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Econ 202 Midterm 1
Terms in this set (28)
Inflation is a problem when
-it is unpredictable.
-it causes consumers and firms to be confused about the relative prices of goods and services.
-when it is persistently high
-it causes resources to be diverted from productive uses.
In computing GDP, it is essential to
avoid double counting
Gross domestic product is a measure of the total market value of all
final goods and services produced in an economy over a period of time.
The biases in the CPI include the
new goods, quality change, and substitution biases.
The working-age population can be divided into two groups:
people in the labor force and people who are not in the labor force.
Suppose the working age population in Tarazed is 100 people. If 25 of these people are NOT in the labor
force, the ________ equals ________.
labor force; 75
Macroeconomics differs from microeconomics in that:
macroeconomics focuses on the national economy and the global economy.
The labor force is defined as people
who have a job or are looking for a job
The consumer price index (CPI)
compares the cost in the current period of a basket of goods typically consumed in the base period to the cost in a
the base period of that same basket of goods.
Which of the following people would be counted as employed in the Current Population Survey?
Gautam, who is working 20 hours a week but wants a full-time job
Positive and normative statements differ in that
positive statements can be tested, whereas normative statements cannot.
Which of the following is an example of a positive statement?
Households are the primary source of saving.
One argument against unemployment insurance is that:
unemployment insurance creates an indirect incentive that can make it more attractive for workers to stay
Assume tuition at Penn State cost $6,142 (per semester) in 2007 and $7,562 in 2012. If the price index was
207.34 in 2007 and 226 in 2012, then we could say:
tuition had increased more rapidly than inflation
To calculate the unemployment rate, which of the following are necessary pieces of information?
I. the number of unemployed persons
II. the population
III. the number of people in the labor force
IV. the working age population (i.e., the work-eligible population)
I and III
In the expenditure approach to GDP, the largest component for the United States in recent decades has
personal consumption expenditures
Which of the following would be counted in the aggregate investment component of GDP (i.e., I)
I. the purchase of production machinery by IBM
II. the purchase of A7 processors by Apple to be inserted in iPhone 5S smartphones
III. an increase in the finished goods inventory at Intel
both I and III
The technique currently used to calculate the CPI implicitly assumes that over time consumers buy
the same relative quantities of goods as in a base year.
An individual is structurally unemployed if
the individual lacks marketable job skills because technology has changed.
Which of the following is included in the government expenditure component of the expenditure approach
state government expenditure on local schools
output and income are treated as essentially identical.
Holding all else constant, if people who had been discouraged workers decide to start looking for jobs
again but haven't yet found them, you will see:
an increase the unemployment rate
If the unemployment rate is 5.8% and the number of unemployed persons is 15 million, the number of
people who are employed is approximately:
The value of a new 2016 Honda Civic produced in 2016 and purchased in 2017
raises overall GDP in 2016
The investment spending category of GDP does NOT include
purchases of stocks and bonds by institutional investors (like pension funds)
If the value of all imports is $100 million less than the value of all exports, government purchases are $600
million, consumer purchases are $1 billion, and investment purchases (including inventory investment) are $400
million, then the GDP for this economy is
Reflecting the state of the economy in November 2008 (after the financial crisis caused the existing
recession to become much, much worse), the Bureau of Labor Statistics reported in October that over 1000 jobs were
lost in the legal services sector. For example, one firm in Chicago stated that it had fired 54 lawyers in 2008. A
representative from the firm stated that most had worked in its real estate division.
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