Deck 2: A Tour of the Book

Question 1

For this question,assume that 1980 is the base year.Given macroeconomic conditions in the United States over the past three decades,we know that

A)nominal GDP is always smaller than real GDP since 1980.
B)real GDP and nominal GDP would be equal for the entire period.
C)real GDP is larger than nominal GDP from 2002 to 2008.
D)real GDP and nominal GDP were equal in 1980.
E) none of the above

Answer 1

real GDP and nominal GDP were equal in 1980.

Question 2

Which of the following does not represent real GDP?

A)GDP in current dollars
B)GDP in terms of goods
C)GDP in base year dollars
D)GDP in constant dollars

Answer 2

GDP in current dollars

Question 3

Deflation generally occurs when which of the following occurs?

A)the consumer price index is greater than the GDP deflator
B)the consumer price index decreases
C)the rate of inflation falls, for example, from 4% to 2%
D)nominal GDP does not change

Answer 3

the consumer price index decreases

Question 4

Which of the following about capital income is not correct?

A)It refers to a firm's revenue.
B)It is also called profit income.
C)It goes to the firms.
D)It accounts for less than 35% of income in advanced countries.

Question 5

GDP in current dollars is equivalent to which of the following?

A)real GDP
B)GDP in terms of goods
C)GDP in 2000 dollars
D)GDP in constant dollars
E) none of the above

Question 6

Which of the following represents real GDP?

A)GDP in constant dollars
B)GDP in terms of goods
C)GDP in base year dollars
D)all of the above

Question 7

Fill in the blank for the following: GDP is the value of all ________ produced in a given period.

A)final and intermediate goods and services produced by the private sector only
B)final goods and services
C)final and intermediate goods and services, plus raw materials
D)all of the above
E) none of the above

Question 8

A firm's value added equals

A)its revenue minus all of its costs.
B)its revenue minus its wages.
C)its revenue minus its wages and profit.
D)its revenue minus its cost of intermediate goods.
E) none of the above

Question 9

According to convention,a recession is referred to if an economy goes through

A)at least two consecutive quarters of negative growth.
B)at least three consecutive quarters of negative growth.
C)at least four quarters of negative growth.
D)at least two consecutive months of negative growth.

Question 10

Measures of aggregate output have been published on a regular basis in the United States since

A)1947.
B)1933.
C)1917.
D)1946.

Question 11

Based on the notation presented in Chapter 2,which of the following expressions represents real GDP?

A)Yt
B)PtYt
C)Yt / Pt
D)$Yt / Pt

Question 12

Hedonic pricing is

A)the way that luxury goods are priced in a market economy.
B)the tendency for the inflation rate to rise by greater and greater amounts.
C)the tendency for nominal GDP to rise when the price level rises.
D)the process of translating nominal GDP into real GDP.
E) the process of pricing individual characteristics of a good or service.

Question 13

Hedonic pricing is used to

A)convert nominal values to real values.
B)calculate the difference between nominal GDP and real GDP.
C)measure the rate of change in real GDP.
D)obtain chain-weight indexes.
E) none of the above

Question 14

Use the following information to answer this question.If nominal GDP rises from $100 trillion to $120 trillion,while the GDP deflator rises from 2.0 to 2.2,the percentage change in real GDP is approximately equal to

A)-10%.
B)10%.
C)20%.
D)9)1%.
E) 0%.

Question 15

In a given year,suppose a company spends $100 million on intermediate goods and $200 million on wages,with no other expenses.Also assume that its total sales are $800 million.The value added by this company equals

A)$200 million.
B)$300 million.
C)$500 million.
D)$700 million.
E) $800 million.

Question 16

Suppose nominal GDP in 2009 does not change (compared its previous level in 2008).Given this information,we know with certainty that

A)real GDP increased during 2009.
B)the GDP deflator increased during 2009.
C)both the GDP deflator and real GDP fell during 2009.
D)more information is needed to answer this question.

Question 17

Suppose nominal GDP increased in a given year.Based on this information,we know with certainty that

A)real output has increased.
B)the price level (GDP deflator)has increased.
C)real output and the price level (GDP deflator)have both increased.
D)either real output or the price level (GDP deflator)have increased.
E) real output has increased and the price level has decreased.

Question 18

During the late 1990s,Japan experienced reductions in the GDP deflator.Given this information,we know with certainty that

A)real GDP fell during these periods.
B)real GDP did not change during these periods.
C)the overall price level in Japan decreased during these periods.
D)both real GDP and the overall price level decreased during these periods.

Question 19

When using the income approach to measure GDP,the largest share of GDP generally consists of

A)interest income.
B)labor income.
C)indirect taxes.
D)profits.
E) capital income.

Question 20

During the mid-1980s,we observed a significant reduction in oil prices.In the United States,we would expect that this reduction in oil prices would cause

A)a larger reduction in the CPI compared to the GDP deflator.
B)an equal reduction in the CPI and GDP deflator.
C)a larger reduction in the GDP deflator compared to the CPI.
D)no change in the CPI and a reduction in the GDP deflator.

Question 21

Refer to the information above.The official unemployment rate is

A) .1.
B) .2.
C) .33.
D) .4.
E) .66.

Question 22

Which of the following calculations will yield the correct measure of real GDP?

A)divide nominal GDP by the consumer price index
B)divide the GDP deflator by the consumer price index
C)multiply nominal GDP by the consumer price index
D)multiply nominal GDP by the GDP deflator
E) none of the above

Question 23

Explain why economists care about unemployment.

Question 24

Macroeconomists are concerned about changes in the unemployment rate because changes in the unemployment rate provide information about

A)the state of the economy.
B)the welfare of those who are unemployed.
C)none of the above
D)both A and B

Question 25

Briefly explain why the reported official unemployment rate in Spain in 1994 may have provided an over-estimate of unemployment in Spain.

Question 26

Labor income's share in an advanced country is likely to be

A)70%.
B)45%.
C)29%.
D)10%.
E) none of the above

Question 27

Refer to the information above.The labor force participation rate is

A) .2.
B) .3.
C) .4.
D) .6.
E) .8.

Question 28

Explain whether it is possible for nominal GDP to increase and real GDP to decrease in the same period.

Question 29

Explain how the existence of discouraged workers alters the extent to which the official unemployment provides an accurate measure of the use of labor resources.

Question 30

Suppose you are provided with the following data for your country for a particular month: 200 million people are working,20 million are not working but are looking for work,and 40 million are not working and have given up looking for work.The official unemployment rate for that month is

A)7)7%.
B)9)1%.
C)10%.
D)23%.
E) 30%.

Question 31

An individual is said to be a discouraged worker if he or she

A)is working, but prefers not to work.
B)is working part time, but would prefer a full time job.
C)is working in jobs she / he is not suited for.
D)wants to work, and is actively searching for a job.
E) wants to work, but has given up searching for a job.

Question 32

First,define nominal GDP and real GDP.Second,is it possible for nominal GDP in a year to be less than real GDP in the same year? Explain.

Question 33

Explain the three ways GDP can be measured.

Question 34

In the United States,someone is classified as unemployed if he or she

A)does not have a job.
B)does not have a job, or else has a job but is looking for a different one while continuing to work.
C)does not have a job, has recently looked for work, and is collecting unemployment insurance.
D)does not have a job, and is collecting unemployment insurance.
E) none of the above

Question 35

The labor force in the United States is defined as

A)the total number of individuals who are employed.
B)the sum of the total number of individuals who are employed and the officially unemployed.
C)the sum of the total number of individuals who are employed, the officially unemployed, and discouraged workers.
D)the total number of individuals who are 16 years old and older, but not retired.
E) none of the above

Question 36

Which of the following tends to occur when the unemployment rate increases?

A)a reduction in the labor force participation rate
B)a reduction in the number of discouraged workers
C)an increase in the number of employed workers
D)all of the above
E) none of the above

Question 37

Refer to the information above.The labor force is

A)20 million.
B)40 million.
C)60 million.
D)80 million.
E) 100 million.

Question 38

Explain the difference between the unemployment rate and the participation rate.

Question 39

What are the social and economic implications of unemployment? Explain.

Question 40

The GDP deflator provides a measure of which of the following?

A)the ratio of GDP to the size of the population
B)the ratio of GDP to the number of workers employed
C)the ratio of nominal GDP to real GDP
D)the price of a typical consumer's basket of goods
E) real GDP divided by the aggregate price level

Question 41

Will the CPI and GDP deflator always move together? Explain.

Question 42

Which of the following prices will be used when calculating the rate of growth of real GDP between the year's 2005 and 2006 using the chain method?

A)prices in the base year (2002)
B)prices in 2005
C)prices in 2006
D)the average of prices in 2005 and 2006
E) prices in 2005, 2006, and in 2002 (the base year)

Question 43

Pure inflation occurs when

A)nominal wages rise faster than all prices.
B)all prices rise faster than nominal wages.
C)all prices and nominal wages rise by the same percentage.
D)the GDP deflator and Consumer Price Index rise by the same percentage.
E) none of the above

Question 44

Explain how inflation can lead to distortions.

Question 45

Explain why the Phillips curve on average is downward sloping.

Question 46

Prices for which of the following are included in the GDP deflator,but not included in the Consumer Price Index?

A)firms' purchases of new equipment
B)intermediate goods and services
C)consumption of goods
D)consumption of services

Question 47

One of the reasons macroeconomists have concerns about inflation is that inflation causes

A)real GDP to rise.
B)nominal GDP to fall.
C)wages to rise as fast as prices.
D)real GDP to exceed nominal GDP.
E) none of the above

Question 48

Which of the following about the Phillips curve is not correct?

A)It shows the relation between GDP growth and unemployment.
B)It has been redefined as a relation between the change in the rate of inflation and the unemployment rate.
C)It was first explored by A. W. Phillips.
D)The curve is downward sloping.

Question 49

Explain Okun's Law.

Question 50

Suppose we switch the base year from 2000 to 2008.This change in the base year will cause

A)nominal GDP in every year to increase.
B)nominal GDP in every year to decrease.
C)both nominal and real GDP in every year to decrease.
D)real GDP in every year to decrease.
E) none of the above

Question 51

The prices for which of the following goods are included in both the GDP deflator and the consumer price index?

A)goods bought by households
B)goods bought by firms
C)good bought by governments
D)goods bought by foreign households (i.e., exports)
E) all of the above

Question 52

Which of the following factors is not believed to affect output in the long run?

A)technology
B)monetary policy
C)the size of the labor force
D)the capital stock

Question 53

Explain why economists care about inflation.

Question 54

Changes in GDP in the short run are caused primarily by

A)demand factors.
B)supply factors.
C)technology.
D)capital accumulation.
E) all of the above

Question 55

The Okun's law shows the relationship between

A)inflation and unemployment rate.
B)output growth and unemployment.
C)inflation and output growth.
D)output growth and money supply.

Question 56

The Phillips curve describes the relationship between

A)output growth and unemployment.
B)inflation and output growth.
C)output growth and money supply.
D)inflation and unemployment .

Question 57

Changes in GDP in the medium run are determined primarily by

A)demand factors.
B)supply factors.
C)monetary policy.
D)all of the above

Question 58

Based on the notation presented in Chapter 2,which of the following expressions represents nominal GDP?

A)Yt
B)PtYt
C)Yt / Pt
D)$Yt / Pt

Question 59

Explain the Phillips curve.

Question 60

Changes in GDP in the long run are determined primarily by

A)monetary policy.
B)fiscal policy.
C)demand.
D)all of the above
E) none of the above

Question 61

Explain what factors cause changes in output in: (1)the short run; (2)medium run; and (3)long run.

Question 62

Can an economy maintain high output growth,low unemployment,and low inflation at the the same time? Explain.