Exam 3 Flashcards
Chapters: 8, 9
During a business cycle expansion, total production ________ and total employment ________
increases; increases
Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of
employment in the economy
Macroeconomics, as opposed to microeconomics, includes the study of what determines the
average price levels of goods and services in the economy
Macroeconomics seeks to understand
economic growth, business cycles, and inflation
Which of the following headlines would be more closely related to what macroeconomists study than what microeconomists study?
Real GDP grows by 2.3% in the second quarter
Which of the following is not directly counted in GDP?
intermediate goods
Value added equals the market price of the firm’s product minus
the price of intermediate goods
In the circular flow model, the value of total income for an economy ________ the value of total production
equals
In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services
equals
The purchase of a new automobile is included in
consumption expenditures on durable goods
Which of the following is not a durable good?
clothing
To calculate GDP by the expenditure method, one must add
consumption spending, investment spending, government purchases, and net exports
The sum of the value added of every firm involved in producing all final goods and services ________ gross domestic product.
equals
Consider the table above showing three stages of production of an automobile. Refer to Table 19-5. The value of each automobile in gross domestic product equals
$25,000
CANOES-R-US makes canoes. It buys the shell of the canoe from another local firm for $300 and uses its labor and intermediate goods to make the canoe. It sells the finished canoe to a retail canoe store for $800. The retail canoe store then sells the canoe to a consumer for $1,200. Refer to Scenario 19-1. The value added of CANOES-R-US for each canoe equals
$500
A final good is one that
is purchased by its final user
An example of a final good would be
a soy latte sold by Starbucks to a student
Which of the following equations correctly measures GDP in an economy?
GDP = C + I + G + NX
To calculate GDP using the value-added method, one would add up
the value added by each firm involved in the production of final goods and services
Gross domestic product understates the total production of final goods and services because of the omission of
the underground economy
The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector
do not pay taxes to the government
GDP is not a perfect measure of well-being because
GDP is not adjusted for pollution
The “underground economy” is also referred to as
the informal sector
Nominal GDP is GDP in a given year
valued in the prices of that year
If real GDP in 2018 (using 2009 prices) is lower than nominal GDP of 2017, then
prices in 2018 are lower than prices in 2017
The GDP deflator is a measure of the
average level of prices of final goods and services in the economy
To make the calculation of real GDP more accurate, in 1996 the BEA switched to using
chain-weighted prices
When the BEA calculates real GDP using the average of prices in the current year and the year preceding it, and this average changes from year to year, this is called calculating GDP using
chained-weighted prices
The GDP deflator is equal to
nominal GDP divided by real GDP, multiplied by 100
Gross national product (GNP) of the United States is the market value of all final goods and services
produced by citizens of the United States anywhere in the world
National income equals gross domestic product minus
depreciation
National income equals gross domestic product
minus the consumption of fixed capital
Depreciation is
the value of worn-out equipment, machinery, and buildings
The best measure of the income households actually have available to spend is
disposable personal income
Disposable personal income equals personal income
minus personal tax payments
National income is equal to
GDP minus depreciation
U.S. gross national product is defined as
the value of final goods and services produced by residents of the United States even if the production takes place outside of the United States
National income is defined as
gross domestic product less the consumption of fixed capital
Personal income is defined as
national income less retained earnings plus transfer payments and plus interest on government bonds
Disposable personal income is defined as
personal income less personal taxes
The natural rate of unemployment is
that rate of unemployment occurring when the economy is at its potential output
Part-time workers who want full-time work are counted as
fully employed, and therefore the official unemployment rate may understate the level of unemployment
The entry of women into the workforce since the 1960s resulted in
a shift outward in the production possibilities curve of the United States
Due to lowering its prices to compete with its rivals, increased competition from Airbus, and cuts to military spending, Boeing announced it would ________ the number of persons it employed in 2017 and this would ________ the total number of persons unemployed in the economy
decrease; increase
The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect
that stock prices are more likely to fall
The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill
employed
The Bureau of Labor Statistics would categorize a retiree who is not working as
out of the labor force
The labor force equals the number of people
employed plus unemployed
The unemployment rate equals the number of unemployed divided by the ________, all times 100
labor force
Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as
not in the labor force
The labor force participation rate equals the
(labor force divided by working-age population) × 100
Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?
labor force participation rate
Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948?
Younger men are remaining in school longer as compared to the past
Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________
decreased; increased
Using a broader measure of the unemployment rate where discouraged workers and part-time workers who wished to work full time were counted as unemployed, the BLS estimates the unemployment rate in April 2017 would have ________ compared to the measured unemployment rate
almost doubled
An advantage of the establishment survey over the household survey of the labor market is that the establishment survey
is based on actual payrolls, rather than on unverified answers
An advantage of the household survey over the establishment survey of the labor market is that the household survey
includes the number of self-employed persons
Which of the following statements is true about the U.S. economy?
Each year, many new jobs are created and many existing jobs are destroyed
The labor force is the sum of
employed workers and unemployed workers
A full-time student who is not working is categorized as
not in the labor force
Upon your graduation from college, you find that the economy is in recession and the unemployment rate is relatively high. Nonetheless, most Americans in this situation would continue along their career paths looking for a new job because
high unemployment rates do not usually last for very long
Discouraged workers are classified by the BLS as
not in the labor force
If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are
cyclically unemployed
The short-term unemployment arising from the process of matching workers with jobs is called
frictional unemployment
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called
structural unemployment
The natural rate of unemployment is made up of
frictional and structural unemployment
Which of the following would decrease the unemployment rate?
government aid to retrain unemployed workers
An efficiency wage
is higher than the market wage and tends to increase productivity
The average price of goods and services in the economy is also known as
the price level
Which of the following price indices comes closest to measuring the cost of living of the typical household?
consumer price index
The percent increase in the CPI from one year to the next is a measure of the
inflation rate
To reduce the bias in the consumer price index, the Bureau of Labor Statistics
updates the market basket every two years, rather than every 10 years
The producer price index measures the prices that firms
receive for the goods and services they use at all stages of production
The broadest measure of the price level that includes all final goods and services is
the GDP deflator
What does the PPI measure?
the average of the prices received by producers of goods and services at all stages of the production process
The real wage equals the nominal wage ________ the CPI, all times 100
divided by
The real interest rate equals the nominal interest rate ________ the inflation rate
minus
The stated interest rate on a loan is the
nominal interest rate
Deflation occurs when
there is a decline in the price level
The costs to firms of changing prices are called
menu costs
