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A) B) C) D)
1.The economic statistic used to measure the level of prices is: GDP. CP . GNP. real GDP.
A) B) C) D)
!.The statistic used "# economists to measure the value of economic output is: the CP. GDP. the GDP deflator. the unemplo#ment rate.
A) B) C) D)
$.GDP is all of of the follo%in& except the the total: e'penditure of ever#one in the econom#. income of ever#one in the econom#. e'penditure on on the econom#(s output of &oods and se services. output of the econom#.
A) B) C) D)
.The total income of ever#one in the econom# is e'actl# e*ual to the total: e'penditure on on the econom#(s output of &oods and se services. consumption e'penditures of ever#one in the econom#. e'penditures of all "usinesses in the econom#. &overnment e'penditures.
A) B) C) D)
+.An econom#(s ______ e*uals its ______. consumption, income consumption, e'penditure on &oods and services e'penditure on &oods, e'penditures on services total income, total e'penditure on &oods and services Pa&e 1
A) B) C) D)
-. All of the follo%in& are measures of GDP except the the total: All of e'penditures of all "usinesses in the econom#. income from all production in the econom#. e'penditures on all final &oods and services produced. value of all final production.
A) B) C) D)
.t is a national income accountin& rule that all e'penditure on purchases of products p roducts in the econom# is necessaril# e*ual to: profits of firms. %a&es of emplo#ees. income of the producers of the products in the econom#. income of emplo#ees.
A) B) C) D)
A) B) C) D)
A) B) C) D)
/.T%o /.T%o e*uivalent %a#s to vie% GDP are as the: tot total pa# pa#ment ents m mad adee to to all all %or %or0er 0ers in in the the econ econom om# # or or the the total otal prof profiits of of al all fi firm rmss and "usinesses in the econom#. tot total e'pe e'pend ndit itur ures es on all all &oo &oods ds prod produc uced ed in the econ econom om# # or or the the total otal incom ncomee ear earne ned d from producin& all services in the econom#. tot total prof profiits o off all all firm firmss and and "usi "usine nessses ses in in the the econ econom om# # or or the the total otal cons consum umpt ptio ion n of of &oods and services "# all households in the econom#. tot total inco incom me of of ever ever# #one one in in the the econ econom om# # or or the the tot total al e'pe e'pend ndiiture ure on on the the econ econom om# #(s output of &oods and services.
.n the circular flo% model2 the flo% of dollars d ollars from firms to households is paid _____ and the flo% of dollars from households to firms is paid _____. as %a&es and profits, for &oods and services for value added, as imputed values in current dollars, in constant dollars as interest and dividends, for depreciation and ta'es
13.4hich of the follo%in& is a flo% varia"le5 %ealth the num"er unemplo#ed &overnment de"t income
11.4hich of the follo%in& is a stoc0 varia"le5 A) %ealth B) consumption
Pa&e !
A) B) C) D)
-. All of the follo%in& are measures of GDP except the the total: All of e'penditures of all "usinesses in the econom#. income from all production in the econom#. e'penditures on all final &oods and services produced. value of all final production.
A) B) C) D)
.t is a national income accountin& rule that all e'penditure on purchases of products p roducts in the econom# is necessaril# e*ual to: profits of firms. %a&es of emplo#ees. income of the producers of the products in the econom#. income of emplo#ees.
A) B) C) D)
A) B) C) D)
A) B) C) D)
/.T%o /.T%o e*uivalent %a#s to vie% GDP are as the: tot total pa# pa#ment ents m mad adee to to all all %or %or0er 0ers in in the the econ econom om# # or or the the total otal prof profiits of of al all fi firm rmss and "usinesses in the econom#. tot total e'pe e'pend ndit itur ures es on all all &oo &oods ds prod produc uced ed in the econ econom om# # or or the the total otal incom ncomee ear earne ned d from producin& all services in the econom#. tot total prof profiits o off all all firm firmss and and "usi "usine nessses ses in in the the econ econom om# # or or the the total otal cons consum umpt ptio ion n of of &oods and services "# all households in the econom#. tot total inco incom me of of ever ever# #one one in in the the econ econom om# # or or the the tot total al e'pe e'pend ndiiture ure on on the the econ econom om# #(s output of &oods and services.
.n the circular flo% model2 the flo% of dollars d ollars from firms to households is paid _____ and the flo% of dollars from households to firms is paid _____. as %a&es and profits, for &oods and services for value added, as imputed values in current dollars, in constant dollars as interest and dividends, for depreciation and ta'es
13.4hich of the follo%in& is a flo% varia"le5 %ealth the num"er unemplo#ed &overnment de"t income
11.4hich of the follo%in& is a stoc0 varia"le5 A) %ealth B) consumption
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C) D)
investment income
A) B) C) D)
1!. All of the follo%in& are a stoc0 except : All of a consumer(s %ealth. the &overnment "ud&et deficit. the num"er of unemplo#ed people. the amount of capital in the econom#.
A) B) C) D)
1$. All of the follo%in& are a flo% except : All of the num"er of ne% automo"ile purchases. the num"er of people losin& their 6o"s. "usiness e'penditures on on pl plant an and e* e*uipment. the &overnment de"t.
A) B) C) D)
1.The amount of capital in an econom# is a ______ and the amount of investment is a ______. flo%, stoc0 stoc0, flo% final &ood, intermediate &ood intermediate &ood, final &ood
A) B) C) D)
1+.The mar0et value of all final &oods and services produced %ithin an econom# in a &iven period of time is called: industrial production. &ross domestic product. the GDP deflator. &eneral dura"le purchases.
A) B) C) D)
1-.GDP is the mar0et value of all ______ &oods and services produced %ithin an econom# in a &iven period of time. used intermediate consumer final
1.To compute the value of GDP: A) &oods and services are valued at mar0et prices. B) the sale of used &oods is included. C) production for inventor# is not included.
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D)
&oods and services are valued "# %ei&ht.
A) B) C) D)
1/.Assume that total output consists of apples and - oran&es and that apples cost 71 each and oran&es cost 73.+3 each. n this case2 the value of GDP is: 13 pieces of fruit. 7. 7/. 713.
A) B) C) D)
1. All of the follo%in& transactions that too0 place in !33 %ould "e included in GDP for !33 except the purchase of a: "oo0 printed in !332 entitled The Year 3000 . !331 8eep Chero0ee. #ear !313 calendar printed in !33. tic0et to see the movie 2001.
A) B) C) D)
!3.9ince GDP includes onl# the additions to income2 not transfers of assets2 ______ are not included in the computation of GDP. final &oods used &oods consumption &oods &oods produced for inventor#
A) B) C) D)
!1.4hen a firm sells a product out of inventor#2 GDP: increases. decreases. is not chan&ed. increases or decreases2 dependin& on the #ear the product %as produced.
A) B) C) D)
!!.4hen a firm sells a product out of inventor#2 investment e'penditures ______ and consumption e'penditures ______. increase, decrease decrease, increase decrease, remain unchan&ed remain unchan&ed, increase
!$.Assume that a "a0er# hires more %or0ers and pa#s them %a&es and that the %or0ers produce more "read. GDP increases in all of the follo%in& cases except %hen the "read: A) is sold to households. B) is stored a%a# for later sale.
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C) D)
&ro%s stale and is thro%n a%a#. is sold to other firms.
A) B) C) D)
!.4hen "read is "a0ed "ut put a%a# for later sale2 this is called: %aste. savin&. fi'ed investment. investment in inventor#.
A) B) C) D)
!+.Assume that a rancher sells cDonald(s a *uarter;pound of meat for 7 1 and that cDonald(s sells #ou a ham"ur&er made from that meat for 7!. n this case2 the value included in GDP should "e: 73.+3. 71. 7!. 7$.
A) B) C) D)
!-.Assume that a tire compan# sells tires to an automo"ile compan# for 7332 another compan# sells a compact disc pla#er for 7+332 and the automo"ile compan# puts all of these items in or on a car that it sells for 7!32333. n this case2 the amount from these transactions that should "e counted in GDP is: 7!32333. 7!32333 less the automo"ile compan#(s profit on the car. 7!3233. 7!3233 less the profits of all three companies on the items that the# sold.
A) B) C) D)
A) B) C) D)
!.The value added of an item produced refers to: a firm(s profits on the item sold. the value of the la"or inputs in the production of an item. the value of a firm(s output less the value of its costs. the value of a firm(s output less the value of the intermediate &oods that the firm purchases.
!/.Assume that a firm "u#s all the parts that it puts into an automo"ile for 71323332 pa#s its %or0ers 7132333 to fa"ricate the automo"ile2 and sells the automo"ile for 7!!2333. n this case2 the value added "# the automo"ile compan# is: 7132333. 71!2333. 7!32333. 7!!2333.
Pa&e +
A) B) C) D)
!.n computin& GDP2 e'penditures on used &oods are included. production added to inventories is e'cluded. the amount of production in the under&round econom# is imputed. the value of intermediate &oods is included in the mar0et price of the final &oods.
A) B) C) D)
$3.To avoid dou"le countin& in the computation of GDP2 onl# the value of ______ &oods are included. final used intermediate investment
A) B) C) D)
$1.mputed values included in GDP are the: mar0et prices of &oods and services. estimated value of &oods and services that are not sold in the mar0etplace. price of &oods and services measured in constant prices. price of &oods and services measured in current prices.
A) B) C) D)
$!.An e'ample of an imputed value in the GDP is the: value;added of meals coo0ed at home. housin& services en6o#ed "# homeo%ners. services of automo"iles to their o%ners. value of ille&al dru&s sold.
A) B) C) D)
$$.n principle2 the GDP accounts should<"ut do not
A) B) C) D)
$.The under&round econom#: is included in the latest GDP accounts. includes onl# ille&al activities. includes domestic %or0ers for %hom 9ocial 9ecurit# ta' is not collected. e'cludes the ille&al dru& trade.
$+.=eal GDP is measured in _____ prices ____ time. A) current, at a point in
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B) C) D)
current, per unit of constant, at a point in constant, per unit of
A) B) C) D)
$-.Nominal GDP is measured in _____ prices _____ time. current, at a point in current, per unit of constant, at a point in constant, per unit of
A) B) C) D)
$.Nominal GDP means the value of &oods and services is measured in ______ prices. current real constant avera&e
A) B) C) D)
$/.=eal GDP means the value of &oods and services is measured in ______ prices. current actual constant avera&e
A) B) C) D)
$.Assume that apples cost 73.+3 in !33! and 71 in !332 %hereas oran&es cost 71 in !33! and 71.+3 in !33. f apples %ere produced in !33! and + in !332 %hereas $ oran&es %ere produced in !33! and in !332 then real GDP >in !33! prices) in !33 %as: 7+. 7-.+3. 7.+3. 711.
A) B) C) D)
3.The "est measure of the economic satisfaction of the mem"ers of a societ# is: nominal GDP. real GDP. the rate of inflation. the value of corporate profits.
1.f nominal GDP in !33 e*uals 71 trillion and real GDP in !33 e*uals 711 trillion2 %hat is the value of the GDP deflator5 A) 3. B) 1.3$
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C) D)
1.! 1.$3
A) B) C) D)
!.f the GDP deflator in !33 e*uals 1.!+ and nominal GDP in !33 e*uals 71+ trillion2 %hat is the value of real GDP in !335 71! trillion 71!.+ trillion 71+ trillion 71/.+ trillion
A) B) C) D)
$.The GDP deflator is e*ual to: the ratio of nominal GDP to real GDP. the ratio of real GDP to nominal GDP. real GDP minus national GDP. nominal GDP minus real GDP.
A) B) C) D)
.Assume that apples cost 73.+3 in !33! and 71 in !332 %hereas oran&es cost 71 in !33! and 71.+3 in !33. f apples %ere produced in !33! and + in !332 %hereas $ oran&es %ere produced in !33! and + in !332 then the GDP deflator in !332 usin& a "ase #ear of !33!2 %as appro'imatel#: 1.+. 1.. 1.. !.3.
A) B) C) D)
+.f nominal GDP &re% "# + percent and real GDP &re% "# $ percent2 then the GDP deflator &re% "# appro'imatel# ______ percent. ! $ + /
A) B) C) D)
-.f nominal GDP increased "# + percent and the GDP deflator increased "# $ percent2 then real GDP ______ "# ______ percent. increased, ! decreased, ! increased, / decreased, /
.Nominal GDP measures the value of &oods and services in ______ prices2 %hile real
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A) B) C) D)
A) B) C) D)
GDP measures the value of &oods and services in ______ prices. forei&n, domestic domestic, forei&n current, constant constant, current
/.=eal GDP is a "etter measure of economic %ell;"ein& than nominal GDP2 "ecause real GDP: e'cludes the value of &oods and services e'ported a"oard. includes the value of &overnment transfer pa#ments. measures chan&es in the *uantit# of &oods and services produced "# holdin& prices constant. ad6usts the value of &oods and services produced for chan&es in the forei&n e'chan&e rate.
A) B) C) D)
.Chain;%ei&hted measures of real GDP ma0e use of prices from: an unchan&in& "ase #ear. a continuousl# chan&in& "ase #ear. a "ase #ear that is chan&ed appro'imatel# ever# + #ears. a "ase #ear that is chan&ed appro'imatel# ever# 13 #ears.
A) B) C) D)
+3.The ne% chain;%ei&hted measures of real GDP are an improvement over traditional measures "ecause the prices used to compute real GDP are: never far out of date. al%a#s from the same "ase #ear. imputed. chained to the CP.
A) B) C) D)
+1.The national income accounts identit#2 for an open econom#2 is: Y ? C @ I @ G NX . Y ? C @ I @ G @ NX . Y ? C @ I @ G. Y ? C @ I G.
A) B) C) D)
+!.f GDP >measured in "illions of current dollars) is 7+2-+2 consumption is 7$2-+2 investment is 712 and &overnment purchases are 7123/2 then net e'ports are: 71$1. 71$1. 7$1. 7$1.
Pa&e
A) B) C) D)
+$.f GDP >measured in "illions of current dollars) is 7+2-+2 consumption is 7$2-+2 investment is 712 and net e'ports are 712132 then &overnment purchases are: 7!2. 71213. 7/$. 7123-.
A) B) C) D)
+.f real GDP &re% "# - percent and population &re% "# ! percent2 then real GDP per person &re% "# appro'imatel# ______ percent. ! $ /
A) B) C) D)
++.n the national income accounts2 consumption e'penditures include all of the follo%in& except household purchases of: dura"le &oods. nondura"le &oods. ne% residential housin&. services.
A) B) C) D)
+-.n the national income accounts2 the purchase of dura"les2 nondura"les2 and services "# households are classified as: consumption. investment. &overnment purchases. net e'ports.
A) B) C) D)
+.f total consumption >measured in "illions of current dollars) e*uals 7$2-+2 co nsumption of dura"le &oods is 7/32 and consumption of nondura"le &oods is 71212 then consumption of services is: 712-. 7!2-$. 7!23/$. 712/$.
+/.n the national income accounts2 &oods "ou&ht for future use are classified as %hich t#pe of e'penditure5 A) services B) investment
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C) D)
&overnment purchases net e'ports
A) B) C) D)
+.f total investment >measured in "illions of current dollars) e*uals 712 "usiness fi'ed investment is 7+!2 and residential fi'ed investment is 7!!!2 then inventor# investment is: 7+. 7+. 71+. 71+.
A) B) C) D)
-3.n the national income accounts2 all of the follo%in& are classified as &overnment purchases except : pa#ments made to 9ocial 9ecurit# recipients. services provided "# police officers. purchases of militar# hard%are. services provided "# .9. senators.
A) B) C) D)
-1.n the national income accounts2 &overnment purchases are &oods and services purchased "#: the federal &overnment. the federal and state &overnments. the state and local &overnments. the federal2 state2 and local &overnments.
A) B) C) D)
-!.n the national income accounts2 net e'ports e*ual: e'ported &oods minus imported &oods. e'ported &oods and services minus imported &oods and services. e'ported &oods minus imported services. e'ported &oods and services plus imported &oods and services.
A) B) C) D)
-$.f GDP >measured in "illions of current dollars) is 7+2-+ and the sum of con sumption2 investment2 and &overnment purchases is 7+2-2 %hile e'ports e*ual 7-$2 imports are: 7-$. 7-$. 73. 73.
-. All of the follo%in& actions are investments in the sense of the term used "# macroeconomists except :
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A) B) C) D)
B(s "uildin& a ne% factor#. corner cand# store(s "u#in& a ne% computer. 8ohn 9mith(s "u#in& a ne%l# constructed home. 9andra 9antia&o(s "u#in& 133 shares of B stoc0.
A) B) C) D)
-+.The investment component of GDP includes all of the follo%in& except : purchases of corporate stoc0. spendin& on ne% plants and e*uipment. purchases of ne% housin& "# households. chan&es in "usiness inventories.
A) B) C) D)
--.n !31$2 the GDP of the nited 9tates totaled a"out: 71-./ "illion. 71-/ "illion. 71-./ trillion. 71-/ trillion.
A) B) C) D)
-.n !31$2 GDP per person in the nited 9tates %as appro'imatel#: 7+2333. 7$+2333. 7+$2333. 7$+$2333.
A) B) C) D)
-/.n !31$ in the nited 9tates2 the appro'imate amount of GDP >in current dollars) that %as spent on consumption per person %as: 7$-233. 7+$2133. 7/2 33. 71-2/33.
A) B) C) D)
-.n !31$ in the nited 9tates2 total &overnment purchases per person >in current dollars) amounted to appro'imatel#: 71233. 7233. 71$2+33. 7!+2-33.
3.n !31$2 American net "orro%in&s from a"road2 per person2 in current dollars2 amounted to appro'imatel#: A) 7133.
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B) C) D)
7!!3. 712-33. 7132333.
A) B) C) D)
1.GNP e*uals GDP ______ income earned domesticall# "# forei&ners ______ income that nationals earn a"road. plus, plus minus, minus minus, plus plus, minus
A) B) C) D)
!.Net national product e*uals GNP: plus net investment. minus net investment. plus depreciation. minus depreciation.
A) B) C) D)
$.National income differs from net national product "# an amount called: depreciation. indirect "usiness ta'es. statistical discrepanc#. net forei&n factor income pa#ments.
A) B) C) D)
.The lar&est component of national income is: corporate profits. compensation of emplo#ees. proprietors( income. net interest.
A) B) C) D)
+.Disposa"le personal income: is computed "# su"tractin& personal ta' from personal income. is &enerall# &reater than personal income. includes corporate profits "ut not dividends. does not include &overnment transfers to individuals.
-.Accordin& to the usual seasonal pattern of the .9. econom#2 GDP is hi&hest in the *uarter of the #ear that includes: A) 8anuar#2 e"ruar#2 and arch. B) April2 a#2 and 8une. C) 8ul#2 Au&ust2 and 9eptem"er.
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D)
cto"er2 Novem"er2 and Decem"er.
D)
.The CP is determined "# computin&: an avera&e of prices of all &oods and services. the price of a "as0et of &oods and services that chan&es ever# #ear2 relative to the same "as0et in a "ase #ear. the price of a fi'ed "as0et of &oods and services2 relative to the price of the same "as0et in a "ase #ear. nominal GDP relative to real GDP.
A) B) C) D)
/.Prices of items included in the CP are: avera&ed %ith the price of ever# item %ei&hted e*uall#. %ei&hted accordin& to amount of the item produced in GDP. %ei&hted accordin& to *uantit# of the item purchased "# the t#pical household. chained to the "ase #ear "# the #ear;to;#ear &ro%th rate of the item.
A) B) C) D)
.Assume that apples cost 73.+3 in !33! and 71 in !332 %hereas oran&es cost 71 in !33! and 73.+3 in !33. f 13 apples and + oran&es %ere purchased in !33!2 and + apples and 13 oran&es %ere purchased in !332 the CP for !332 usin& !33! as the "ase #ear2 is: 3.+. 3./3. 1. 1.!+.
A) B) C) D)
/3.The core inflation rate: measures the chan&e in producer prices. is measured usin& a Paasche inde'. e'cludes food and ener&# prices. includes the price of e'ports and includes the price of imports.
A) B) C) D)
/1.easurin& the rate of inflation usin& a mar0et "as0et that e'cludes food and ener&# prices is preferred "# some anal#sts "ecause this measure2 called core inflation2 provides a real2 rather than a nominal2 rate of inflation. &ives a "etter measure of on&oin&2 sustained price chan&es. is more consistent %ith measures of inflation used in other countries. fluctuates more than measures of inflation that include food and ener&# prices.
A) B) C)
/!.An increase in the price of &oods "ou&ht "# firms and the &overnment %ill sho% up in: A) the CP "ut not in the GDP deflator. B) the GDP deflator "ut not in the CP.
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C) D)
"oth the CP and the GDP deflator. neither the CP nor the GDP deflator.
A) B) C) D)
/$.An increase in the price of imported &oods %ill sho% up in: the CP "ut not in the GDP deflator. the GDP deflator "ut not in the CP. "oth the CP and the GDP deflator. neither the CP nor the GDP deflator.
A) B) C) D)
/.nli0e the GDP deflator2 the CP includes the prices of: &oods purchased "# firms. &oods purchased "# &overnments. e'ported &oods. imported &oods.
A) B) C) D)
/+.Assume that the mar0et "as0et of &oods and services purchased in !33 "# the avera&e famil# in the nited 9tates costs 712333 in !33 prices2 %hereas the same "as0et costs 7!12333 in !33 prices. Eo%ever2 the "as0et of &oods and services actuall# purchased "# the avera&e famil# in !33 costs 7!32333 in !33 prices2 %hereas this same "as0et %ould have cost 71+2333 in !33 prices. Given this data2 a Faspe#res price inde' of !33 prices usin& !33 as the "ase #ear %ould "e: 1.3+. appro'imatel# 1.3. appro'imatel# 1.$$. 1.+3.
A) B) C) D)
/-.Assume that the mar0et "as0et of &oods and services purchased in !33 "# the avera&e famil# in the nited 9tates costs 712333 in !33 prices2 %hereas the same "as0et costs 7!12333 in !33 prices. Eo%ever2 the "as0et of &oods and services actuall# purchased "# the avera&e famil# in !33 costs 7!32333 in !33 prices2 %hereas this same "as0et %ould have cost 71+2333 in !33 prices. Given these data2 a Paasche inde' for !33 usin& !33 prices %ould "e: 1.3+. appro'imatel# 1.3. appro'imatel# 1.$$. 1.+3.
/.The CP is a: A) Faspe#res price inde'. B) Paasche price inde'. C) Faspe#res *uantit# inde'.
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D)
Paasche *uantit# inde'.
A) B) C) D)
//.The GDP deflator is a: Faspe#res price inde'. Paasche price inde'. Faspe#res *uantit# inde'. Paasche *uantit# inde'.
A) B) C) D)
/.4hen prices of different &oods are increasin& "# different amounts2 the price inde' that %ill rise the fastest is: isher(s ideal inde'. the CP. the GDP deflator. a Paasche inde'.
A) B) C) D)
3.The panel of economists appointed "# the 9enate inance Committee estimated that the CP ______ inflation "# appro'imatel# ______ percenta&e point>s) per #ear. overestimates, 1 overestimates, 13 underestimates, 1 underestimates, 13
A) B) C) D)
1.The num"er of households intervie%ed in the monthl# emplo#ment surve# of the .9. Bureau of Fa"or 9tatistics is appro'imatel#: -2333. -32333. -332333. - million.
A) B) C) D)
!.Accordin& to the definition used "# the .9. Bureau of Fa"or 9tatistics2 a person is not in the la"or force if that person: is &oin& to school full time. is temporaril# a"sent from a 6o" "ecause of illness. has "een temporaril# laid off. is out of a 6o" and loo0in& for %or0 durin& the previous four %ee0s.
$.Accordin& to the definition used "# the .9. Bureau of Fa"or 9tatistics2 people are considered to "e unemplo#ed if the#: A) are out of a 6o"2 "ut not loo0in& for %or0. B) retired from the la"or force "efore a&e -+.
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C) D)
do not have a 6o"2 "ut have loo0ed for %or0 in the past %ee0s. are a"sent from %or0 "ecause of "ad %eather or illness.
A) B) C) D)
.The la"or force e*uals the: adult population. num"er of emplo#ed individuals. num"er of unemplo#ed individuals. num"er of emplo#ed and unemplo#ed individuals.
A) B) C) D)
+.Assume that the adult population of the nited 9tates is 11.- million2 total emplo#ment is 11.- million2 and . million are unemplo#ed. Then the unemplo#ment rate2 as normall# computed2 is appro'imatel# ______ percent. . . . .
A) B) C) D)
-.f million %or0ers are unemplo#ed2 1$ million %or0ers are emplo#ed2 and the adult population e*uals !33 million2 then the unemplo#ment rate e*uals appro'imatel# ______ percent. $.+ . .
A) B) C) D)
.The la"or;force participation rate is the percenta&e of the: adult population that is emplo#ed. adult population that is in the la"or force. la"or force that is emplo#ed. la"or force that is unemplo#ed.
A) B) C) D)
/.f the unemplo#ment rate is - percent and the num"er of emplo#ed is 1// million2 then the la"or force e*uals ______ million. 11.!/ 1-.! 1// !33
.f an increasin& proportion of the adult population is retired2 then the la"or force participation rate:
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A) B) C) D)
%ill increase. %ill decrease. %ill remain constant. ma# increase2 decrease2 or remain constant.
133.f the adult population e*uals !+3 million2 of %hich 1+ million are emplo#ed and + million are unemplo#ed2 the la"or force participation rate e*uals ______ percent. A) +3 B) +/ C) -3 D) -
131.f the num"er of emplo#ed increases %hile the num"er of unemplo#ed does not chan&e2 the unemplo#ment rate: A) %ill increase. B) %ill decrease. C) %ill not chan&e. D) ma# either increase or decrease.
13!.n the nited 9tates since the end of 4orld 4ar : A) the la"or force participation rates of "oth men and %omen have increased. B) the la"or force participation rates of "oth men and %omen have decreased. C) the la"or force participation rate of men has increased2 %hile the la"or force participation rate of %omen has decreased. D) the la"or force participation rate of men has decreased2 %hile the la"or force participation rate of %omen has increased.
13$.The household surve# conducted "# the Bureau of Fa"or 9tatistics provides estimates of the num"er of %or0ers ______2 %hile the esta"lishment surve# provides estimates of the num"er of %or0ers ______. A) self;emplo#ed, unemplo#ed B) unemplo#ed, self;emplo#ed C) %ith 6o"s, on firms( pa#rolls D) on firms( pa#rolls, %ith 6o"s
13.The emplo#ment statistics computed from the esta"lishment surve# do not include: A) %or0ers %ith t%o 6o"s. B) the self;emplo#ed. C) %or0ers on firms( pa#rolls. D) part;time %or0ers on firms( pa#rolls.
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13+.A %or0er %ith t%o 6o"s is counted: A) once in "oth the household and the esta"lishment surve#s. B) once in the household surve#2 "ut t%ice in the esta"lishment surve#. C) once in the esta"lishment surve#2 "ut t%ice in the household surve#. D) t%ice in "oth the household and the esta"lishment surve#s.
13-.An estimate of the num"er of unemplo#ed %or0ers in the econom# can "e o"tained from: A) "oth the household and esta"lishment surve#s. B) from the household surve#2 "ut not from the esta"lishment surve#. C) from the esta"lishment surve#2 "ut not from the household surve#. D) from neither the household nor the esta"lishment surve#s.
13.An estimate of total emplo#ment in the econom# can "e o"tained from: A) "oth the household and esta"lishment surve#s. B) from the household surve#2 "ut not from the esta"lishment surve#. C) from the esta"lishment surve#2 "ut not from the household surve#. D) from neither the household nor the esta"lishment surve#s.
13/.A farmer &ro%s %heat and sells it to a miller for 71, the miller turns the %heat into flour and sells it to a "a0er for 7$, the "a0er uses the flour to ma0e "read and sells the "read for 7-. The value added "# the miller is: A) 71. B) 7!. C) 7$. D) 7-.
13.A %oman marries her "utler. Before the# %ere married2 she paid him 7-32333 per #ear. Ee continues to %ait on her as "efore >"ut as a hus"and rather than as a %a&e earner). 9he earns 7123332333 per #ear "oth "efore and after her marria&e. The marria&e: A) does not chan&e GDP. B) decreases GDP "# 7-32333. C) increases GDP "# 7-32333. D) increases GDP "# more than 7-32333.
113.A %oman marries her "utler. Before the# %ere married2 she paid him 7-32333 per #ear. Ee continues to %ait on her as "efore >"ut as a hus"and rather than as a %a&e earner). 9he earns 7123332333 per #ear "oth "efore and after her marria&e. f GDP %ere chan&ed so that it trul# measured the sum of all final economic activit#2 the marria&e %ould: A) decrease GDP. B) increase GDP.
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C) D)
leave GDP unchan&ed. first decrease and then increase GDP.
111.A fi'ed;%ei&ht price inde' li0e the CP ______ the chan&e in the cost of livin& "ecause it ______ ta0e into account that people can su"stitute less e'pensive &oods for ones that have "ecome more e'pensive. A) underestimates, does not B) overestimates, does C) accuratel# estimates, does D) overestimates, does not
se the follo%in& to ans%er *uestions 11!;11: 'hi"it: Totals =ecorded for the nited 9tates >"illions of dollars)H Dura"le &oods consumption 7 Nondura"le &oods consumption 12$31 9ervices consumption !2$! Business fi'ed investment +-=esidential fi'ed investment !! nventor# investment ederal &overnment purchases 9tate and local &overnment purchases -/$ 'ports -3 mports -3 'cess of GNP over GDP Depreciation -+/ ndirect "usiness ta'es ++1 Corporate profits >includes %a&e accruals less dis"ursements) $/ 9ocial insurance contri"utions ++ Net interest ! Dividends >includes "usiness transfer pa#ments) 1-! Government transfers to individuals /$ Personal interest income - Personal ta' and nonta' pa#ments -+ HNote: The num"ers &iven in this e'hi"it and the ans%ers to the follo%in& *uestions differ from those in Ta"le !;1 in the "od# of the te't.
11!.>'hi"it: Totals =ecorded for nited 9tates) 4hat %ere GDP2 consumption e'penditures2 investment e'penditures2 &overnment purchases2 and net e'ports5
11$.>'hi"it: Totals =ecorded for nited 9tates) 4hat %ere net national product2 national
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income2 personal income2 and disposa"le personal income5
11.>'hi"it: Totals =ecorded for nited 9tates) 4hat %ere the appro'imate ratios of consumption2 investment2 and &overnment purchases to GDP5
11+.'hi"it: Iuantit# Consumed and Price of Good Base Jear Fater Jear Price of &ood A 133 !33 Iuantit# of &ood A 133 !33 Price of &ood B 133 133 Iuantit# of &ood B 133 133 n the e'hi"it2 the citiKens of countr# LJM come to desire more of &ood A. As a result2 the *uantit# and price of the &ood "oth rise. a. Compute nominal GDP in the "ase #ear and later #ear. ". Compute real GDP in the "ase and later #ears >in "ase;#ear prices). c. Compute the GDP deflator in the later #ear2 usin& #our ans%ers to parts a and ". d. Compute a fi'ed;%ei&ht price inde' for the later #ear2 usin& the "ase;#ear *uantities as %ei&hts. e. 4hich price inde' rises faster2 the GDP deflator >Paasche) inde' or the fi'ed;%ei&ht inde' >Faspe#res) inde'5
11-.Assume t%o countries have the same nominal GDP >measured in the same currenc# usin& the same accountin& rules). 'plain at least three reasons %h# #ou cannot assume that citiKens in each countr# en6o# appro'imatel# the same level of economic %ell;"ein&.
11.conomic statistics are not perfect. 'plain at least one %a# in %hich ea ch of the follo%in& statistics as currentl# calculated in the nited 9tates fails to completel# or accuratel# measure the correspondin& economic concept >in parentheses): a. real GDP per person >economic %ell;"ein&), ". CP >cost of livin&), c. unemplo#ment rate >involuntar# unemplo#ment).
11/.There are a num"er of statistics computed to measure the price level2 such as the GDP deflator and the CP. The choice of %hich of these measures to use depends in man# cases on the specific *uestion in %hich #ou are interested. or each of the follo%in& situations2 state %hether the CP or GDP deflator is a more appropriate measure to use and e'plain %h# the statistic is preferred. a. Jou are interested in loo0in& at the impact of hi&her prices of imported oil in the overall cost of livin&. ". The &overnment is interested in %hether increases in defense spendin& are affectin& the price level.
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c.
An economic consultin& firm is investi&atin& the impact on the a&&re&ate price level of more computers and electronic technolo&# used in production.
11.ne senator criticiKes the &overnment for ma0in& an inade*uate effort to stimulate the econom# "ased on data from the BF9 esta"lishment surve# that sho%s the num"er of 6o"s in the econom# has fallen. Another senator counters that the num"er of emplo#ed %or0ers in the econom# has increased over the same period2 "ased on the BF9 household surve#. 'plain ho% "oth senators can "e correct.
1!3.There are a num"er of measures of a&&re&ate economic activit#2 such as GDP2 GNP2 national income2 personal income2 and disposa"le personal income. ach of these measures can "e a &ood indicator dependin& on the issue under consideration. or each of the follo%in& issues2 &ive #our reasons for selectin& one of the measures 6ust mentioned as the "est indicator to use in stud#in& the issue: a. the proportion of income households save, ". the relative share of earnin&s &oin& to la"or versus capital, c. the total output of final &oods and services.
1!1.=eal GDP per capita is an imperfect measure of economic %ell;"ein& "ecause it does not value home production or production in the under&round econom#2 amon& other factors. Give at least t%o e'amples that sho% %h# the omission of these t#pes of items %ill ma0e a difference in evaluatin& economic %ell;"ein&. ne e'ample should e'plain ho% the omissions distort comparisons of economic %ell;"ein& across countries and the other e'ample should e'plain ho% the omission distorts comparisons of economic %ell;"ein& in the same countr# over time.
1!!.Based on the data in the ta"le "elo%2 e'plain %hat happened to output and prices in the econom# "et%een !33 and !313. !33 !313 Nominal GDP >7 "illions) 71233 71+2!33 =eal GDP >7 "illions !333 chain %ei&hted) 71!2133 711233
1!$.'plain %h# the value of GDP in !31! %ould or %ould not chan&e as a result of each transaction descri"ed "elo%: a. n !31!2 the 9mith famil# purchases a ne% house that %as "uilt in !31!. ". n !31!2 the 8ones famil# purchases a house that %as "uilt in !331. c. n !31!2 a construction compan# purchases %indo%s to put in the 9mith famil# home that %as "uilt in !31!. d. n !31!2 r. 8ones paints all of the rooms of the 8ones famil# house purchased in !332 usin& paint and supplies purchased in !31!.
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e.
n !31!2 r. 9mith uses an online "ro0era&e service to purchases shares of stoc0 in a construction compan#.
1!.'plain %hich e'penditure cate&or# of GDP chan&es and the direction of the chan&e that results for each transaction descri"ed. a. A domestic "usiness purchases a domesticall# produced computer to use in a "usiness office. ". A domestic "usiness produces a computer that is sold to a forei&n compan#. c. The federal &overnment purchases a domesticall# produced computer to use in a courthouse. d. A domestic household purchases a domesticall# produced computer to use in a home. e. A domestic household purchases a computer produced in a forei&n countr# to use in a home.
1!+.nto %hich of the three cate&ories
1!-.Assume an econom# in %hich the value of the GDP deflator is ! and the current inflation rate is percent. Calculate the real and nominal interest rates.
1!.9am %ants a loan from Dean. 4hile discussin& the interest2 Dean told 9am that he %ill &ive him t%o options. 4hich one should 9am choose and %h#5 The options are: a. 9am %ill pa# the nominal interest of / percent per annum. ". 9am %ill pa# real interest of percent per annum.
1!/.OGDP deflator is a "etter price level indicator than CP. Give reasons "oth supportin& and opposin& the statement.
1!.Cit# A has a total population of 13 million2 of %hich 3 percent are adults. Assume that !3 percent of the adult population is not loo0in& for a 6o" and -3 percent of the remainin& adult population is emplo#ed. Compute:
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a. Fa"or;force participation rate ". nemplo#ment =ate
1$3.s real GDP a "etter measure of economic %ell "ein& of a countr# than nominal GDP5 Give an e'planation for #our ans%er.
1$1.n !31+2 8ohn "u#s a factor# "uilt in !33 and constructs a ne% stora&e house %ithin the premises. The transaction of "u#in& the factor# is not counted in the GDP2 "ut the construction of the stora&e house in the same factor# is counted in GDP. 4h#5
1$!.OGDP as a measurement unit of economic %ell;"ein& has a fla% %hich is removed "# imputations. 'plain %ith an e'ample.
1$$.O li0e eatin& man&oes dail#2 "ut %hen their price rises2 s%itch to man&o 6uice. Does this statement support the fact that CP overstates inflation5 >Assume man&o is included in the &oods "as0et used to calculate the CP2 "ut the man&o 6uice is not included.)
1$.Cass %as paid 7+33 in social securit# from the &overnment. Thou&h it %as e'penditure made "# the &overnment2 it is not included in the G component of GDP. 'plain %h#.
1$+.Bo" "ou&ht 7+333 %orth of Ado"e 9#stems stoc0. This transaction %as "ro0ered "# 8ohn2 %ho received 7+3 for his help. thin0 the 7+333 should "e included in GDP2 and the 7+3 should not "e included in GDP. 9tate %hether am ri&ht or %ron& %ith an e'planation for #our ans%er.
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Answer Ke 1.B !.B $.A .A +.D -.A .C /.D .A 13.D 11.A 1!.B 1$.D 1.B 1+.B 1-.D 1.A 1/.B 1.B !3.B !1.C !!.B !$.C !.D !+.C !-.A !.D !/.B !.D $3.A $1.B $!.B $$.B $.C $+.D $-.B $.A $/.C $.B 3.B 1.C !.A $.A .B
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+.A -.A .C /.C .B +3.A +1.B +!.D +$.A +.C ++.C +-.A +.D +/.B +.B -3.A -1.D -!.B -$.C -.D -+.A --.C -.C -/.A -.B 3.C 1.C !.D $.C .B +.A -.D .C /.C .D /3.C /1.B /!.B /$.A /.D /+.D /-.B /.A //.B /.B 3.A
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1.B !.A $.C .D +.B -.B .B /.D .B 133.C 131.B 13!.D 13$.C 13.B 13+.B 13-.B 13.A 13/.B 13.B 113.C 111.D 11!.-23$, 213, , 121$!, and $3 "illion dollars. 11$.+2$//, +2$//, +21+, and 2+33 "illion dollars. 11.a"out - percent, a"out 1$ percent, and a"out percent 1. 11+.a. Base;#ear nominal GDP ? !32333. Fater;#ear nominal GDP ? +32333. ". =eal GDP in "ase #ear ? !32333. =eal GDP in later #ear ? $32333. c. GNP deflator in later #ear ? 1.--. d. i'ed;%ei&ht inde' ? 1.+3. e. The Paasche inde'2 %ith current *uantit# %ei&hts2 rises faster in this case than the "ase;#ear *uantit#;%ei&hted Faspe#res inde'. 11-.9ome possi"le2 "ut not all2 e'planations include: a. different price levels in the t%o countries %ould result in different amounts of real GDP2 i.e.2 different *uantities of &oods and services availa"le in each coun tr#, ". different;siKed populations could result in different *uantities of &oods and services availa"le per person in each countr#, c. different levels of nonmar0et production in the t%o countries %ould alter the *uantit# of &oods and services availa"le in each countr#, d. different amounts of leisure time availa"le >not captured in nominal GDP fi&ures) %ould cause economic %ell;"ein& to differ in the t%o countries, e. different distri"utions of income in the t%o countries could alter the *uantit# of &oods and services availa"le to the t#pical citiKen in each countr#, f. different *uantities of "oth positive and ne&ative e'ternalities associated %ith producin& GDP2 such as pollution and con&estion2 %hich are not measured in GDP2 %ould cause the different levels of economic %ell;"ein& "et%een the t%o countries.
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11.a.
The official measure of GDP does not include measurements of leisure time availa"le2 nonmar0et production2 production in the under&round econom#2 the distri"ution of income2 or production e'ternalities >e.&.2 pollution). ". The CP does not allo% su"stitution a%a# from products %ith risin& prices and has difficult# distin&uishin& "et%een price chan&es and *ualit# chan&es in products included in the inde'. c. The official unemplo#ment rate does not ta0e into account discoura&ed %or0ers2 part;time %or0ers %ho desire full;time emplo#ment2 and %or0ers emplo#ed in 6o"s not matchin& their s0ill level2 such as ta'i drivers %ith PhDs in ph#sics. 11/.a. The CP is the more appropriate statistic2 "ecause the price of imports is not included in the GDP deflator. ". The GDP deflator is the more appropriate statistic2 "ecause the CP does not include the prices of &oods and services purchased "# the &overnment sector. c. The GDP deflator is more appropriate2 "ecause the CP does not include prices of &oods and services purchased "# "usinesses or the &overnment sector. 11.f the num"er of self;emplo#ed %or0ers and %or0ers emplo#ed in ne% start;up firms >%ho are included in the household surve#2 "ut not in the esta"lishment surve#) has increased more rapidl# than the decline in pa#roll 6o"s counted in the esta"lishment surve#2 then the num"er of emplo#ed %or0ers as measured in the household surve# could increase %hile the num"er of pa#roll 6o"s decreases. 1!3.a. Disposa"le personal income provides a measure of the income households have to use for either consumption or savin& after the# pa# ta'es. ". National income provides a measure of the income &oin& to the factors of production. c. GDP is the most complete measure of the value of ne%l# produced &oods and services in the econom#. n contrast2 personal income includes transfer pa#ments2 %hich do not represent ne%l# produced &oods and services. 1!1.Ans%ers %ill var#2 "ut one e'ample could sho% that measured GDP in one countr# could "e much lo%er than in another countr#2 "ut the amount of home production in the first countr# could "e ver# lar&e. n this case2 measured real GDP indicates a much lar&er difference in economic %ell;"ein& than actuall# e'ists "et%een the countries. The other e'ample could e'plain ho% chan&es in the amount of home production in a countr# over time ma0e it difficult to compare economic %ell;"ein& over time. or e'ample2 if most people &re% their o%n food initiall# and then over time moved to commercial a&riculture2 the increase in real GDP per person %ould overstate the increase in the amount of &oods and services availa"le in the countr#2 since the food &ro%n at home %as not counted in real GDP in the earl# period. 1!!.=eal GDP decreased2 indicatin& that the production of final &oods and services %as lo%er in !313 than in !33. Nominal GDP increased2 %hich indicates that prices2 on avera&e2 %ere hi&her in !313 than in !332 &iven that real GDP decreased. 1!$.a. GDP in !31! increases "# the purchase price of the house2 %hich is a ne%l# produced &ood. ". GDP in !31! does not chan&e "ecause the house is NT a ne%l# produced &ood2 since it %as "uilt in !331. Transactions involvin& used &oods are not included in GDP. c. GDP in !31! does not chan&e directl# "ecause the %indo%s are intermediate &oods2 not final &oods. The value of intermediate &oods is not included in GDP to avoid dou"le countin&. The value of the %indo%s is implicitl# included in the price of the house.
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d. GDP in !31! %ould chan&e "# the purchase price of the paint and supplies2 "ut not "# the implicit value of the paintin& services provided "# r. 8ones "ecause home production is not included in GDP. e. GDP in !31! %ould increase "# the char&e for usin& the online "ro0era&e service "ut not "# the amount of stoc0 purchase "ecause financial transactions do not represent the production of final &oods and services and are not included in GDP. 1!.a. nvestment spendin& increases "# the price of the computer. ". 'ports >and net e'ports) increase "# the price of the computer. c. Government spendin& increases "# the price of the computer. d. Consumption spendin& increases "# the price of the computer. e. Consumption spendin& increases "# the price of the computer2 "ut imports also increase "# the price of the computer2 so that net e'ports decrease "# the price of the computer2 and there %ill "e no net chan&e in GDP. 1!+.a. emplo#ed. 9he is %or0in& as a full;time emplo#ee. ". out of the la"or force. ull;time students are not counted in the la"or force. c. emplo#ed. Ee is out sic0 "ut still an emplo#ee of the school. d. out of the la"or force. Discoura&ed %or0ers are not counted in the la"or force. e. unemplo#ed. 9he is activel# loo0in& for a 6o". 1!-.9tart %ith the follo%in& e*uations for the 0no%n values: >a) GDP Deflator ? Nominal interest rate Q =eal interest rate and >") Nominal interest ? =eal interest @ inflation B# solvin& the a"ove e*uations %e &et the follo%in&: >c) =eal interest ?nflation Q >GDP Deflator 1) Plu&&in& in the &iven values of inflation and GDP deflator2 %e find that: =eal interest rate ? percent and Nominal interest rate ? / percent. 1!.=emem"er that Nominal interest ? =eal interest @ inflation. The ans%er actuall# depends upon the inflation rate. f the inflation rate is less than percent2 9am should choose option >"). f the inflation rate is more than percent2 then option >a) is a more favora"le choice for 9am. f inflation is percent2 9am can &o %ith either of the options as the# %ill #ield the same result. 1!/.The advanta&e of usin& a GDP deflator is that it is calculated usin& all &oods and services
produced2 includin& those "ou&ht onl# "# firms and the &overnment as %ell as consumers2 and allo%s a chan&in& "as0et of &oods. This allo%s it to ta0e consumers( a"ilit# to su"stitute less e'pensive &oods for more e'pensive ones into account. The CP is calculated usin& a fi'ed "as0et of &oods "ou&ht onl# "# consumers and does not ta0e su"stitutions into account2 so it tends to overstate the cost of livin& for consumers. Eo%ever2 the GDP deflator does not include imported &oods2 %hich do impact the CP. t also doesn(t count for an# chan&es in consumer %elfare that ma# result from su"stitutin& &oods2 and tends to understate the cost of livin& for consumers. 1!.Adult Population ? >13)>3))Q133 ? million. Fa"or force ? >23332333)>133;!3))Q133 ? +2-332333 Fa"or;force participation rate ? >+2-332333)>133))Q23332333 ? /3 percent nemplo#ed population ? >>133;-3)>+2-332333))Q133 ? !2!32333 nemplo#ment rate ? >>!2!32333)>133))Q+2-332333 ? 3 percent
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