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Macro Modules 7&8

A nation’s gross domestic product (GDP):
can be found by summing C + Ig + G + Xn.
GDP is the:
monetary value of all final goods and services produced within the borders of a nation in a particular year.
National income accountants can avoid multiple counting by:
only counting final goods.
Which of the following is a final good or service?
A haircut purchased by a father for his 12 year-old son.
Alejandro Scoobertini owns a store specializing in soccer jerseys. In 2012, he purchased $150,000 worth of jerseys from manufacturers, employed one worker for $40,000, purchased $20,000 worth of supplies from an office supply store, and sold jerseys for $280,000. Based on this information, what was the value added at Alejandro’s store in 2012?
$70,000.
Which of the following transactions would be included in GDP?
Peter buys a newly constructed house.
Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:
$200,000.
If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:
net investment is negative.
Economy A: gross investment equals depreciation
Economy B: depreciation exceeds gross investment
Economy C: gross investment exceeds depreciation

Refer to the information. Positive net investment is occurring in:

economy C only.
In national income accounting, the consumption category of expenditures includes purchases of:
consumer durable goods, consumer nondurable goods, and services.
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.
In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:
not counted.
The largest component of total expenditures in the United States is:
consumption.
Answer the question on the basis of the following data. All figures are in billions of dollars:

Refer to the data. GDP is:

$121
Answer the question on the basis of the following data. All figures are in billions of dollars:

Refer to the data. GDP is:

$417.
Answer the question on the basis of the following data. All figures are in billions of dollars.

The gross domestic product for the above economy is:

$110.
Answer the question on the basis of the following data. All figures are in billions of dollars.

Refer to the data. The gross domestic product is:

$307
Answer the question on the basis of the following data. All figures are in billions of dollars.

Refer to the data. Personal income is:

$228
Answer the question on the basis of the following national income data. All figures are in billions of dollars.

Refer to the data. U.S. imports are:

$14.
Answer the question on the basis of the following national income data. All figures are in billions of dollars.

Refer to the data. Personal consumption expenditures:

cannot be calculated.
Nominal GDP is:
the sum of all monetary transactions involving final goods and services that occur in the economy in a year.
A price index is:
a comparison of the current price of a market basket to a fixed point of reference.
Recurring upswings and downswings in an economy’s real GDP over time are called:
business cycles.
The phase of the business cycle in which real GDP declines is called:
a recession.
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
Expansion.
Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions.

Refer to the given information. The labor force in Scoob is:

102 million.
Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions.

Refer to the given information. The unemployment rate in Scoob is:

6.9 percent
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.
Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is:
not in the labor force.
Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is:
6 percent.
Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would:
decline.
Susie has lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipates that a new job will be available. We can say that Susie is faced with:
structural unemployment.
Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would be officially counted as:
employed
Which of the following constitute the types of unemployment occurring at the natural rate of unemployment?
Structural and frictional unemployment.
Answer the question on the basis of the following information about a hypothetical economy:

Refer to the given information. The unemployment rate is:

12.5 percent.
A large negative GDP gap implies:
a high rate of unemployment.
If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, real GDP is:
$360 billion.
Okun’s law:
shows the relationship between the unemployment rate and the size of the negative GDP gap.
Inflation means that:
prices on average are rising, although some particular prices may be falling.
If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:
deflation of 3.33 percent.
GDP is the market value of:
All final goods and services produced in an economy in a given year
To avoid multiple counting in national income accounts:
Only final goods and services should be counted
An example of intermediate goods would be:
Paper and ink bought by a publishing company
A business buys $5,000 worth of inputs from other firms in order to produce a product. The business makes 100 units of the product and each of them sells for $65. The value added by the business to these products is:
$1,500
Firm A produces something that Firm B uses as an input. The product of Firm B, in turn, is purchased and used as an input by Firm C, and so on down the line through Firm E, which produces the end product. The total value added by Firms A-E from the production of the end product described here is:
$3,800
Which of the following is a private transfer payment?
A check for $250 sent by a parent to a daughter at college
The two ways of looking at GDP are the:
Expenditures approach and income approach
The largest expenditure component of GDP is:
Personal consumption expenditures
Which of the following is not a component of GDP in the expenditures approach?
Workers’ wages and other compensation
Business inventories increase when firms produce:
More than they sell, and the inventory increase is added to GDP
When gross private domestic investment exceeds depreciation, it can be concluded that:
Net investment is positive
Net exports is a positive number when:
A nation’s exports of goods and services exceed its imports
GDP in an economy is $11,050 billion. Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion. Net exports must be:
-$84 billion
The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP in this economy?
$3,237 billion
The following data about a hypothetical economy are in billions of dollars.

Refer to the above data. GDP in this economy is:

$6,230 billion
(The following national income data are in billions of dollars.)

Refer to the above data. This nation’s exports are:

$24 billion
Refer to the above data. The expenditures approach to GDP calculation can be done by adding:
8 through 11
Refer to the above data. Gross domestic product in this economy is:
$1,079 billion
Refer to the above data. Disposable income in this economy is:
$611 billion
Refer to the above data. National income is:
$384 billion
If the price index in year A is 130, this means that:
Prices in year A are on average 30 percent higher than in the base year
The GDP deflator or price index equals:
Nominal GDP divided by real GDP
The base year is 2005, and the GDP price index in 2004 is 92.0. This implies that the:
Prices in 2005 were higher than in 2004
Consumers in an economy buy only three general types of products, A, B, and C. Changes in the prices of these items over a period are shown below:

Using year 1 as the base year, the country’s price index in year 2 is:

106.3
The recurrent ups and downs in the level of economic activity extending over several years are referred to as:
Business cycles
Refer to the diagram above. The phases of the business cycle from points A to D are, respectively:
Peak, recession, trough, expansion
Which phase of the business cycle would be most closely associated with an economic contraction?
Recession
Full-time homemakers and retirees are classified in the BLS data as:
Not in the labor force
The unemployed are those people who:
Are not employed but are seeking work
Which of the following is the correct way to calculate the unemployment rate?
[(unemployed)/(labor force)] × 100
If the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, then the unemployment rate would be:
8 percent
The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is:
9 million
The total adult population of an economy is 175 million, the number of employed is 122 million, and the number of unemployed is 17 million. The percent of adults who are not in the labor force is:
20.6 percent
The best example of a “frictionally unemployed” worker is one who:
Is in the process of voluntarily switching jobs
A worker who loses a job at a call center because the company moved the call center operations to another country is an example of:
Structural unemployment
Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
Structural
The following items describe the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.

1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer.

2. George used to work in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in a few months when national economic conditions improve.

3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the Federal government cut defense spending. She has been looking for similar work for a year but no company seems interested in her aircraft design skills.

4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year, but was unsuccessful and quit looking for work.

Refer to the above information. Which individual is frictionally unemployed?

Mollie
The natural rate of unemployment:
Is equal to the total of frictional and structural unemployment
Okun’s law indicates that for:
Every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated
Inflation is a rise in:
The general level of prices over time

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