Economic Exam Study 2

Not included in GDP, because they do not increase domestic production

The sale of financial assets, such as stocks and bonds, is

Bureau if Economic Analysis

National Income accounts are compiled by the

lumber and steel beams purchased by a construction company

Which one of the following is not an example of a final good in national income accounting

this is a nonmarket transaction

The service a homeowner performs when she mows her yard is not included in GDP because

household and individual purchases of services and durable and nondurable goods

Personal consumption expenditures consist of

• Residential investment

• fixed investment

• inventory investment

Gross investment includes

seedlings and saplings purchased for resale by Wendy’s Garden Ccenter

which of the following is not an example of a final good or service (from the perspective of the national income accounts)?

Nominal GDP divided by Real GDP

The GDP price index equals

add indirect business taxes

When using the income approach to calculate Nominal GDP, you should

8 through 11

The expenditures approach to GDP calculation can be done by adding

only final goods and services should be counted

To avoid multiple counting in national income accounts

$9.9 billion

Suppose that a country imports $5.7 billion of goods and services and exports $4.2 billion of goods and serviced. What is the value of net exports?

expenditures approach and income approach

What are the two ways of looking at GDP

all final goods and services produced in an economy in a giver year.

Nominal GDP is the market value of

The value of a haircut

Which of the following is included in GDP?

monetary measure

The Gross Domestic Product (GDP) concept account for society’s valuation of the relative worth of goods and services by using a

The Black Coal Company sells $5 million of coal to Germany

Which of the following is an example of net exports?

The total spending for consumption, investment, net exports, and government purchases.

The expenditures or output approach to GDP measures it by summing up

Consumption

Currently, the largest component of aggregate spending in the United States is

The purchase is always counted as consumption

The purchase of a computer by a person for household use would be counted in what category of GDP

the GDP price index

The broadest measure to adjust nominal GDP for price changes is

paper and ink bought by a publishing company

An example of an intermediate good would be

Not included in GDP, because they do not increase domestic production

The sales of financial assets such as stocks and bonds, is

understate economic welfare, because it does not take into account increase in leisure

GDP tends to

the lumber produced by Boise Cascade and sold to a builder of old houses

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

GDP excludes intermediate transactions

The total volume of business sales in our economy is several times larger than GDP because

Household and individual purchases of services and durable and nondurable goods

Personal Consumption Expenditures consist of

per capita income

Which of the following measures is most often used to compare the standard of living in different countries?

the cost of a dinner at a restaurant

Which of the following is included in GDP

increase profits and losses

All else equal, increases in proprietors income will

expenditures approach and income approach

What are the two ways of looking at GDP

• Home production

• Underground economy

• intangibles

• resource depletion

• externalities

Problems with GDP

production possibilities frontier shifted outward

Suppose that an economy’s labor became more productive between year 1 and year 2. We could conclude that this economy’s

A firm purchases new equipment for a manufacturing process.

Which of the following scenarios is an example of an investment in physical capital?

Increasing; decreasing

Providing a constant numbers of workers with additional capital with which to work will ___ labor productivity at a(n) ___ rate.

Increase output less

Alpha has $40,000 of capital per worker, while Beta has $5,000 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing return to capital, an additional unit of capital will __ in Alpha compared to Beta, holding other factors constant.

Labor productivity

The application of new technologies to the production process wil increase

dividing real GDP by population

real GDP per capita is found by

current consumption sacrificed for capital formation

The principle economic cost of growth is

increases

Usually an abundance of natural resources ____ labor productivity.

Shift to outward away from the origin

If labor becomes more productive, the production possibilities frontier will

Increase output more

Gamma has $30,000 of capital per worker, while Omega has $7,500 of capital per worker. In all other respects, the two countries are the same. According to the principle of diminishing return to capital, an additional unit of capital will __ in Omega compared to Gamma, holding other factors constant.

diminishing returns to capital

The principle is that if the amount of labor and other inputs is held constant, the greater the amount of capital in use, the less an additional unit of capital adds to production is called the principle of

the factories and machinery used to produce others goods and services

Physical capital is

28.8 years

A nation’s average annual real GDP growth rate is 2.5 percent. Based on rule 72, the approximate number of years that it would take for this nation’s real GDP to double is

less goods for the future that at point P.

Curve (a) is the current frontier for the economy. Focusing on curve (a), point N suggest that the economy currently produces.

calculate the number of years required for real GDP to double

Given the annual rate of economic growth, the “rule of 72” allows one to

increases in Real GDP

Which of the following is a measure of economic growth that is most useful for measuring changes in the overall size of an economy?

6.0 %

A nation’s real GDP was $250 billion in Year 1 and $265 bullion in year 2. Its population was 120 million in Year 1 and 125 million in Year 2. What is the real GDP growth rate in Year 2?

human capital

Economists refer to the talents, training, and education of workers as

resources and/or the productivity of the resources

society can increase its output and income by increasing its

increases in real GDP per capita

Which of the following is a measure of economics growth that is most useful for comparing changes in standards of living?

can grow either more slowly or more rapidly than real GDP

Real GDP per capita

Increased output per person; the consumption sacrificed in exchange for capital formation

The benefits of economic growth are ____ , while the cost of economic growth are _____

current consumption

The cost of a higher living standard int he future is giving up

increases

Usually an abundance of natural resources ___ labor productivity

growth of Real GDP per capita

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

education, training, and skills of workers

Human capital refers to the

average price level

Which of the following will not increase a nation’s real GDP

Shift to outwards away from the origin

If labor becomes more productive, the production possibilities frontier will

28.8 years

If a nation’s real GDP is growing by 2.5 percent per year, its real GDP will double in approximately

Lessens the burden of scarcity

Growth is advantageous to nation because it

1. Peak

2. recession

3. Trough

4. expansion

The phases of the business cycle from points A to D are

expansion

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

100

The Consumer Price Index for the year 2007 is

labor force that are not employed

The unemployment rate is interpreted as the percentage of the

The CPI turns negative in the next year

If the CPI declines from one year to the next, then which one of the following statement is not true?

The central bank printing less money than was expected

Which of the following would most likely move the economy into a recession in the short term?

worker is protected by a cost-of-living adjustment clause in an employment contract.

A worker would be hurt least by inflation when the

business cycles

The recurrent ups and downs in the level of economic activity extending over several years are referred to as

a deficiency of spending on goods and services

Cyclical unemployment results from

is a temporary maximum point.

A peak in the business cycle

the purchasing power of money decreases

When inflation occurs

structural

A mismatch between the geographic location of workers and the location of job openings would result in which type of unemployment?

2 percent

You are given the following information about the economy: the nominal interest rate =8 percent; the real rate of interest =6 percent. The inflation premium is

Reduces the buying power of people on fixed incomes

Inflation

economic growth trend

The straight line E drawn through the wavy lines would provide an estimate of the

The CPI turns negative in the next year

If the CPI declines from one year to the next, then which one of the following statement is not true?

Official unemployment rate will remain unchanged

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time worker’s witch to full-time. As a result, the

employment and output reach their lowest levels

A trough in the business cycle occurs when

100

If year 2 is the base year, the Consumer Price Index for year 2 is

Frictionally unemployed

New college graduates still looking for their first jobs would be classified in the BLS data as

the general level of prices over time

Inflation is a rise in

6 percent

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

Change in consumption divided by the change in income

The MPC can be defined as the

is in the process of voluntarily switching jobs

the best example of a “frictionally unemployed” worker is one who

decline

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.

structural unemployment

a worker who loses a job at a call center because the company moved the call center operation to another country is an example of

natural rate of unemployment

The unemployment rate of full employment is also called the

Decrease investment

An increase in the interest rate would ____.

consumption decreases and the amount of saving decreases

As Real GDP falls from level 3 to level 2, the amount of

Increase U.S exports

Over time, an increase in the real output and incomes of the trading partners of the United States will most likely

Tina replaced the old water heater in her house with a new one that is more energy efficient.

Which of the following would be considered consumption?

1-MPS

What is the slope of the consumption schedule or consumption line for a given economy?

FG

At Real GDP level 3, the amount of saving is represented by the line segment

not change, but the average propensity to consume will change

The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All figures are in billions of dollars.

If consumption increases by $10 billion at each level of disposable income, the marginal propensity to consume will

investment schedule will shift downwards

If the expected rate of return on investment decreases, then most likely the

1-MPC=MPS

The relationship between the MPS and the MPC is such that

point D

Real GDP equals consumption at

Tine replaced the old water heater in her house with a new one that is more energy efficient.

Which of the following would be considered consumption?