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Flashcards in Exam 2 Practice Test Deck (29)
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1
Q

When government imposes a price ceiling or a price floor on a market…

A

price no longer serves as a rationing device.

2
Q

The minimum wage, if it is binding, raises the incomes of

A

only those workers whose jobs would pay less than the minimum wage if it didn’t exist.

3
Q

Under rent control, tenants can expect

A

lower rent and lower quality housing.

4
Q

On a graph, the area below a demand curve and above the price measures

A

consumer surplus.

5
Q

Consumer surplus

A

is the amount a consumer is willing to pay minus the amount the consumer actually pays.

6
Q

All else equal, what happens to consumer surplus if the price of a good increases?

A

Consumer surplus decreases.

7
Q

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

A

the purchase of a new house

8
Q

Which of the following items is counted as part of government purchases?

A

The federal government pays the salary of a Navy officer.

The state of Nevada pays a private firm to repair a Nevada state highway.

The city of Las Vegas, Nevada pays a private firm to collect garbage in that city.

ALL OF THE ABOVE

9
Q

Which of the following is included in the investment component of GDP?

A

spending on new residential construction but not spending on stocks and bonds

10
Q

When a U.S. citizen buys $500 of Chinese-made parts for a motorcycle,

A

U.S. consumption increases by $500, U.S. net exports decline by $500, and U.S. GDP remains the same.

11
Q

In the economy of Talikastan in 2015, consumption was $200, exports were $150, GDP was $475, government purchases were $100, imports were $75, and investment was $100. What were Talikastan’s net exports in 2015?

A

$75

12
Q

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

A

the inflation rate.

13
Q

Suppose an economy’s production consists only of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2009 as the base year, it follows that, for 2010,

A

nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.

14
Q

Which of these events would cause the consumer price index to overstate the increase in the cost of living?

A

Car makers benefit from a new technology that allows them to sell higher-quality cars to consumers with no increase in price.

Energy prices decrease, and consumers respond by buying more gas and electricity.

A new good is introduced that renders cellular telephones inferior and obsolete.

ALL OF THE ABOVE

15
Q

Which of the following is not an example of a price index computed by the Bureau of Labor Statistics?

A

the stock price index

16
Q

Which is the most accurate statement about the GDP deflator and the consumer price index?

A

The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year, whereas the GDP deflator compares the price of currently produced goods and services to the price of the same goods and services in the base year.

17
Q

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

A

5.0 percent

18
Q

Who of the following would be included in the Bureau of Labor Statistics’ “unemployed” category?

A

Miguel, who is on temporary layoff

19
Q

Who is not included in the labor force by the Bureau of Labor Statistics?

A

Lauren, who has retired and is not looking for work

20
Q

Unemployment rate formula

A

Unemployment Rate = number of unemployed (number of employed + number of unemployed) 100.

21
Q

The Bureau of Labor Statistics reported in 2005 that there were 53.23 million people over age 25 who had at least a bachelor’s degree, 40.59 million of whom were employed and 0.98 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group?

A

78.1% and 2.4%

22
Q

Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?

A

28.5 million

23
Q

A country reported a nominal GDP of $85 billion in 2010 and $100 billion in 2009. It also reported a GDP deflator of 100 in 2010 and 105 in 2009. Between 2009 and 2010,

A

real output and the price level both fell.

24
Q

As the Consumer Price Index increases, the value of money

A

falls, so people hold more money to buy the goods and services they want.

25
Q

Christopher is an unpaid, stay-at-home father who works as a volunteer at the local Habitat for Humanity chapter. Currently, Christopher is not looking for a paid job. The Bureau of Labor Statistics counts Christopher as

A

neither in the labor force nor unemployed.

26
Q

If the nominal interest rate is 4 percent and expected inflation is 2.5 percent, then what is the expected real interest rate?

A

1.5 percent

27
Q

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

A

the inflation rate.

28
Q

The inflation rate in year 2 equals

A

(GDP deflator in year 1 - GDP deflator in year 2) / GDP deflator in year 1

29
Q

People who are unemployed because of job search are best classified as

A

frictionally unemployed.