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Economy

The consumer price index was 177.1 in 2001 and 179.9 in 2002. Therefore, the rate of inflation in 2002 was about:

1.6 percent

Real GDP per capita is found by:

dividing real GDP by population

In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:

Not counted

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, it real GDP per capita will:

remain constant.

The ZZZ Corporation issued $25 million in new common stock in 2004. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment:

of $18 million has occurred.

The natural rate of unemployment is:

That rate of unemployment occurring when the economy is at its potential output.

The labor force includes:

employed workers and persons who are officially unemployed.

The type of unemployment associated with recessions is called:

cyclical unemployment.

The production of durable goods varies more than the production of nondurable goods because.

durables purchases are postponable.

In 2003 Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November 2003. The bicycle was sold to E.Z. Ryder in March of 2004. This bicycle is counted as:

investment in 2003 and as disinvestment in 2004.

In which of the following industries or sectors of the economy is output likely to be most strongly affected by the business cycle?

Capital goods.

In the United States, the rate of unemployment is highest for:

African- American teenagers.

Suppose that inventories were $40 billion in 2003 and $50 billion in 2004. In 2004, accountants would:

add $10 billion to other elements of investment in calculating total investment.

A price index is:

A comparison of the price of a market basket from a fixed point of reference.

Cost-push inflation:

moves the economy inward from its production possibilities curve.

If nominal GDP rises:

real GDP may either rise or fall.

During a period of hyperinflation:

people tend to hold goods rather than money.

The unemployment rate is the:

percentage of the labor force that is unemployed

Real GDP per capita:

can grow either more slowly or more rapidly than real GDP

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

the child-care services provided by stay-at-home parents

GDP includes:

Final, but not intermediate, goods.

At the economy's natural rate of unemployment:

the economy achieves its potential output.

The value of U.S imports is:

subtracted from exports when calculating GDP because imports do not constitute production in the United States

If intermediate goods and services were included in GDP:

the GDP would be overstated.

Kara voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kara presently is:

frictionally unemployed.

At the economy's natural rate of unemployment:

the economy achieves its potential output.

GDP data are criticized as being inaccurate measures of economic welfare because:

Doesn't take into account many factors

Full-employment output is also called:

potential output.

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is:

$210 billion

If the economy adds to its inventory of goods during some year:

this amount should be included in calculating that year's GDP.

Tom Atoe grows tomatoes for home consumption. This activity is:

Productive but is excluded from GDP because no market transaction occurs.

Cost-of-living adjustment clauses(COLAs):

tie wage increases to changes in the price level.

If actual GDP is less than potential GDP:

the actual unemployment rate will be higher than the natural unemployment rate.

GDP can be calculated by summing:

investment, government purchases, consumption, and net exports

Which of the following is an intermediate good?

the purchase of baseball uniforms by a professional baseball team.

National income accountants define investment to include:

any increase in business inventories

In calculating the GDP national income accountants:

add increases in inventories or subtract decreases in inventories.

A price index can rise from one year to the next even though:

some individual prices in the economy fall.
nominal GDP falls.
real GDP falls.

Real GDP and nominal GDP differ because the real GDP:

has been adjusted for changed in the price level.

Given the annual rate of economic growth, the "rule of 70" allows one to:

calculate the number of years required for real GDP to double.

Inflation affects:

both the level and the distribution of income.

Which of the following statements is correct? Unanticipated inflation:

arbitrarily "taxes" fixed-income groups.

A nation's gross domestic product (GDP):

is the dollar value of the total output produced within the borders of the nation.

Suppose there are 10 million part - time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result:

the official unemployment rate will remain unchanged.

Cyclical unemployment results from:

a deficiency of aggregate spending.

By summing the dollar value of all market transactions in the economy we would:

Obtain a sum substantially larger than the GDP.

If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the:

cyclical unemployment rate is 4 percent.

Recurring upswings and downswings in an economy's real GDP over time are called:

Business cycles.

Net Exports are:

Exports less imports.

Official unemployment statistics:

understate unemployment because discouraged workers are not counted as unemployed.

Mild demand-pull inflation:

has an uncertain effect on real output.

In national income accounting, consumption expenditures include purchases of:

automobiles for personal use, but not houses.

Gross Domestic product (GDP) measures and reports output:

in dollar amounts.

The growth of GDP may understate changes in the economy's economic well-being over time if the:

quality of products and services improves.

During a severe recession, we would expect output to fall the most in:

the construction industry.

When an economy's production capacity is expanding:

domestic investment exceeds depreciation

To be officially unemployed a person must:

be in the labor force.

Suppose Smith pays $100 to Jones.

We need more information to determine whether GDP has changed.

Demand-pull inflation:

occurs when total spending in the economy is excessive.

Cost-push inflation:

reduces real output.

A college graduate using the summer following graduation to search for a job would best be classified as:

a part of frictional unemployment.

If the Consumer Price index rises from 300 to 333 in a particular year, the rate of inflation in that year is:

11 percent.

Growth is advantageous to a nation because it:

lessens the burden of scarcity.

If depreciation (consumption of fixed capital) exceeds domestic investment, we can conclude that:

net investment is negative.

Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called:

structural unemployment.

For comparing changes in potential military strength and political preeminence, the most meaningful measure of economic growth would be:

changes in total real output.

The natural rate of unemployment is the:

full-employment unemployment rate.

A recession is a period in which:

real domestic output falls.

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