ECON MID 3 Review

Which of the following is an intermediate good?

The rice used to make Chex cereal

Which of the following is a final good?

Chocolate chips purchased by Karen to make chocolate chip cookies for her kids

Which of the following is a final good?

Coffee grounds used by Elodie to make herself coffee every morning

A Chinese restaurant buys 1 pound of rice for $1; soy, fish, and oyster sauces for $1 each; and assorted vegetables for $20. They create 10 meals with these ingredients and sell each meal for $5. How much does this process contribute to GDP?

$50

Which of the is an example of a good that would not count toward U.S. GDP?

Sneakers made by Nike in Indonesia

We can measure total production by:

Adding up what people spend on final goods and services.

The income approach to calculating GDP is:

The same as the expenditure approach to calculating GDP.

One of the most crucial ideas in macroeconomics is understanding that:

total expenditures or total income both measure total production of an economy.

What is included when using the expenditure method to estimate GDP?

Consumption, investment, government purchases, and net exports

Ted is moving into his first apartment. He decides to buy a barely-used washer/dryer set from Craigslist and hires a company to pick it up and deliver it to his apartment. Which part of this transaction will be counted in GDP?

The value of the delivery service

Rachel decides to buy a house for $200,000. The only thing Rachel needs to do is replace all the gutters for $1,000, which she happily does. How will GDP be affected by Rachel's recent purchases?

GDP will increase by $1,000.

At the end of the year, 2,500 Ford Explorers are waiting to be delivered to dealerships. How is this overproduction accounted for in this year's GDP?

The cars are inventory, and their value will increase investment.

Transfer payments are:

spending that transfers resources from the government to individuals.

Net exports equal:

total exports minus total imports.

What are the four components that make up GDP in the expenditure approach?

Consumption, Investment, Government Purchases, and Net Exports

If total consumption is $5 trillion, investments $2 trillion, government purchases $1 trillion, exports $1 trillion, and imports $3 trillion, the GDP must equal:

$6 trillion.

Using the income approach to calculating GDP, in a simple closed economy, the national income equals:

wages + interest +rental income + profits.

If consumption is $7 trillion, wages $10 trillion, interest $1 trillion, rental income $1.5 trillion and profits $2 trillion, what is the value of the economy using the income approach?

$14.5 trillion

Real GDP is calculated:

on goods and services valued at constant prices.

If a country's real GDP increases from one year to the next, we can conclude the country experienced:

a definite increase in output, and may have experienced an increase in prices.

The value of the GDP deflator in the base year is always:

100.

Assume the table shown displays the total output and prices of the only two goods produced in a small economy. What is the value of the GDP deflator in 2020 (rounded to the nearest whole number)?

135

A GDP deflator of 112 means:

the overall price level is 12 percent higher than in the base year.

According to annual price deflator information from the table shown, what was the rate of inflation (rounded to the nearest percent) from 2012 to 2013?

2 percent

According to annual price deflator information from the table shown, what was the rate of inflation (rounded to the nearest percent) from 2016 to 2018?

4 percent

Given the annual price deflator information shown in the table, we can conclude that which year was the base year?

2015

If the GDP of Macroland is $250,000,000 and the country has a population of 5,000 people, what is the GDP per capita?

$50,000

If the GDP per capita of the Vermont Republic is $20,000 and the country has a population of 150,000 people, what is the GDP?

$3 billion

The rate of change in GDP over time is called the:

economic growth rate.

If U.S. real GDP grew from $12.7 trillion the next year, the annual growth rate would be:

5.8 percent.

A period of significant decline in economic activity--marked by falling GDP, rising unemployment, and an increased number of bankruptcies-- is called:

a recession.

GDP per capita is _____ correlated with quality of life.

highly

When the market basket is tracked over time, the goods within the basket:

remain the same, and only changing prices are captured.

Goods in the market basket:

are held relatively constant over time.

A price index:

measures how much the cost of a market basket has risen or fallen relative to the cost of the same market basket in a base time period.

Suppose the base year of the CPI is 2017, and the CPI calculated for 2019 was 102. What is the correct interpretation of this number?

The cost of living for a typical consumer is 2 percent higher than it was in 2017.

When the CPI is less than 100:

the cost of living is lower than the base year.

The table shown displays CPI data for 2015 to 2019. Between 2015 and 2019, the cost of living:

increased 11.6 percent.

The inflation rate:

calculates the percentage change in the overall price level.

The table shown displays CPI data for 2015 to 2019. What was the rate of inflation from 2015 to 2016?

5.32 percent

The table shown displays CPI data for 2015 to 2019. What was the rate of inflation from 2018 to 2019?

12.5 percent

Headline inflation measures price changes:

for the entire market basket of the average urban consumer.

Core inflation measures price changes:

for the entire market basket, but with food and energy costs taken out of the basket.

While the CPI ___, the GDP deflator ___.

tracks changes in prices using a a market basket; measures price changes for everything produced in the economy

To determine the income your grandparents would have to earn today in order to have purchasing power equivalent to their income in 1969, you would:

translate their nominal income in 1969 into constant, real dollars of today.

The real value of any variable is its nominal value:

adjusted for inflation.

Social Security payments were ___ adjusted for inflation, causing the real value to retirees to ___over time.

not originally; decrease

The first recipients of unindexed Social Security checks:

grew poorer over time, because the payments were nominal amounts.

Today, Social Security payments:

are adjusted for inflation using the CPI.

Social Security payments are indexed using the:

CPI.

Unemployment rates tend to be highest during periods of:

recession.

In the United States, the working-age population includes people:

ages 16 years or older.

The table shown displays employment statistics for two years. What was the labor force participation rate in 2018?

70 percent

The table shown displays employment statistics for two years. What was the unemployment rate in 2019?

11 percent

The table shown displays employment statistics for two years. The unemployment rate in 2019 was ___ percentage points ___ than in 2018.

3; lower

The labor force does not include people in the working-age population who are:

retired, a full-time student, or a stay-at-home parent.

Discouraged workers are people who have:

looked for work in the past year but have given up looking because of the condition of the labor market.

Jennifer has a PhD in economics and has been working for three years as a part-time instructor, but she would like to be hired as a full-time faculty member. Jennifer is best describes as:

underemployed.

The labor demand curve shows:

the number of workers firms want to hire at each given wage.

The labor supply curve:

is made up of workers who want to work for firms at each given wage.

In terms of supply and demand, unemployment is:

a surplus of labor.

The price of labor is called

the wage.

When the prevailing market wage is above equilibrium

there is a surplus of labor.

The normal level of unemployment that persists in an economy in the long run is:

the natural rate of unemployment.

Which type of unemployment does not contribute to the natural rate of unemployment?

cyclical

Barbara has been working in a coffee shop full-time while she attends college. When she graduates, she quits the coffee shop and begins to search for full-time employment related to her college degree. Barbara is:

frictionally unemployed

Weizhe just quit his job as a phone salesman and is looking for work as an accountant. Weizhe is:

frictionally unemployed

In 2017, the city of Seattle passed legislation implementing a $15 per hour minimum wage. Critics of the plan argued that this legislation would increase:

real-wage unemployment

After the financial crisis in 2007, many firms laid off workers who struggled to find new work during recession. These workers experienced:

cyclical unemployment

An economic slowdown would likely cause the labor_______ curve to shift to the _______

demand; left

The four components of aggregate expenditure (AE) are:

consumption, investment, government, and net exports.

Which of the following id not a primary determinant of consumption spending?

Rate of return on capital

The marginal propensity to consume (MPC) is calculated as:

the change in consumption divided by the change in disposable income.

If a person's MPC is 0.75 it means they will:

spend 75 cents of each new dollar they receive.

A(n) ________ relationship exists between expected future income and consumption.

positive

The marginal propensity to consume:

All of these are true.

A _________ relationship exists between the real interest rate and investment spending.

negative

If the expected profitability of a business activity increases, we would expect investment spending to:

increase

Which component of aggregate expenditure is neutral to macroeconomic changes?

Government

Which of the following scenarios would increase the next exports component of aggregate expenditure?

Countries in the European Union experience a long period of economic growth.

A ______ relationship exists between domestic income and net exports spending.

negative

If foreign income decreases, net exports will likely:

decrease

The real exchange rate generally has a ________ relationship with aggregated expenditure.

negative

In the equation PAE=A+bY, autonomous sources of spending are captured by:

A

In the equation PAE=A+bY, the MPC is captured by:

b

A decrease in government spending would:

decrease autonomous spending

If PAE is greater than Y:

production will eventually increse

When PAE is less than Y firms will:

decrease production

The Keynesian equilibrium occurs when:

planned inventors are equal to actual inventories

The Keynesian equilibrium occurs at what output level?

Y2

Economic environments that have higher levels of planned aggregate expenditure for a given level of output have:

PAE curves that are higher on the expenditure diagram.

When PAE decreases an economy will move towards:

lower levels of equilibrium GDP

When PAE increases, we expect that the economy will be at ______ levels of equilibrium GDP

higher

A recessionary output gap exists when equilibrium aggregated expenditure is _______ full employment GDP.

below

An inflationary output gap exists when the current level of output is ____ full employment GDP.

above

Suppose that the economy's output is Y1. This level of GDP would be considered:

recessionary

The distance between _______ illustrates an inflationary expenditure gap.

Y2 and Y3

The effect of government spending or tax cuts on national income is measures by the:

multiplier

The spending multiplier tells us the amount by which:

GDP increases when spending increases by $1

The spending multiplier grows _______ as the marginal propensity to consume ________

larger; increases