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Questions And Answers
Chapter 1/2: What was the initial response of most central banks to the Covid-19 pandemic and subsequent lockdowns of most nation's economies? - correct answer ✅Central banks reduced interest rates to near zero. Chapter 1/2: Politicians are very shortsighted and prefer to run deficits rather than increase taxes. This is known as ______. - correct answer ✅Deficit bias Chapter 1/2: Which of the following data types do economists generally use to compare GDP across countries? - correct answer ✅Purchasing power parity (PPP) numbers Chapter 1/2: From 1960 to 2019 China's growth rate has averaged______. - correct answer ✅5.6% Chapter 1/2: Overall, inequality across countries has ____ over the past 40 years. - correct answer ✅Decreased
Questions And Answers
Chapter 1/2: In 2021 the top 10% of U.S. wage earners received ____ of total pretax income. - correct answer ✅45% Chapter 1/2: Since 1960 inequality in the United States has ____. - correct answer ✅Increased Chapter 1/2: Which of these statements is the most accurate with respect to global warming? - correct answer ✅There is overwhelming evidence that shows that global warming does exist. Scientific consensus is clear that global warming is occurring and has significant consequences. Chapter 1/2: Forecasts show that the earth's temperature will increase by another _______ degrees celsius by the end of the century if we elect to do nothing to stop global warming. - correct answer ✅3 degrees celsius
Questions And Answers
What was a major disadvantage of using the old method? - correct answer ✅1. When the base year changed, all of the old measures of real GDP had to be recalculated. Recalculating past GDP every time the base year changed was cumbersome and resource-intensive.
- The old methodology tended to underweight the real growth of industries growing above average and overweight those growing below average This misrepresentation of economic growth was a significant drawback of the old method. Chapter 1/2: For any year t, let $YtYt denote nominal GDP and YtYt denote real GDP. The GDP deflator, denoted by PtPt, can be expressed as: - correct answer ✅$Y (small t)/Y (small t) The GDP deflator is calculated by dividing nominal GDP by real GDP, reflecting price level changes. Chapter 1/2: If in year t nominal GDP is $7,200 and real GDP is $6,200, the GDP deflator is ______. (Round your response to two
Questions And Answers
decimal places. Do not multiply by 100) - correct answer ✅1.
- {GDP Deflator} = {Nominal GDP}/{Real GDP}
- Nominal GDP = $7,200 and Real GDP = $6, The GDP deflator calculation is: {7,200}/{6,200} = 1.
- Rounding to two decimal places: the GDP deflator is 1.16. Chapter 1/2: If the GDP deflator in the prior year 1.10, the inflation rate for year t is ____ %. (Round your response to one decimal place.)
- given that the GDP Deflator of the prior year is 1.16 - correct answer ✅5.5%
- {Inflation Rate} = [{GDP Deflator in Year t} - {GDP Deflator in Prior Year}] / [{GDP Deflator in Prior Year}] X 100
- GDP Deflator in Year t = 1.16 GDP Deflator in Prior Year = 1.
- Now, calculate the inflation rate:{Inflation Rate} = [{1.16 - 1.10}/{1.10}] X 100 = {0.06}/{1.10} X100 = 5.5%
Questions And Answers
Chapter 1/2: In which year, a year where output growth is 2% or a year where output growth is − 2%, will the unemployment rate rise more? - correct answer ✅A year with output growth of -2% will see a higher rise in the unemployment rate because negative growth in output means firms will need fewer workers, which will cause unemployment to rise. Chapter 1/2: The Phillips curve is a relation between the inflation rate and the level of the unemployment rate. Using the Phillips curve, what will happen to the unemployment rate when the rate of inflation is 2%? - correct answer ✅It will be about 5.5% Chapter 1/2: The Phillips curve is often portrayed as a line with a negative slope. In the text, the slope is about − 0.17. Is this a "better" economy than one that has a Phillips curve with a large slope, say − 0.5 or a smaller slope, say -0.1? - correct answer ✅No, the slope does not indicate whether one economy is better than another; it simply shows how much inflation rises or falls given a change in the unemployment
Questions And Answers
Chapter 1/2: Using official data, U.S. GDP was 47 times higher in 2022 than it was in 1960 (T/F)? - correct answer ✅True Based on available data, U.S. nominal GDP in 1960 was approximately $543.3 billion, while in 2022 it was about $25. trillion. To calculate the increase: (25.44)/(0.543) = 46.84 = 47 (rounded) Chapter 1/2: When the unemployment rate is high, the participation rate is high (T/F)? - correct answer ✅False Historically, when the unemployment rate is high, it is often accompanied by a decline in the labor force participation rate. This is because, during periods of high unemployment, discouraged workers may stop actively seeking employment, which reduces the participation rate. The labor force participation rate measures the percentage of people either working or actively seeking work, so if many unemployed people give up looking for jobs, the participation rate declines.
Questions And Answers
Chapter 1/2: Okun's law shows that when output growth is lower than normal, the unemployment rate tends to rise (T/F)? - correct answer ✅True Okun's law suggests a relationship between output growth and unemployment, where lower output growth is associated with higher unemployment. Chapter 1/2: Periods of negative GDP growth are called recessions (T/F)? - correct answer ✅True Negative GDP growth is commonly used to define recessions. Chapter 1/2: When the economy is functioning normally, the unemployment rate is zero (T/F)? - correct answer ✅False Even in a well-functioning economy, there is always some level of unemployment due to factors like frictional and structural unemployment.
Questions And Answers
The Phillips curve is a relation between the level of prices and the level of unemployment (T/F)? - correct answer ✅False The Phillips curve shows the relationship between inflation and unemployment, not price levels directly. Chapter 1/2: Factors that one might explore to understand the pace at which a country's capital stock and its level of technology are advancing include: - correct answer ✅1. Quality of its education system A strong education system fosters innovation and helps develop a skilled workforce, which is crucial for technological progress.
- Role of the government Government policies, such as investment in infrastructure and R&D, play a significant role in advancing capital stock and technology.
- Saving rate
Questions And Answers
- Hedonic pricing is used to account for quality improvements in goods, ensuring prices reflect both inflation and changes in product features. Chapter 1/2: A firm's value added in any period equals: - correct answer ✅Its revenue minus its cost of intermediate goods in that period.
- Value added is the contribution a firm makes to the final product, calculated as revenue minus the cost of intermediate goods used in production. Chapter 1/2: What represents real GDP? - correct answer ✅1. GDP in constant dollars
- GDP in base year dollars
- GDP in terms of goods Chapter 1/2: Based on the notation presented in Chapter 2, which of the following expressions represents real GDP? - correct answer ✅Y (small t)
Questions And Answers
Chapter 1/2: Which statement about capital income is NOT correct?
correct answer ✅It refers to a firm's revenue.
- Capital income refers to income derived from the ownership of capital (e.g., profits, interest), not the firm's revenue. Chapter 1/2: Suppose you are provided with the following data for your country for a particular month: 200 million people are working, 20 million are not working but are looking for work, and 40 million are not working and have given up looking for work. Your country uses the same standards for calculating unemployment as the US. The official unemployment rate for that month is ______. - correct answer ✅9.1% This is the correct calculation of the unemployment rate. 20/(200+20) = 9.1% Chapter 1/2: In the United States, which of these persons would be classified as unemployed? - correct answer ✅Someone who does not have a job, has recently looked for work, and is collecting unemployment insurance.
Questions And Answers
jobs; 10 million would like jobs but are not searching; and 10 million do not want jobs at all. The official unemployment rate in percentage points is? - correct answer ✅33% This correctly calculates the unemployment rate based on the working-age population actively looking for work. 10/(10+20) = 33% Chapter 1/2: The GDP deflator provides a measure of? - correct answer ✅The ratio of nominal GDP to real GDP.
- The GDP deflator measures the change in price levels by comparing nominal GDP with real GDP. Chapter 1/2: The prices for which of the following goods are included in both the GDP deflator and the consumer price index? - correct answer ✅Goods bought by households
- The prices of goods purchased by households are included in both measures.
Questions And Answers
Chapter 1/2: Why do economists care about inflation? - correct answer ✅1. Inflation affects income distribution when not all prices and wages rise proportionally
- Inflation affects production, employment and investment decisions when not all goods and factor prices move proportionally
- Inflation leads to distortions: due to uncertainty, some prices that are fixed by law or regulation, and its interaction with taxation Most economists the "best" rate of inflation to be a stable economy is between a low (1-4) percent. Chapter 1/2: Which of the following prices will be used when calculating the rate of growth of real US GDP between the year's 2022 and 2023 using the chain method? - correct answer ✅The average of prices in 2022 and 2023
- The chain method for calculating real GDP growth between two years uses the average of the prices from both years to measure the change in output. This method reduces the distortion that can occur from using only one year's prices. The chain-weighted real
Questions And Answers
Chapter 1/2: The Phillips curve describes the relationship between?
correct answer ✅Inflation and Unemployment Chapter 1/2: Changes in GDP in the short run are caused primarily by: - correct answer ✅Demand factors
- In the short run, changes in GDP are often driven by demand factors, such as changes in consumer spending or investment. C. Capital accumulation Chapter 1/2: Changes in GDP in the medium run are determined primarily by: - correct answer ✅Supply factors
- In the medium run, supply factors such as capital accumulation, labor force growth, and technological progress are the primary determinants of GDP changes) Chapter 1/2: Changes in GDP in the long run are determined primarily by: - correct answer ✅Long-run GDP changes are primarily determined by factors such as technological progress and productivity growth
Questions And Answers
Chapter 3/4: What best explains the difference between endogenous and exogenous variables? - correct answer ✅Endogenous variables are explained within the model while exogenous variables are not; they are simply taken as given. Chapter 3/4: Imagine a world in which all variables were exogenous. Could policymakers change economic outcomes? In such a world policymakers would have (1) control over economic outcomes since their policy tools would (2). - correct answer ✅(1) Little to no (2) Not have a direct influence over any economic variables Chapter 3/4: The largest component of GDP is consumption (T/F)? - correct answer ✅True Chapter 3/4: Government spending, including transfers, was equal to 17.4 % of GDP in 2022 (T/F)? - correct answer ✅False
