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EC 202: EXAM 1
What is the one that is most accurate in measuring average living standards? A) the average inflation rate. B) the average unemployment rate. C) consumption D) average output per person. E) GDP.
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D, average output per person.
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If the participation rate is 2/3 and if 120 million people are in the labor force, then the number of working age people NOT in the labor force is
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D
PR = LF/WAP. (2/3) = 120m people/WAP. Therefore, WAP = 120m people/(2/3) = 180m people. Since LF + NLF = WAP, or 120m people + NLF = 180m people, NLF = 60m people.
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When a government decides to deregulate the electric utility industry, this is an example of ______ policy.
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structural |
The country of Southland produced $2,000 of output in one year. The population of Southland was 100 people, 40 of whom were employed, What was the value of average labor productivity in Southland?
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$50 per year of output per person
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If $500,000 of steel is produced in 1998 ofwhich $400,000 is purchased by an auto producer and if, in 1999, $300,000 ofthat steel is used for the production of $1,000,000 of cars, then theseactivities will contribute to 1998 & 1999 GDP:
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E $500,000; $ 700,000.
Value Added Method: 1998 $500,000 (of steel) 1999 $1,000,000 - $300,000 (of autos)
Expenditure Method: 1998 I = $500,000 (of steel); that is, $500,000 change in business inventories 1999 (assuming without loss of generality that all autos are consumed) C = $1,000,000 I = - $300,000 (inventories of steel are reduced)
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If you are in a period of disinflation, you would observe
A) falling prices
B) rising inflation rates
C) rising prices
D) rising output
E) falling output
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C
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Which of the following statements primarily represents positive (as opposed to normative) analysis?
A) A tax cut that benefits low-income households is acceptable.
B) The United States in not going to have a recession.
C) When the Federal Reserve increases the money supply, interest rates decrease.
D) Large budget deficits should be avoided.
E) Higher taxes are needed to support education.
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C
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Government actions designed to affect the performance of the economy as a whole are called ____
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Macroeconomic policy
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If the price of a shmoo increases from $100 to $120 while at the same time (one year) a $1000 bank deposit increases to $1320, then the simple one year real return from the deposit will be
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10%
The real return from a deposit is its percentage increase in purchasing power. The purchasing power of $1000 was 10 shmoos at $100/shmoo. The purchasing power of $1320 is 11 shmoos at $120/shmoo. The percentage increase in purchasing power is new minus old all over old or (11 - 10)/10 = 10%.
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Peg's Manicure Manor did 4,000 sets of nails inthe year 2,000 and 4,500 sets of nails in the year 2001. The price of a set ofnails was $20 in 2000 and $22 in 2001. If the year 2000 is the base year, Peg'scontribution to real GDP in 2001 was _____ and to nominal GDP in 2001 was_____.
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$90,000; $99,000
Real GDP is measured in base-year prices. 2001 RGDP equals 2001 output measured in 2000 prices; that is, 4500*$20 = $90,000
Nominal GDP measures output in current prices. 2001 NGDP equals 2001 output measured in 2001 prices; that is, 4500*$22 = $99,000
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If a pizza maker, for goods produced in the current year, pays $1 for tomatoes, $1 for cheese, and $2 for sausage, and sells the pizza made with these ingredients for $7, then these activities contribute how much to current year GDP?
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$7
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The unemployment rate typically _______ the end of a recession.
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decreases only with a significant lag after
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Macroeconomists are concerned with each of the following issues EXCEPT:
A) Why does inflation vary over time?
B) What are the costs of inflation?
C) Why does inflation vary across countries?
D) Why do the prices of computers increase more slowly than the price of gasoline?
E) Must a reduction in inflation be accompanied by an increase in unemployment?
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D |
What fraction of GDP is consumption spending?
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about 2/3rds
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For a hypothetical economy in a given year, nominal GDP is $6500 per year, real GDP is $5000 per year and real consumption is $4000 per year. What is the value of the GDP deflator for that year?
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130
RGDP = (NGDP/P) * 100 (real GDP is nominal GDP deflated) so P = (NGDP/RGDP) * 100, where P is the GDP deflator, since NGDP is output are current prices and RGDP is the same output at base year prices. 130 = ($6500/$5000) * 100
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Investment spending includes spending on:
A) services.
B) new capital goods.
C) stocks and bonds.
D) exports.
E) consumer durable goods.
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B |
Which of the following is a stock variable?
A) investment
B) the government surplus
C) consumption
D) income
E) savings
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E
A stock variable is a quantity measured at an instant of time. A flow variable is a rate at which some stock variable is changing. For a flow variable to be meaningful, it must contain a time interval.
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Which of the following would be considered an example of fiscal policy?
A) A government initiative to reduce the country's reliance on agriculture and promote high-technology industries.
B) Interest rate hikes generated by a reduction in the money supply.
C) A government initiative to increasing spending on the national highway system.
D) A decision to reduce government control of the economy and to become more market-oriented.
E) Provision of additional cash to the banking system.
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C |
The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 1999, the base year, the typical consumer purchased 10 books for $25 each and 25 hamburgers for $2 each. In 2000, the typical consumer purchased 15 books for $30 each and 100 hamburgers for $3 each. The consumer price index for 2000 on Planet Econ most closely equals:
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C
The CPI uses the base-year basket of goods; 10 books and 25 hamburgers. At $30 per book and $3 per hamburger, expenditure on the base-year basket is $375. At $25 per book and $2 per hamburger, expenditure on the base-year basket is $300. CPI = cost of CPI basket at current prices/cost of CPI basket at base-year prices all multiplied by 100. CPI = ($375/$300)*100 = 125. Prices are 1/4 higher than in the base year by this measure.
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The number of people in the labor force and out of the labor force equals the:
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WAP
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In a country with 200 million people aged 16 years and older, 120 million in the labor force, and 114 million employed, what is the unemployment rate?
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The unemployment rate is the number of unemployed divided by the labor force. The number of unemployed plus the number employed sum to the labor force. u = (U/LF) = 6 million/120 million, which equals 5%.
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Aggregation allows economists to ______ at the cost of ________.
A) study monetary policy issues; neglecting fiscal policy issues
B) make normative statements; ignoring positive analysis
C) make positive statements; ignoring normative analysis
D) see the big picture; obscuring the details
E) see the details; obscuring the big picture
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D |
If output, Y, equals $1000 while consumption, C, equals $700, taxes, T, equal $100, government spending, G, equals $200, and investment, I, equals $300, then national saving equals ______ and net exports equal ______ .
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National Saving is defined equal to Y - C - G = $1000 - $700 - $200 = $100
Since all output is purchased, Y = C + I + G + NX. $1000 = $700 + $300 + $200 + NX. NX = -$200.
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The value of unpaid work by a homemaker ___included in GDP and the value of housekeeping services sold in the market ___included in GDP.
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is not; is
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Which of the following transactions would be included in the GDP of the United States?
A) You buy a used computer from a friend.
B) You buy 600 shares of common stock of IBM, a U.S. corporation.
C) Honda, a foreign corporation, sells vehicles in the U.S. that were manufactured in Asia.
D) Ford, a domestic corporation, builds and sells vehicles in Mexico.
E) none of the other choices are included.
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E
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Real GDP measures the _______ of production and nominal GDP measures the _______ of production.
A) physical volume; physical volume
B) physical volume; current dollar value
C) current dollar value; physical volume
D) current dollar value; current dollar value
E) current dollar value; market value
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B |
The CPI equals 100 in year one and 110 in year two. If the nominal wage is $12 per hour in year one and a contract calls for the wage to be indexed to the CPI , what will be the hourly nominal wage in year two?
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The RW is $12 in year 1 since it's the BY (the CPI equals 100). The RW in year 2, w indexing must also be $12. For the RW in year 2 to equal $12, the NW in year 2 must reflect the higher price level in year 2. The BYP level must be replaced w the CP level for year 2, which is found by dividing out the BP level & multiplying by the CP level. This results in ($12/$100)*110 equal to $13.20. Since prices increased by 10%, the NW must also increase by 10%. $12 * 1.10 = $13.20
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With typical fixed nominal interest rate loans, unexpectedly high inflation ______ borrowers and _____ lenders.
A) helps; hurts
B) hurts; helps
C) hurts; hurts
D) hurts; does not affect
E) helps; helps
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A |
Government purchases include all of the following EXCEPT:
A) social security benefits paid by the federal government.
B) the purchase of new military hardware by the U.S. Army.
C) the construction of new highways by the state of Colorado.
D) the construction of a new court house built by a county government.
E) the salary paid to an elementary school teacher employed by a local public school district.
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A |
The term "real" as used in economics ALWAYS refers to
A) GDP.
B) macroeconomic variables.
C) purchasing power.
D) calculations valued at current prices.
E) economic truths.
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C |
If the CPI equaled 100 in 1995 and 110 in 2000 and if a typical household's income equaled $30,000 in 1995 and $33,000 in 2000, then between 1995 and 2000, nominal income ________ and real household income _________
A) decreased; increased.
B) increased; increased.
C) increased; was constant.
D) was constant; increased.
E) increased; decreased.
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C
Nominal income increased from $30,000 to $33,000. Real income is measured in base-year prices. Real income changed from $30,000 to ($33,000/110)*100 or $30,000. Alternatively, nominal income rose by 10% and prices rose by 10% so there is no change in purchasing power or real income.
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Consumption expenditures include spending by households on:
A) services.
B) inventories.
C) taxes.
D) residential housing .
E) exports.
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A |
The sum of the value added by all firms equals total:
A) value of final goods and services.
B) consumption spending.
C) spending on capital goods.
D) profits in the economy.
E) input costs.
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A |
If the percent change in nominal GDP is negative while the percent change in real GDP is positive then we can necessarily conclude
A) physical output increased and prices decreased.
B) physical output decreased and prices increased.
C) there is not enough to say whether prices increased or decreased.
D) physical output and prices both decreased.
E) physical output and prices both increase
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A
Nominal GDP is output evaluated at current prices, or P*Y, where Y is physical (or real) output. If the percent change in real GDP is positive, then Y has increased. The only way P*Y can decline is if P drops by more than Y increased.
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Output per employed worker is called
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Average Labor Productivity
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Last year you purchased 20 shirts at $20 each and 10 CDs at $10 each. This year you buy 16 shirts at $30 each and 6 CDs at $20 each. If a consumer type price index was 100 last year, this year's similar type CPI is
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160 |
Ed's Barber Shop cut 5,000 heads of hair in the year 2000 and 6,000 inthe year 2001. The price of a hair cut was $9 in 2000 and $10 in 2001. If theyear 2000 is the base year, Ed's contribution to real GDP in the year 2000 was_________ and in 2001 was _________ ?
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$45,000; $54,000
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Suppose $400,000 of steel is produced in 1998. In 1999, $100,000 of steel is produced and $300,000 of steel is used to produce $1,000,000 of cars. Then these activities will contribute _____ to 1999 GDP and the value added of the car producer in 1999 is _____.
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$800,000; $700,000.
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None of the following adds to current year U.S. GDP, by the indicated value, EXCEPT
A) the value of computers produced in Europe by IBM.
B) the value of houses constructed last year, but not occupied until sold this year.
C) the value of IBM common stock you purchased this year.
D) the value of IBM bonds sold by IBM this year.
E) the value of rice produced this year by a wholesaler to be sold next year for cereal production.
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E |
Which of the following is counted as investment in the GDP accounts?
A) a developer purchases land for a shopping center
B) a household purchases a restaurant-style stove
C) the government purchases a ten-year old airplane factory from Boeing
D) a business purchases a new airplane for executive travel
E) you purchase 100 shares of GM common stock.
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D |
In a small town of 100 people there are 10 people under 16. Out of theremaining persons, there are 10 retired people, 60 people will full-time jobs,3 people with part-time jobs, 3 full-time students, 4 full-time homemakers, and10 people who do not have jobs, but want them. All but one of these latter 10people without jobs had actively looked for a job in the preceding four weeks.In this town, the unemployment rate (U3) is _____ and the labor forceparticipation rate is _____.
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12.5%; 80%
WAP = 90; Emp = 60 + 3 = 63; U = 9; LF = 72; u = (U/LF) = 12.5%; PR = (LF/WAP) = (72/90) = 80%)
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The fraction of the working age population who would like to be employed, but can't find work or who are temporarily laid off from a job they expect to return to shortly is called:
A) none of the other choices.
B) the average labor productivity rate.
C) the participation rate.
D) the unemployment rate.
E) the average standard of living.
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A |
People who say that they would like to have a job but have not made an effort to find a job in the past four weeks are classified as _______
A) indolent unemployed.
B) involuntary part-time workers.
C) out of the labor force.
D) chronically unemployed.
E) short-term unemployed
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C |
The extra costs incurred to avoid holding cash when there is inflation are called the
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shoe leather costs
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In Smallville last year,the population was 10, the number of employed workers was 5, and average laborproductivity was at a rate of $20,000 per year. During that year totaloutput in smallville was _____ and the average standard of living was_____.
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$100,000; $10,000
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_________ is a flow variable while ___________ is a stock variable.
A) Wealth; income
B) Consumption; debt
C) Savings; deficit
D) Debt; saving
E) Investment; GDP
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B |
Which of the following statements is positive (as opposed to normative)?
A) A tax cut will increase consumer spending.
B) Large budget surpluses should be avoided.
C) Higher taxes are needed.
D) A tax cut that benefits high-income households is acceptable policy.
E) Tax cuts should be designed to primarily benefit low-income households.
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A |
Deflating a nominal quantity is the process of dividing a ____ quantity by a ______ in order to express the quantity in ______ terms.
A) nominal; real quantity; price index
B) nominal; another nominal quantity; real
C) real; nominal quantity; real
D) nominal; price index; real
E) real; price index; nominal
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D |
A government budget deficit occurs when:
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government spending exceeds government revenue.
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A labor contract provides for a first-year wage of $10 per hour, and specifies that the real wage will rise by 10 percent in the second year of the contract. The CPI is 100 in the first year and 105 in the second year. What dollar wage must be paid in the second year?
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The original real wage is $10 per hour since ($10/100)*100 equals $10 per hour where the current price level is divided out and the base-year price replaces it (deflating the money wage of $10). For the real wage to rise by 10%, it must increase by $1 to $11. To find the nominal wage, the base-year price level is replaced with the current price level, or ($11/100)*105 equal to $11.55 per hour. This answer can also be obtained by noting that since price has increased by 5%, indexing requires a 5% increase in wage to $10.50 per hour. Since the question requires a real wage increase of 10%, a 10% further increase is required, or an increase of $1.05 to $11.55 per hour. Still another way to verify this, is to assume a shmoo costs $1. Then the first year real wage is 10 shmoos per hour. A required 10% increase leads to a real wage of 11 shmoos per hour. With the shmoo increasing to $1.05 each (a 5 percent increase in price), purchasing 11 shmoos per hour requires a nominal wage of $11.55.
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Data for an economy shows that the unemployment rate is 10%, the participation rate 75 percent, and 100 million people 16 years or older are not in the labor force. How many people are employed in this economy?
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270 million
10% = U/LF. PR = 75% = LF/WAP. LF = Emp + U. Since 75% = LF/WAP, 25% = NLF/WAP where WAP = LF + NLF. Therefore, 25% = 100m/WAP, so WAP = 400m. LF must be 300m since the participation rate is 75% (3/4s of 400m). 10% of them or 30m are unemployed, so the rest, 270m, are employed.
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If the inflation rate is negative, _______________ .
A) nominal GDP is falling and there is deflation
B) nominal GDP is falling and there is disinflation
C) real GDP is increasing and there is disinflation
D) real GDP is increasing and there is deflation
E) none of the other choices is accurate
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E |
If the CPI in 1996 was 200 and the CPI one year later was 240, then the inflation rate over that year was
A) 80.0%.
B) 16.7%.
C) 180.0%.
D) 30.0%
E) 20.0%
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E
The inflation rate is the percentage change in prices ((new - old)/old), or (240-200)/200, or 20%.
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Which of the following would be considered an example of structural policy?
A) Privatization of government owned industries..
B) A reduction in income taxes to stimulate consumer spending.
C) Provision of additional cash to the banking system.
D) An attempt to reduce the government budget deficit by reducing spending.
E) Interest rate hikes by the Federal Reserve.
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A |
Which of the following is included in GDP for the amount indicated?
A) You buy a used refrigerator, paying $200.
B) An unemployed worker receives $100 in government unemployment compensation.
C) Payment of $5000 in salaries for public school teachers.
D) You buy a one-acre lot in Micanopy, Florida, as an investment, for $10,000.
E) You chop down a tree and build yourself a shed, which you insure for $500.
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C |
If a borrower and lender agree to a fixed nominal interest rate on a loan when inflation is expected to be 3% and inflation turns out to be 6% over the life of the loan, then the borrower _____ and the lender ______.
A) gains; gains
B) gains; loses
C) is not affected; is not affected since neither are affected by unexpectedly high inflation
D) loses; gains
E) loses; loses
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B |
If the price of a shmoo increases from $40 to $50 while at the same time (one year) a $400 bank deposit increases to $700, then the simple one year real return from the deposit will be
A) 50.0 percent.
B) 20.0 percent.
C) 75.0 percent.
D) 25.0 percent.
E) 40.0 percent.
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E |
Assume for 1999, nominal GDP is $9000 and the GDP deflator is 90. For 2000, nominal GDP is $8800 and the GDP deflator is 110. Then the percent change in REAL GDP between 1999 and 2000 is approximately
A) negative 20%.
B) negative 2.2%.
C) 22.2%.
D) 19.5%.
E) 2.2%.
|
A
The percentage change in real GDP is (new - old)/old, or [($8800/110)*100] - [($9000/90)*100] all divided by the second term, or ($8000 - $10,000)/$10,000, or -20%.
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Suppose that the CPI does indeed overstate the rate of inflation by two percentage points. When the CPI increases by 5% and household nominal incomes also increase by 5%, we should conclude, therefore, that the real incomes of households:
A) increased, but by less than 5%.
B) stayed constant.
C) decreased, but by more than 5%.
D) increased, but by more than 5%.
E) decreased, but by less than 5%.
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A |
To measure GDP, economists add together the _____ of final goods and services produced.
A) units
B) dollar value
C) physical volume
D) weight
E) average output
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B |
The real wage is a measure of
A) the rate of inflation.
B) the price level.
C) the amount earned due to merit only.
D) purchasing power.
E) the amount of income from labor left over after all taxes are subtracted.
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D |
Peg's Manicure Manor did 3,000 sets of nails in the year 2,000 and4,000 sets of nails in the year 2001. The price of a set of nails was $10in 2000 and $12 in 2001. If the year 2000 is the base year, Peg'scontribution to real GDP in 2000 was _____ and to nominal GDP in 2000 was_____.
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$40,000; $30,000
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If the simple inflation rate is 50% at the same time (one year) a$1000 bank deposit increases to $1605, then the simple one-year realreturn from the deposit will be ______ .
|
10.5 percent
|
Government purchases include all of the following EXCEPT:
A) the salary paid to an elementary school teacher employed by a local public school district.
B) social security benefits paid by the federal government.
C) the purchase of new military hardware by the U.S. Army.
D) the construction of new highways by the state of Colorado.
E) the construction of a new court house built by a county government.
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B |
If the Consumer Price Index (CPI) overstates the true rateof inflation, the use of the CPI to index nominal incomes resultsin:
|
unintended increases in real incomes.
|
"Shoe leather" costs of inflation refer to the:
A) arbitrary redistribution of wealth from one group to another.
B) difficulty of interpreting the price signals in an inflationary environment.
C) interference of inflation on the long-run planning of households and businesses.
D) costs of economizing on holding cash.
E) unintended changes in taxes caused by inflation.
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D |
Which of the following is an example of a final good for year 2?
A) A metal-stamping machine manufactured in year 1 that is sold to an automaker in year 2 who uses it to produce cars in year 3.
B) A metal-stamping machine manufactured in year 1 that is sold to an automaker in year 2 who uses it to produce cars in year 2.
C) A car produced in year 1 and sold to a family in year 2.
D) Tires produced in year 2 and sold in year 2 to an automaker for use on cars in year 3.
E) A CD player produced in year 2 sold to an automaker for installation in a car in year 2.
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D |
In Econland, population increased from 100 to 108, thenumber of employed workers increased from 50 to 60, but average laborproductivity decreased from $2,000 per worker per year to 1,800 per worker peryear. Total output in Econland _____ and the average standard of living_____.
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increased; remained constant
|
Three equivalent ways to measure GDP are total _____, total _____, and total ______.
A) revenue; profits; production
B) investment; consumption; government spending
C) production; income; expenditure
D) expenditure; income; national saving
E) profits; production; national saving
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C |
If, in a given period, the rate of inflation turns out to be 9% while lenders and borrowers (who are parties to a fixed money rate loan) anticipated 6%, the effect is:
A) both the nominal and real payments of borrowers will be higher than expected.
B) the nominal income of lenders will be higher than expected, but their real income will be lower than expected.
C) neither the nominal nor the real payments of borrowers will be different from what was expected.
D) the real payments of borrowers will be higher than expected, but their nominal payments will be as expected.
E) the nominal income of the lenders will be as expected, but their real income will be lower than expected.
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E |
If there is disinflation at the same time that physical output is increasing, then:
A) nominal GDP is falling and real GDP is rising.
B) Real GDP is rising, but nominal GDP can be falling, rising, or remaining constant.
C) nominal GDP is rising and real GDP is falling.
D) nominal GDP is constant and real GDP is rising.
E) nominal GDP and real GDP are both rising.
|
E |
In a country with 250 million people aged 16 years and older, with a labor force participation rate of 60%, and with 135 million employed, the unemployment rate is equal to _______ percent.
A) 21.60 B) 6.00 C) 11.11 D) 10.00 E) 46.00
|
D |
"If Congress cuts income taxes, demand for output is not likely to increase" is a _______ statement about ______ policy.
A) normative; fiscal
B) positive; monetary
C) positive; fiscal
D) negative; structural
E) normative; structural
|
C |
Suppose a jar of orange marmalade that is ultimately sold to a consumer at The Corner Groceries is produced by the following production process:
Name of Company; Revenues; Cost of Purchased Inputs --- respectively:
Citrus Growers Inc.; $1.25; $0
Florida Jam Company.; $2.75; $1.25
The Corner Groceries; $4.50; $2.75
If the oranges were grown and the jam produced in the year 2003, but the marmalade was sold at The Corner Groceries in the year 2004, the contribution of these transactions to GDP in the year 2004 is ______ .
|
E |
In the base year real GDP ______ nominal GDP.
A) is less than
B) could be less than or equal to
C) is equal to
D) could be greater or less than
E) is greater than
|
C |
If Honda, a Japanese corporation produces motorcycles in Germany and exports them for sale to the U.S., then the value of the output is in _______ .
A) Germany GNP
B) U.S. GDP
C) U.S. GNP
D) Germany GDP
E) Japan GDP
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D |
For a hypothetical economy in a given year, nominal GDP is $6000 per year, the GDP deflator is 150 and nominal consumption is $4500 per year. What is the value of real GDP for that year?
A) $3000 B) $6000 C) $4000 D) $6750 E) $9000
|
C |
If, on a deposit to a bank account, the annual NOMINAL interest rate is 4% and the annual REAL interest rate is 3%, then at the end of one year:
A) the inflation rate over the year will have been 3%.
B) the bank account will show a dollar balance 3% higher.
C) the purchasing power of the deposit will be 4% higher.
D) the purchasing power of the deposit will be 1% higher.
E) the bank account will show a dollar balance 4% higher.
|
E
The nominal interest rate is the percentage increase in the dollar value of the deposit while the real interest rate takes into account price changes measuring the percentage increase in the amount of goods that can be purchased.
|
_________ is a stock variable.
A) Saving
B) The trade deficit
C) GDP
D) Government spending
E) Capital
|
E |
Suppose a year's tuition at MSU cost $800 in 1972 when the CPI equaled 40 and the cost of a year's tuition increased to $4000 in 2004 when the CPI equaled 200. The real cost of tuition between 1972 and 2004:
A) may have either increased or remained constant.
B) increased.
C) remained constant.
D) may have either decreased, or remained constant.
E) decreased.
|
C |
An economy produces 700 tables valued at $100 each. Households purchase 100 domestically produced tables. Businesses purchase 200 tables of which 50 are imported. The government purchases 100 domestically produced tables and 150 domestically produced tables are sold abroad. The unsold tables at the end of the year are held in inventory by the table manufacturers. What is the value of the investment component of GDP?
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$40,000
Investment is the change in business inventory of tables and business purchases of tables. The change in inventory of the domestic table manufacturer is 200 tables (unsold) and business purchases are 200 tables for a total of 400 tables at $100 each, or $40,000. (200 tables are unsold because 700 are produced and only 500 are purchased --- 100 by households, 150 by business, the government 100, and 150 are exported.)
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Because Congress fixes the minimum wage in nominal terms, when there is inflation, the nominal minimum wage _____ and the real minimum wage _____.
A) remains constant; increases
B) increases; remains constant
C) increases; falls
D) falls; remains constant
E) remains constant; falls
|
E |
A labor contract provides for a first-year wage of $15 per hour, and specifies that the real wage will rise by 4 percent in the second year of the contract. The CPI is 150 in the first year and 180 in the second year. What dollar wage must be paid in the second year?
A) $15.60 B) $28.08 C) $18.60 D) $18.72 E) $18.00
|
D |
When macroeconomists add together the purchases of houses, cars, food, clothing, entertainment, and other goods and services by households in an economy, they are using _____ .
A) fiscal policy
B) normative analysis
C) macroeconomic policy
D) positive analysis
E) aggregation
|
E |
The typical family on the Planet Econ consumed 10 pizzas and 20 gallons of milk in 2002, the base year, at which time pizzas cost $16 each and milk cost $2 per gallon. In 2003, the typical family consumed 16 pizzas and 30 gallons of milk at which time the price of pizzas went down to $15 each, while the price of milk increased to $3 per gallon. The consumer price index for 2003 equaled ______ .
A) 165 B) 105 C) 117 D) 135 E) 158
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E |
Suppose it is observed that in a certain year after the base year, real GDP is greater than nominal GDP. Then it must be true for that year:
|
there has been deflation since the base year.
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The value of goods produced and intended to be sold to households, but are not purchased by households in the current period is:
A) nevertheless counted in GDP in the current period as consumption.
B) allocated to GDP in future periods on the basis of value added in those periods.
C) not as indicated in any of the other choices.
D) counted in GDP next period as consumption when purchased by households then.
E) counted in GDP next period as investment when purchased by households then.
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C |
The consumer price index for Planet Econ consists of only two items: books and hamburgers. In 2004, the base year, the typical consumer purchased 25 books for $20 each and 100 hamburgers for $5 each. In 2005, the typical consumer purchased 15 books for $40 each and 250 hamburgers for $3 each. The consumer price index for 2005 on Planet Econ, rounded to the nearest integer, equals:
A) 87 B) 135 C) 115 D) 130 E) 155
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D |
In Econland, population increased from 100 to 200, the number of employed workers increased from 80 to 120, but the standard of living decreased from $4000 per person to $3000 per person. Total output in Econland _____ and average labor productivity _____.
A) increased; decreased
B) increased; remained constant
C) decreased; increased
D) increased; increased
E) decreased; decreased
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B |
Who of the following is counted as unemployed?
A) Anna Marie spends all of her time taking care of her children at home.
B) Frank would like to work, but has not looked for work because he believes no jobs are available.
C) Melissa has a Ph.D. in physics, but is currently employed full time driving a taxi.
D) Ray wants to work forty hours per week, but can only find work for twenty hours per week.
E) Martin has been offered several jobs in the past four weeks, but has chosen not to accept any of the offers.
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E |
_________ is a stock variable.
A) Government debt
B) GDP
C) The trade deficit
D) Consumption
E) Government spending
|
A |
"If Congress increases regulation of the airline industry, there will be fewer bankrupt airlines" is a _______ statement about ______ policy.
A) normative; fiscal
B) positive; structural
C) positive; fiscal
D) normative; structural
E) positive; monetary
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B |
If Congress were to index the minimum wage to inflation, then when there is inflation minimum wage earners can expect:
A) increasing real wages.
B) decreasing nominal wages.
C) constant real wages.
D) decreasing real wages.
E) constant nominal wages.
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C |
One family received a paycheck of $28,000 in 1990. Over the next five years, the family paycheck increased by 15%, while the CPI increased by 12%. After the five years, this family's nominal paycheck ______ and their real paycheck ______.
A) increased; did not change
B) increased; decreased
C) decreased; increased
D) decreased; decreased
E) increased; increased
|
E |
Bob's Barber Shop cut 10,000 heads of hair inthe year 2004 and 12,000 in the year 2005. The price of a hair cut was $12 in2004 and $15 in 2005. If the year 2004 is the base year, what was Bob'scontribution to real GDP in the year 2005?
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$144,000
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If the simple inflation rate is 40% atthe same time (one year) a $1000 bank deposit increases to $1512, then thesimple one-year real return from the deposit will be ______ .
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8 percent
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If an economy experiences deflation at the same time that physical output is falling, then:
A) nominal GDP and real GDP are both falling.
B) nominal GDP is falling and real GDP is rising.
C) Real GDP is falling, but nominal GDP can be falling, rising, or remaining constant.
D) nominal GDP and real GDP are both rising.
E) nominal GDP is rising and real GDP is falling.
|
A |
An economy produces 800 computers valued at $900 each. Households purchase 300 computers of which 100 are imported.Businesses purchase 300 computers of which 200 are imported. The government purchases 200 domestically produced computers and 100 domestically produced computers are sold abroad. The unsold computers at the end of the year are held in inventory by the computer manufacturers. What is value of the investment component of GDP?
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$450,000
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At increased rates of inflation, more frequent trips by consumers to the bank to make cash withdrawals will result in a reduction:
A) in the tax distortion generated by inflation.
B) in the shoe leather costs of inflation.
C) of the Fisher effect on interest rates and consumer bank accounts.
D) of the loss in real value of consumer asset holdings.
E) of the "noise" in the price system.
|
D |
A labor contract provides for a first-year wage of $20 per hour, and specifies that the real wage will rise by 7 percent in the second year of the contract. The CPI is 80 in the first year and 88 in the second year. What dollar wage must be paid in the second year?
A) $24.00 B) $22.47 C) $23.40 D) $23.54 E) $21.40
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D |
Suppose, in 2001, an automobile manufacturer pays $300 for a newly produced car windshield and pays $400 for four unused car tires produced new in 2000. In 2002, the automobile manufacturer pays $200 for a newly produced car CD player, and sells new cars made with all of these parts (from 2000, 2001 and 2002) for $25,000. Then all of these activities contribute _____ to 2002 GDP and the value added in 2002 by the automobile manufacturer is _____.
A) $25,000; $24,800
B) $25,000; $24,100
C) $24,300; $24,100
D) $25,200; $25,000
E) $24,300; $23,400
|
C |
If, on a deposit to a bank account, the annual NOMINAL interest rate is 8% and the annual REAL interest rate is 5%, then at the end of one year
A) the bank account will show a dollar balance 3% higher.
B) the purchasing power of the deposit will be 5% higher.
C) the inflation rate over the year will have been approximately 8%.
D) the purchasing power of the deposit will be 3% higher.
|
B |
If General Motors, a U.S. corporation, produces automobiles in China and exports them for sale to South Korea, then the value of the automobile output is in _______ .
A) China GDP
B) South Korea GDP
C) South Korea GNP
D) U.S. GDP
E) China GNP
|
A |
Private saving is equal to _____ .
A) taxes minus government spending
B) disposable income not consumed
C) output minus consumption minus government spending
D) national saving
E) public saving
|
B |
If workers and employers agree to a three-year wage contract, without conditions, expecting 3% inflation and inflation turns out to be 5%, then:
A) the nominal employer wage payments will be higher than expected, but their real wage payments will be lower than expected.
B) both the nominal and real wages received by workers will be higher than expected.
C) the real real wages received by workers will be higher than expected, but their nominal wages received will be as expected.
D) neither the nominal nor the real wages received by workers will be different from what was expected.
E) the nominal employer wage payments will be as expected, but their real wage payments will be lower than expected.
|
E |
_________ is a flow variable.
A) The money supply
B) The value of bond holdings
C) Bond interest payments
D) The national debt
E) Your wealth
|
C |
In a country with 320 million people aged 16 years and older, with 120 million of them NOT in the labor force, and with 160 million employed, the labor force participation rate is _____ and the unemployment rate is _____ .
A) 62.5%; 20%
B) 62.5%; 25%
C) 50.0%; 25%
D) None of the other choices is correct for both answers.
E) 50.0%; 20%
|
A |
Which of the following statements is true about the relationship between a nominal quantity and a real quantity?
A) A real quantity indicates the amount of money received, while a nominal quantity indicates the real quantity's purchasing power.
B) A nominal quantity is adjusted for inflation; a real quantity is not.
C) A nominal quantity is measured in current dollar values, but a real quantity is measured in terms of physical quantity.
D) A nominal quantity minus a real quantity equals purchasing power.
E) A real quantity minus a nominal quantity equals purchasing power.
|
C |
Suppose a year's tuition at MSU cost $1000 in 1975 when the CPI equaled 45 and the cost of a year's tuition increased to $4100 in 2000 when the CPI equaled 180. The real cost of tuition between 1975 and 2000:
A) decreased.
B) increased.
C) remained constant.
D) may have either increased or remained constant.
E) may have either decreased, or remained constant.
|
B |