Learning Curve 1

Question 1

In order to get from GNP (gross national product) to NNP (net national product), _____ is/are deducted.

Answer 1

depreciation

Question 2

Who is NOT counted as part of the labor force in most statistical surveys?

Answer 2

discouraged workers

Question 3

Real GDP can increase because:

Answer 3

increase because of quantity increases only.

Question 4

The core inflation rate measures the increase in price of a consumer basket that excludes:

Answer 4

food and energy products.

Question 5

The percentage change of a product of two variables is approximately the _____ of the percentage changes in each of the variables.

Answer 5

sum

Question 6

The increase in the overall level of prices is called:

Answer 6

inflation.

Question 7

Suppose that real GDP increases by 3 percent in a year when the GDP deflator increases by 2 percent. This means that nominal GDP increased by approximately _____ percent in that year.

Answer 7

5

Question 8

In an economy with an adult population of 120 million, total employment of 90 million and unemployment of 10 million people, the unemployment rate is _____ percent.

Answer 8

10

Question 9

An economy produces only one bread. If the current price of a loaf of bread is $3.99, and the base year price of the loaf of bread is $3.50, then the GDP deflator is:

Answer 9

1.14.

Question 10

Suppose that nominal GDP increases by 6 percent in a year when real GDP increases by 3 percent. This means that the inflation rate, as measured by the percentage change in the GDP deflator, was approximately _____ percent in that year.

Answer 10

3

Question 11

Adjustment of the CPI to reflect the measurement problems that currently result in overstatement of price increases will:

Answer 11

reduce government spending.

Question 12

An economy produces wind turbines, pizza, automobiles, and haircuts. Consumers purchase pizza and haircuts, as well as T-shirts made in another country. Firms purchase wind turbines, as well as x-ray machines made in another country. The government purchases automobiles. An increase in the price of T-shirts will:

Answer 12

increase the CPI.

Question 13

All of the following are true regarding the PCE deflator EXCEPT that it:

Answer 13

is more volatile than the CPI and GDP deflator.

Question 14

Suppose that nominal GDP increases by 5 percent in a year when the inflation rate, as measured by the percentage change in the GDP deflator, was 2 percent. This means that the real GDP growth rate was approximately _____ percent in that year.

Answer 14

3
The percentage change of a ratio is approximately the percentage change in the numerator minus the percentage change in the denominator.

Question 15

Bill sells his car to a used car dealer for $4,000, who then sells it to another household for $5,000. Together, these transactions add _____ dollars to the GDP.

Answer 15

1,000

Question 16

A stock broker charges a 1 percent fee to purchase stock for clients. If a client buys 100 shares of a stock at $50/share, then the transaction contributes _____ spending to GDP.

Answer 16

$50 of consumption

Question 17

Kathleen has a full-time job and a part-time job. If Kathleen quits the part-time job, the household survey will show _____ in employment, and the establishment survey will show _____ in employment.

Answer 17

no change; a decrease

Question 18

The percentage change of a ratio of two variables is approximately the percentage change in the numerator _____ the percentage change in the denominator.

Answer 18

minus

Question 19

Suppose that real GDP increases by 3 percent in a year when the GDP deflator increases by 2 percent. This means that nominal GDP increased by approximately _____ percent in that year.

Answer 19

5

Question 20

Which statement regarding the CPI and the GDP deflator is true?

Answer 20

The GDP deflator is a Paasche index and accounts for substitution of goods when prices change.

Question 21

Suppose that unemployed workers decide to retire rather than to continue to seek employment. All else equal, this phenomenon would cause the unemployment rate to:

Answer 21

fall.

Question 22

Suppose that consumers purchase fish and cellphones. In 2010, one pound of fish costs $1, a cellphone costs $1 and the typical consumer buys 10 pounds of fish and 10 cellphones. In 2011, one pound of fish costs $2, a cellphone costs $0.50, and the typical consumer buys 5 pounds of fish and 20 cellphones. In 2012, one pound of fish costs $2.10, a cellphone costs $0.90, and the typical consumer buys 12 pounds of fish and 20 cellphones. Using 2010 as the base year, the inflation rate between 2011 and 2010 is _____ percent.

Answer 22

25

Question 23

From 2001 to 2003, the establishment survey showed a(n) _____ in employment, and the household survey showed a(n) _____ in employment.

Answer 23

decline; increase

Question 24

A person with two paid jobs is _____ in the establishment survey.

Answer 24

counted twice

Question 25

The PCE deflator is the ratio of nominal _____ spending to real _____ spending.

Answer 25

consumer; consumer

Question 26

The percentage change in the price level from one period to the next is called the:

Answer 26

inflation rate.

Question 27

An economy has a labor force of 120 million and total employment of 90 million. In this economy, the unemployment rate is _____ percent.

Answer 27

25

Question 28

The CPI has a fixed basket of goods and is an example of a _____ index.

Answer 28

Laspeyres

Question 29

Dominique got laid off from a job at a multinational corporation and decided to create her own business. As a result:

Answer 29

the establishment survey will show a drop in employment.

Question 30

If the unemployment rate is 6 percent and the number of employed people is 146 million, then, rounded to the nearest million, the labor force equals _____ million people.

Answer 30

155

Question 31

Each month, about _____ households are interviewed to measure the unemployment rate.

Answer 31

60,000

Question 32

Suppose that real GDP increases by 3 percent in a year when the GDP deflator increases by 2 percent. This means that nominal GDP increased by approximately _____ percent in that year.

Answer 32

5

Question 33

The PCE deflator is based on only the _____ component of GDP.

Answer 33

consumption

Question 34

In the United States, in practice, the differences among the measures of inflation computed using the CPI, the GDP deflator, and the PCE deflator:

Answer 34

are small.

Question 35

According to the text, the inflation rate measured by the percentage change in the CPI usually exceeds the inflation rate measured by the percentage change in the PCE deflator. This is MOST likely because the:

Answer 35

CPI may overstate the inflation rate.

Question 36

The core inflation rate is sometimes viewed as a better gauge of ongoing inflation trends because it:

Answer 36

excludes food and energy prices.

Question 37

According to the text, one suggested solution to the different employment measures in the household and establishment surveys is to use:

Answer 37

the average of both surveys.

Question 38

The labor force participation rate of men has fallen for all of the following reasons EXCEPT:

Answer 38

increasing numbers of women who are employed for pay.

Question 39

One reason that the labor force participation rate of both men and women has fallen since 2005 is because:

Answer 39

the weak economy following of the financial crisis of 2008-2009 led to large-scale unemployment as well as many discouraged workers.

Question 40

As the economy improves after a recession, previously discouraged workers often rejoin the labor force and search for employment because the chances of finding a job have increased. All else equal, this phenomenon would cause the unemployment rate to:

Answer 40

rise.

Question 41

Other things constant, the unemployment rate can fall because of:

Answer 41

an increase in the number of discouraged workers.

Question 42

Suppose that consumers purchase lettuce and computer chips. In 2010, one pound of lettuce costs $1, a computer chip costs $1, and the typical consumer buys 10 pounds of lettuce and 10 computer chips. In 2011, one pound of lettuce costs $2, a computer chip costs $0.50, and the typical consumer buys 5 pounds of lettuce and 20 computer chips. In 2012, one pound of lettuce costs $2.10, a computer chip costs $0.90, and the typical consumer buys 12 pounds of lettuce and 20 computer chips. Using 2010 as the base year, the inflation rate between 2012 and 2011 is _____ percent.

Answer 42

20

Question 43

With an unchanged number of unemployed workers, retirements of employed workers will _____ the labor force participation rate, and will _____ the unemployment rate.

Answer 43

decrease; increase

Question 44

Each June, new high school and college graduates join the labor force and search for jobs. All else equal, this phenomenon would cause the unemployment rate to:

Answer 44

rise.