e exam 2

In 1933, net private domestic investment was a minus $6 billion. This means that:

the production of the 1933’s GDP used up more capital goods than were produced that year

GDP is the:

monetary value of all final goods and services produced within the borders of a nation in a particular year

National income accountants can avoid multiple counting by:

only counting final goods

Alejandro owns a store specializing in soccer jerseys. One year, he purchased $150,000 worth of jerseys from manufacturers and later that year he sold the jerseys for $280,000. Based on this information, what was the value added at Alejandro’s store

$130,000

Real GDP refers to:

GDP data that have been adjusted for changes in the price level

GDP excludes:

the market value of unpaid work in the home

Net exports are:

Exports less imports

A price index is:

The price of a market basket in a given year divided by the price of an identical market basket in a reference year

A transfers of funds from one private individual to another private individual without any production taking place is a(n)

private transfer payment

Tom Atoe grows fruits and vegetables for home consumption. This activity is:

Productive but is excluded from GDP because no market transaction occurs

Network effects are:

increases in the value of a product to each user, including existing users, as the total number of users rises

The four supply factors (determinants) that relate to economic growth -

will increase the potential size of an economy’s GDP

What are the supply factors of economic growth

Quantity and quality of natural resources

Quantity and quality of human resources

Supply of capital

Technology

Economic growth is best defined as

Either real GDP or real GDP per capita

U.S growth statistics:

may understate or may overstate the gains in well-being

True or false: The last 250 years of history have been fundamentally different from anything that went before

True

Critics of economic growth:

Argue that economic growth does not resolve socioeconomic problems such as unequal distribution of income and wealth

The number of years required for Real GDP to double can be found by

dividing 70 by the annual growth rate

Which of the following statements about a growing economy is incorrect

A growing economy is just like a static economy in that it cannot consume more today without sacrificing its capacity to produce in the future

Economic growth in follower countries

tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs

The unemployment rate is:

percentage of that labor force that is unemployed

Recurring increases and decreases in an economy’s real GDP over periods of years are called

business cycles

Okun’s law indicates that for

every 1 percent that the actual unemployment rate exceeds the natural unemployment rate a 2 percent GDP gap is generated

What is the primary reason that changes in total spending leads to cyclical change in output and employment

prices are sticky in the short run

The phase of the business cycle in which real GDP declines is called

a recession

Susie has lost her job in Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon where she anticipates a new job will be available. We can say that Susie is faced with

Structural unemployment

If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is

$320 billion

What is the GDP gap

GDP Gap = actual GDP - potential GDP

What is most likely to occur during the expansionary phase of the business cycle

demand-pull inflation

Rapid assets price increases:

Are sometimes referred to as bubbles

Cost-push inflation:

ensues as costs are pushing the price upward

True false of uncertain: a person who is not working is considered unemployed

False

If the unemployment rate is falling, then more people are employed

uncertain

Real GDP is the best measure for standard of living comparisons

False

GDP is a count of the physical output and is not a monetary measure

False

A country with a nominal GDP of $10k in year 1 and a nominal GDP of $11k in year 2 is experiencing real growth

uncertain

the external cost of pollution associated with production of GDP is deducted from the GDP calculation

False

Economic growth is measured as either an increase in the real GDP or the real GDP per capita

True

GDP is the

monetary value of all final goods and services produced within the borders of a nation in a particular year.

Jen is a babysitter and is paid in cash under the table. This activity will be

Excluded from GDP because no market transactions take place.

Which of the following would most likely occur during the expansionary phase of the business cycle?

demand-pull inflation

The largest component of total expenditures in the United States is

personal consumption expenditures.

To make a meaningful comparison of economic growth in a country between different years, we must compare

Real GDPs

The congestion effect is best described as

Decreases in the value of the product resulting from an increasing number of consumers

Economists who believe in economic growth believe

Economic growth is the path to greater material advancement.

Most economists agree that the majority of most business cycle variations are caused by

an unexpected change in the level of total spending.

A nation is considered fully employed when

There is structural unemployment and frictional unemployment.

Structural unemployment is best described as

Unemployment involving workers whose skills and experience have become obsolete or unneeded.

Real GDP formula

Real GDP = Nominal GDP / price index in hundredths

Price index formula

Price index = ((price of market basket in a specific year)/(price of market basket in the base year)) * 100

or Nominal GDP / Real GDP

Size of labor force formula

Size of Labor Force = Population - (U16 and institutionalized) - NILF

Number of unemployment formula

Number of unemployment = Size of Labor force - employed

Unemployment Rate formula

(Number of unemployed) / size of labor force) * 100

Labor force participation formula

((Employed + Unemployed) / Population) * 100

What is NRUE formula (Full employment-unemployment rate)

Frictional unemployment + structural unemployment

What is GDP Gap

GDP Gap = actual GDP - potential GDP

What is Okun Law GDP Gap formula

GDP gap = - 2.0 x (Actual Unemployment Rate - NRUE)

How do you find the Dollar Amount of GDP lost

Dollar Amount of GDP Lost = Actual GDP * GDP Gap (in hundredths)

What is nominal interest rate formula

Nominal interest rate = Real interest rate + inflation premium

How do you calculate productivity

Productivity = Real GDP / Employed