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In early versions of the 2009 stimulus bill, a ʺBuy Americanʺ provision required
all manufactured goods bought with stimulus money to be made in the United States
Over the past several decades there has been a rapid growth in international trade. This growth has been due to all except one of the following factors. Which factor has not contributed to the growth of international trade?
a change in the tariffs charged on many goods
A tax imposed by a government on imports of a good into a country is called
When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is
a U.S. export and an French import
Twenty-seven countries in Europe have formed the European Union (EU). After the EU was formed it
eliminated all tariffs among its member countries
The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as
trading countries because they result in a loss of job
________ is the ability to produce more of a good or service than competitors when using the same amount of resources
If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania
will take place so long as each country has a comparative advantage in a good or service
that buyers in the other country want
If the ________ cost of production for two goods is different between two countries then
mutually beneficial trade is possible
In a small economy, gross investment in 2009 is $1,500, consumption spending is $6,000, net investment is $200, government spending is $1,500, exports are $2,000 and imports are $1,000. What is GDP for this economy in 2009?
In a small economy, consumption spending in 2009 is $6,000, government spending is $1,200, gross investment is $1,500, exports are $2,000, and imports are $1,000. What is gross domestic product in 2009?
Consumption spending is $4.5 billion, gross private domestic investment is $3 billion, and
government expenditures are $2 billion. If GDP is $14 billion, which of the following could be true regarding exports and imports in the economy?
Exports are $15 billion, and imports are $10.5 billion
Which of the following equations correctly measures GDP in an economy?
GDP = C + I + G + NX
Between 2008 and 2009, if an economyʹs exports rise by $8 billion and its imports fall by $8 billion, by how much will GDP change between the two years, all else equal?
Net exports will increase GDP by $16 billion.
Which of the following would result in GDP for an economy equal to $10 trillion?
C = $5 trillion
I = $5 trillion
G = $2 trillion
NX = -$2 trillion
Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, even though an art lover would pay $4,500 for that painting. How much value does Caroline add?
The measure of production that values production using current prices is called
The ________ is a measure of the price level and is calculated by dividing ________ by ________
and multiplying by 100.
GDP deflator; nominal GDP; real GDP
The measure of production that values output using base-year prices is called
The drawback to calculating real GDP using base-year prices is that
relative prices change over time and these are not reflected in base-year prices, and this
Nominal GDP is another term for
An inflation rate of 5% between 2008 and 2009 would be implied by a change in the GDP
deflator from ________ in 2008 to ________ in 2009
Which of the following is a true statement about real and nominal GDP?
If real GDP increases from one year to the next, we know that production of goods and
services has risen.
Disposable personal income is defined as
personal income less personal taxes
If the number employed is 190 million, the working-age population is 230 million, and the
number unemployed is 10 million, then the unemployment rate is
If the number employed is 190 million, the number unemployed is 10 million, and the
working-age population is 250 million, then the labor force participation rate is
If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate?
The short-term unemployment arising from the process of matching workers with jobs is called
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called
Workers laid off as a result of a recession suffer
People who lost their jobs as hand-drawn animators because of the popularity of
computer-generated 3D animation are examples of persons who are suffering
Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?
Sarah is not experiencing unemployment of any kind because she is not currently part of
the labor force
Emma is a road construction worker. During the winter months, emmy finds it more difficult to get work. The unemployment Emma experiences in the winter is
What are the three main kinds of unemployment?
structural, frictional, and cyclical
When an economy is at its natural rate of unemployment, which of the following will be true?
The unemployment rate will be greater than 0%
The natural rate of unemployment is made up of
frictional and structural unemployment
We say that the economy is at full employment if the unemployment rate is equal to
the natural rate of unemployment
By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce
Which of the following has a tendency to raise the unemployment rate?
implementing a minimum wage in an economy
An efficiency wage
is higher than the market wage and tends to increase productivity
The most widely used measure of inflation is based on which of the following price indices?
the consumer price index
If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then
changes in the CPI overstate the true rate of inflation
The formula for calculating the CPI is
(Expenditures in the current year/Expenditures in the base year) × 100
The CPI in 1990 was 131, and the CPI in 2008 was 215. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2008?
If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.
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?
You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. If inflation over the year is 2%, what is the real interest rate you are paying?
If inflation is completely anticipated
firms lose because they incur menu costs
The only way the standard of living of the average person in a country can increase is if
________ increases faster than ________
The best measure of the standard of living is
real GDP per capita
Suppose that real GDP for 2008 was $10,000 billion and real GDP for 2009 was $11,000 billion. What is the rate of growth of real GDP between 2008 and 2009?
If GDP grows at a rate of 3% per year, approximately how long will it take for GDP to double in size?
The rule of 70 states that
Labor productivity is
the quantity of output produced by one worker or by one hour of work
Which of the following is most likely to be able to sustain economic growth in an economy?
Potential GDP is defined as
the level of GDP attained when all firms are producing at capacity
A country with no trade and no borrowing and lending relationships with other countries is known as a(n)
Private saving is defined as
Y + TR - C - T
If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government
purchases are $10 billion, what is investment?
When the government runs a deficit, which of the following is true?
T < G + TR
The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.
During the expansion phase of the business cycle
The Business Cycle Dating Committee defines a recession as
a significant decline in activity visible in industrial production, employment, real income,
and wholesale/retail trade lasting more than a few month
A recession begins with a(n) ________ in spending by firms on capital goods and a(n) ________ in spending on durable goods by households
Recessions cause the unemployment rate to ________ and the inflation rate to ________
During an expansion, how do inflation and unemployment typically change?
Inflation rises and unemployment falls
If you spend more of your income on consumption goods, which of the following will occur?
The production of investment goods will fall
The best measure of a country's standard of living is
GDP per capita
If a country's real GDP is rising by 3% per year while its population is rising at 5% per year, which of the following is true?
The country's standard of living is falling
________ is considered a high income country, ________ a developing country, and ________ a
newly industrializing country.
United States; Somalia; Taiwan
High-income countries are also referred to as
An economic growth model
explains changes in real GDP per capita in the long run.
The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant.
capital; real GDP; technology
The per-worker production function has a ________ slope, indicating that increases in capital per hour worked ________ real GDP.
Which of the following is not a reason why low-income countries might experience low
The country has a good education system.
________ save a ________ of their income. This ________ capital in their economy and raises
High-income countries; large proportion; increases
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