Exam One

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The production possibilities frontier shows the ____ combinations of two products that may be produced in a particular time period with available resources.

maximum attainable

In a production possibilities frontier model, a point ____ the frontier is productively inefficient.

inside

A production possibilities frontier with a bowed outward shape indicates

increasing opportunity costs as more and more of one good is produced

Which of the following is NOT directly counted in gdp

intermediate goods

The size of the underground economy would tend to increase if the government of a country

increased income taxes

If the quantity of goods and services produced in the economy DECREASES,

it may be possible for nominal GDP to increase

Which of the following is included in both the U.S. GDP and U.S. GNP

the value of all cars produced by General Motors in the United States

The labor force equals the number of people

employed plus unemployed

Structural unemployment is the result of

a persistent mismatch between the skills and characteristics of workers and the requirements

Which of the following policies would reduce frictional unemployment?

building an on-ine job database that helps workers find jobs

The consumer price index is the

average of the prices of the goods and services purchased by a typical urban family of four

If inflation is positive and perfectly anticipated,

those that hold paper money lose.

The official unemployment rate as calculated by the U.S. Bureau of Labor would equal

(# of unemployed)/(labor force)

Labor Force = full-time,part-time,not employed.

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on

the producer price index

If the production possibilities frontier is _____, then opportunity costs are constant as more of one good is produced

linear

The increase generosity of unemployed insurance programs in Canada as compared to the United States should

increase the duration of unemployment in Canada as compared to the United States

Suppose the nominal GDP in 2009 was less than the real GDP in 2009. Given this information we know for certain that

the price level in 2009 was less than the price level in the base year

The principle of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up.

Value added equals the market price of the firm's product minus

the price of intermediate goods

The output of U.S. citizens who work in Canada would be included in the

gross domestic product of Canada

Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan contract period, then

borrowers gain 1% of the loan value

Legalizing all forms of illegal activities

increasing GDP and reduces the size of the underground economy.

The production possibilities frontier model assumes which of the following?

the economy produces only two products.

If cyclical unemployment is eliminated in the economy, then

the economy is considered to be at full employment

The slope of the production possibilities frontier

measures the opportunity cost of producing one more unit of a good

Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier

shifting inward

Which of the following transactions represents the purchase of a final good?

your father buys a new John Deere riding lawn mower.

A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will

increase GDP and decrease well being in the economy

To examine how the total production of an economy has changed over time, it would be better to examine

real GDP.

The value of what a U.S.-owned McDonald's produces in South Korea is included in the U.S. ____ and the South Korean ____.

GNP; GDP

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

remain constant.

A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat. This lumberjack would be

structurally unemployed

If firms pay what are called "efficiency wages," they pay wages that

motivate workers to increase their productivity.

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

rose 60% from the market basket in the base year.

The cost of firms of changing prices

is called a menu cost.

The size of the underground economy would tend to increase if the government of a country

increased income tax rates

Scarcity

stems from the incompatibility in market economies than in socialist economies.

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good

The points outside the production possibilities frontier are

unattainable

Gross domestic product is calculated by summing up

the total market value of final goods and services produced in the economy during a period of time.

Gross domestic product understates the total production of final goods and services because of the omission of

household production

Real GDP is GDP in a given year

valued in the prices of the base year

The output of Mexican citizens who work in Texas would be included in the

gross national product of Mexico.

The Bureau of Labor Statistics would categorize a person as ____ if they were temporarily away from their job because they were ill.

employed

Frictional unemployment is the result of

the search process of matching workers with jobs

Which of the following would increase the unemployment rate?

an increase in the unemployment insurance payments

Which of the following is true about the consumer price index?

It assumes that consumers purchase the same amount of each product in the market basket each month.

Suppose that in 2010, all prices in the economy double and that all wages and salaries have also doubled. In 2010 you

are no better off or worse off than you were in 2009 as the purchasing power of your salary has remained the same.

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