to €200 billion as population increases from 100 million to 150 million, then output per person:

The correct answer is: increases, but by less than 100 percent.

The real rate of return on holding cash is equal to

zero minus the inflation rate.

If we augment the Solow model to allow for technical progress

The correct answer is: the economy can grow by more than the rate of population growth.

Holding other factors constant, if oil prices rise relative to the prices of other products, then the real wages of oil workers will ______ and employment of oil workers will _____.

increase; increase

Small differences in annual growth rates of real GDP generate large differences in real GDP over time because of the

power of compound interest.

Income lost by the unemployed is an example of the ______ cost of unemployment, while the additional spending to control crime is an example of the _____ cost of unemployment.

economic; social

Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays annual compound interest, and you do not withdraw from the account until your retirement at the age of 65, 44 years later. How much more will be in your account if the interest rate is 6 percent rather than 4 percent?

$7,369

The application of new technologies to the production process will increase

average labor productivity.

The aggregate production function for the Solow growth model assumes ___________ returns to scale and _____________marginal productivity of labour and capital.

constant; diminishing.

If tax revenues equal 20 percent of total output and government expenditures equal 25 percent of total output, then there is a

government budget deficit.