ECON 04 (Exam) 2 MULTIPLE CHOICE Flashcard Example #29115

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Nominal GDP is measured as a
dollar amount
Which of the following is not included in GDP for the reason of avoiding double counting?
intermediate goods
Consumption makes up about _____ of overall GDP.
two-thirds
Inventories are included in what component of GDP?
Investment
Which of the following components of GDP is most volatile?
Investment
Which of the following reasons is why real GDP per capita may not be the perfect measure of overall economic well-being in a society?
It does not include health measures
If the GDP deflator in 2012 has a value of 98.0, then
prices have decreased 2 percent between the base year and 2012.
Do you agree or disagree with the following statement and why: “Whenever real GDP declines, nominal GDP must also decline?”
Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise.
The current official unemployment rate (U-3) in the US is:
5.0%
Janelle is an electrical engineer who loses her job during the most recent recession. She continues to look for work but can’t find a job. Economists would classify her as:
Cyclically Unemployed
he natural rate of unemployment is when:
Only structural and frictional unemployment exists in an economy.
The natural rate of unemployment tends to be lower when
unemployment insurance benefits are lower.
Suppose that Apple and the investors buying the firm’s bonds both expect a 4 percent inflation rate for the year. Further, suppose the nominal interest rate on bonds is 8 percent and the expected real interest rate is 4 percent. Now suppose that a year after the investors purchase the bonds, the inflation rate turns out to be 3 percent, rather than the 4 percent that had been expected. In this situation, investors _____ and borrowers ______.
win; lose
Nominal incomes generally increase with inflation because
when inflation is anticipated, average nominal incomes also increase by the same percentage as the rate of inflation.
“The average hourly wage, adjusted for inflation, increased from $19 in 1990 to $22 in 2015, or 16% in 25 years,” According to the statement above, how much of the increase in the wage was due to inflation, if the CPI was 135.9 in 1990 and 244.3 in 2015?
0%
You lend $5,000 to a friend for one year at a nominal interest rate of 10%. The CPI over that year rises from 180 to 190. What is the real rate of interest you will earn?
4.4%
When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called
substitution bias
In terms of economic growth, the key measures of the standard of living is:
real GDP per capita
Which of the following alternative measures of overall well-being in a society was first developed in the country Bhutan?
Gross National Happiness (GNH)
Data that is plotted against time is called:
time-series data
Gross domestic product understates the total production of final goods and services because of the omission of
household production
If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?
2.703%
If nominal GDP rises we can say with certainty that
production has risen or price has risen or both have risen
Investment, as defined by economists, would include the purchase of a
computer by an accounting firm
Dan is a paid reporter at The Daily Collegian. The engineering department at Penn State develops a robot that can interview people around the community and write articles fornewspapers. The Daily Collegian uses this robot and decides to fire Dan and he continuesto search for work. Economists would classify Dan as now being:
structurally unemployed
Which of the following best describes actual trends in the US labor force participation rate?
The labor force participation rate of adult women has risen since 1950
The minimum wage law in the US:
has only a small effect on the unemployment rate since only a small part of the labor force earns minimum wage
Subsidizing education and training programs would be a good way to try and limit the amount of ___________________ in an economy.
structural unemployment
The working-age population, as defined in the United States,
Includes everyone 16 years old or older
Suppose you take out a loan at your local bank and the nominal interest rate is 5%. The bank expects the inflation rate to be 2% during the life of your loan. The bank’s expectedreal interest rate is ____%. If the inflation rate happens to be 3% during the life of this loan the bank’s real interest rate is ___%. As a borrower, you would benefit from a _____ actual inflation rate.
3; 2; higher
When a significant fraction of the domestic production takes place in foreign-ownedfacilities, a country’s difference between GDP and GNP is as follows:
GDP will be much larger than GNP.
The increase in quality bias in the consumer price index refers to the idea that priceincreases in the CPI reflect pure inflation, but ______ quality increases. This causes theCPI to ______ the cost of the market basket.
not; overstate
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