07 Feb frictional unemployment.

ECON312N Principles of Economics

Week 5 Homework

Question 1

U.S. real GDP

is not as accurate as nominal GDP when measuring standard of living changes over time.

excludes the value of underground production and leisure time.

measures the change in the price level over time.

precisely measures the improving standard of living in the United States.

includes the value of underground production but excludes the value of leisure time.

Question 2U.S. unemployment rate lowest since 2008

The Labor Department said that the economy added 146,000 jobs in November, and the unemployment rate fell to 7.7% from 7.9% in October. But it fell mainly because workers dropped out of the labor force.

Source: CNN Money, December 7, 2012

Explain why workers dropping out of the labor force lowers the unemployment rate and why by more than new jobs do.

____________________

When workers drop out of the labor force, the unemployment rate falls because _______.

the ratio of the number employed to the number unemployed increases

the percentage change in the number unemployed is less than the percentage change in the labor force

the percentage change in the number unemployed equals the percentage change in the labor force

the percentage change in the number unemployed is greater than the percentage change in the labor force

Question 3

A standard definition of recession is

an increase in unemployment from one month to the next.

a decrease in real GDP for at least two successive quarters.

a period of time when the unemployment rate exceeds 6.5 percent.

an increase in GDP that lasts for at least 6 months.

a period of expansion in many sectors of the economy.

Question 4

Based on the figure above, in which quarter or quarters did a peak occur?

in 2014, 2nd quarter

in 2013, 2nd quarter

between 2012, 2nd quarter to 2013, 2nd quarter and also between 2014, 2nd quarter to the end of the figure

There are no peaks illustrated in the figure.

between 2013, 2nd quarter to 2014, 2nd quarter

Question 5

Which of the following people would be considered unemployed?

Sam, a part-time worker who wishes to work full time

Shirley, who is working but expects to be laid off at the end of the month

Victoria, who does not have a job and has been actively searching for work, but turned down a job paying less than she desired

Bobby, a full-time student in his last term before he graduates and who has not yet started to look for a job

Pat, who gave up looking for a job because he was discouraged about his job prospects

Question 6

Why GDP fails as a measure of well-being

There is a new reason why GDP is a poor measure of economic well-being: It doesn’t measure the benefits we gain from free apps and lots of other free stuff on the Internet. And none of the other indexes deal with this problem.

Source: CBS News, January 27, 2016

What are the other reasons why GDP is a poor measure of economic well-being?

_________________

GDP is a poor measure of economic well-being because it _______.

includes items such as political freedom which cannot be accurately measured

includes only production that is traded in markets

fluctuates more than potential GDP

exaggerates the depth of recessions and the height of expansions

Question 7

Unemployment benefits in western Europe are more generous than in the United States. As a result, ________ in the United States.

frictional unemployment is lower

cyclical unemployment is higher

frictional unemployment is higher

structural unemployment is higher

avoidable unemployment is lower

Question 8

Based on the figure above, in which quarter or quarters did an expansion occur?

in 2013, 2nd quarter

in 2014, 2nd quarter

between 2012, 2nd quarter to 2013, 2nd quarter and also between 2014, 2nd quarter to the end of the figure

There are no expansions illustrated in the figure.

between 2013, 2nd quarter to 2014, 2nd quarter

Question 9

The business cycle describes

the behavior of real GDP over time.

the behavior of GNP over time.

the change in potential GDP over time.

the change in the standard of living across countries.

the behavior of nominal GDP over time.

Question 10

Investment is the expenditure done by

savers.

Both answers A and B are correct.

firms.

the rest of the world.

governments.

Question 11

U.S. economy ended 2015 with slow growth

GDP increased at an annual rate of 0.7 percent in the final quarter of 2015. Government expenditure grew at the same 0.7 percent rate, but consumption expenditure grew at a rate of 2.2 percent. Investment and net exports shrank.

Source: BEA News Release, January 29, 2016

W5-HW-15.png

Use the figure to indicte the flows in which the items in the news clip occur.

How can GDP increase by 0.7 percent if consumption expenditure increased at a 2.2 percent rate?

_____________

It is possible for GDP to increase by only 0.7 percent when consumption expenditure grew at a 2.2 percent rate because _______.

intermediate goods are included in the measurement of GDP

the sum of investment and net exports increased by less than 2.2 percent

there is a measurement error

the sum of investment and net exports shrank

total expenditure does not equal total income

Question 12

Natural unemployment equals the sum of

cyclical and frictional unemployment.

business and cyclical unemployment.

cyclical and structural unemployment.

frictional and structural unemployment.

cyclical, business, and structural unemployment.

Question 13

One reason the total sum of the income categories does not equal GDP is that

GDP values goods and services at market prices and the income approach values them at factor cost.

GDP values goods and services at retail prices and the income approach values them at wholesale cost.

people do not spend all their income, so the value of consumption expenditure is less than the value of wages.

GDP does not include depreciation, which is part of the income categories.

taxes are generally larger than subsidies and the depreciation of capital is negligible.

Question 14

The U.S. economy is experiencing falling output, falling employment, falling incomes and rising unemployment. These conditions best describe a business cycle

trough.

trend.

peak.

recession.

expansion.

Question 15

Gross Domestic Product is equal to the market value of all the final goods and services ________ in a given period of time.

produced within a country

produced and consumed within a country

produced by the citizens of a country

consumed within a country

consumed by the citizens of a country

Question 16

For twenty years, Jim was a customer service representation at a call center in Minnesota. In order to save money, his firm moved the call center to India and laid off Jim two years ago. Jim has been unable to find a similar job anywhere. Jim’s unemployment is best classified as

competitive.

transported.

frictional.

structural.

cyclical.

Question 17

Potential GDP is the level of output produced when the unemployment rate is

equal to the natural unemployment rate.

greater than the natural unemployment rate.

made up of only cyclical unemployment.

zero.

less than the natural unemployment rate.

Question 18

The working-age population of people over the age of 16 can be divided into two groups, people

in the labor force and people with a job.

looking for work and those in the U.S. Armed Forces.

in the labor force and people looking for work.

with a job and people actively seeking a job.

in the labor force and people who are not in the labor force.

Question 19

Andrew is not working, but is available and willing to work after finishing a month-long mission trip for his church. While on his mission, Andrew did not look for work. Andrew is considered

a discouraged worker.

Both answers A and B are correct.

unemployed.

a marginally attached worker.

part of the labor force.

Question 20

Jordan recently quit her job as a marketing consultant in Washington, D.C. and is looking for a better-paying job with an advertising agency in New York. Jordan is considered to be

structurally unemployed.

cyclically unemployed.

frictionally unemployed.

a discouraged worker.

not in the labor force.

Question 21

Net exports of goods and services is equal to the value of

domestic consumption minus the value of imports.

exports minus the value of imports.

imports minus the value of exports.

exports plus the value of imports.

domestic consumption minus the value of exports.

Question 22

Consumption expenditure includes spending

by governments when they are buying goods and services that consumers also buy.

by households and spending on office supplies by firms.

by households.

on office supplies by firms.

on intermediate goods and services by firms.

Question 23

The U.S. economy is experiencing rising output, rising employment, rising incomes and falling unemployment. These conditions best describe a business cycle

trend.

expansion.

trough.

recession.

peak.

Question 24

The following are groups of individuals in the population:

1. Individuals who are under 16

2. Individuals in institutional care

3. Individual in the armed forces

4. Individuals working for pay at a fulltime job

5. Individuals who are employed

6. Individuals not employed but were available for work and were looking for work

7. Individuals not employed and looking for work

Using the list above, the Current Population Survey classifies the group of individuals who are left after subtracting from the total population groups 1, 2, and 3 as

unemployed.

employed.

the working-age population.

discouraged workers.

the labor force.

Question 25

Using the data in the above table, the labor force participation rate is

56 percent.

64.4 percent.

60.8 percent.

4.8 percent.

61.6 percent.

Question 26

People who are working up to 34 hours per week but would like to work more are considered

discouraged workers.

job leavers.

job seekers.

unemployed.

involuntary part-time workers.

Question 27

Suppose the working-age population is 500 million, the labor force is 200 million, and the unemployment rate is 15 percent. The number of unemployed people is

30 million.

105 million.

15 million.

75 million.

45 million.

Question 28

When measuring GDP,

only the federal government’s expenditure on goods and services are included.

the expenditure on goods and services by all levels of government are included.

the government sector is not counted because it does not produce goods and services.

the government sector is not included because it is the public sector not the private sector.

the government sector is counted, and the value of the government sector in GDP is equal to its tax revenue.

Question 29

Janae was fired from her job with Microsoft in the 2008-09 recession because Microsoft’s sales dipped. Janae’s unemployment would be best classified as

cyclical unemployment.

structural unemployment.

natural unemployment.

sales-related unemployment.

frictional unemployment.

Question 30

In order to measure gross domestic product, we can follow

only one approach: the circular flow approach.

three approaches: the expenditure approach, the income approach, and the market-based approach.

only one approach: the national accounts approach.

three approaches: the expenditure approach, the income approach, and the production approach.

two approaches: the expenditure approach and the income approach.