GEORGIA STATE UNIVERSITY

Spring Semester 02

MACROECONOMICS

Homework I

Answer the following questions:

1- The labor force consists of

a)      All the people in the economy who are not retired

b)      All people in the economy over 16 years of age

c)      All the adults in the economy between 18 and 65 years old who are able to work

d)      all the noninstitutionalized adults in the economy who hold jobs or are looking for them

e)      all the citizens in the economy who are graduates of high school

2-      People who are not currently employed, but say they want a job, are counted as unemployed only if they

a)      have previously held a job

b)      are actively seeking employment

c)      are willing to accept a reasonable offer

d)      are between 16 and 65 years of age

3-     The unemployment rate is

a)      the percentage of people in  the economy who do not hold jobs

b)      the percentage of the labor force that does not have a job

c)      the number of people in the economy who have given up looking for employment

d)      the number of people in the labor force without jobs

4-     Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for work, and 15 of who are retired.  The number of people in the labor force is

a)      30

b)      60

c)      85

d)      70

 

 

5-     Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of  whom are looking for work, and 15 of who are retired.  The number counted as unemployed is

a)      10

b)      15

c)      40

d)      30

6-     Consider an economy made up of 100 people, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of who are retired.   The unemployment rate is

a)      10 percent

b)      12 percent

c)      17 percent

d)      20 percent

7-     Inflation can be best defined as

a)      any change in the purchasing power

b)      a one-time increase in the price level

c)      A continuous increase in the price level

d)      An increase in the price of ever good and service in the economy

 

8-     The distinction between recession and depression is that recessions are

a)      longer that depressions

b)      more severe than depressions

c)      accompanied by price increases; depressions by price decreases

d)      shorter and less severe than depressions

9-      In the base year :

a)      real GDP will be greater than nominal GDP

b)      nominal GDP will be greater than real GDP

c)      real GDP will be the same as nominal GDP  

d)      both real and nominal GDP will equal zero

 

10- If nominal GDP in 1995 was $4,000 billion, and real GDP is $3855, then

a)      GDP price deflator or the price level index is 105

b)      GDP price deflator is 200

c)      GDP price deflator is 103.76

d)      GDP price deflator is 120

 

11- The level of output that would materialize at the target rate of unemployment and the target rate of capital utilization is called

a)      nominal output

b)      actual output

c)      potential output

d)      historical output

 

12- Gross investment differs from net investment by: 

a)      net exports

b)      net imports

c)      depreciation

d)      transfer payments

 

13- Which of the following is the best measure available to compare changes in standards of living among countries overtime?

a)      changes in nominal income

b)      changes in changes in nominal per capita income

c)      changes in real income

d)      changes in real per capita income

 

14- The Expenditures Approach to measuring GDP consists of summing measured spending by

a)      government transfer payments

b)      Firms and household members

c)      Household consumers, business investors, government purchases and net exports

d)      Households, business sector, and federal government

15- If consumer price index(CPI) was 112.0 in 1994 and 115.0 in 1995, then the inflation rate was:

a) 2.3%       b) 3.0%                c) 0.8%         d) 14.8%

 

16- The total amount of goods and services produced within the borders of a nation’s economy in a given year is:

       a)  Gross National product                        b) Gross Domestic product

c)  Net National product            d)  Real Gross Domestic product

Answer the following questions by using the information bellow

Expenditure and income statement of U.S. economy (1995 data in trillions of dollars)

Consumption (C)                                                       $4.94

Gross investment (I)                                                    1.06

Depreciation                                                                0.82

Net indirect business taxes                                          0.61

Compensation of employees                                       4.22

Proprietor’s income                                                     0.48

Corporate profits                                                          0.59

Net interest income                                                             0.41

Rental income                                                               0.13

Government purchases (G)                                                    1.36

Net exports( X-M)                                                   -0.11

Net earnings of American resources abroad                         -0.01

17- By using the expenditure approach, GDP is

a)      $7.25

b)      $15

c)      $2

d)      $20

18- By using income approach, GDP is

a)      $7.25

b)      $10

c)      $25

d)      $1

 

19-  Based on the information above, Net domestic product is

a)      5.63 trillion dollars

b)      6.43 trillion dollars

c)      4.30 trillion dollars

d)      7.50 trillion dollars   

20- The largest component of expenditures in GDP is

a)      Consumption

b)      Investment

c)      Net exports

d)      Governments purchases of goods and services

 

21- The difference between consumer price index and GDP price deflator is that Consumer Price Index (CPI)

a)      reflects only durable goods while GDP price index reflects only non durable goods

b)      reflects consumer goods purchased by typical urban consumers, while GDP price deflator reflects the whole economic activity of a particular country

c)      reflects only farmers’ output and GDP price deflator is not relevant to any

d)       reflects only services and GDP price deflator reflects High tech products

 

22- When Gross investment is less than depreciation, then

a)      productive capacity of the economy is shrinking and production possibilities curve shifts inward

b)      productive capacity of the economy is expanding and production possibilities curve shifts outward

c)      productive capacity of the economy is not changing at all

d)      neither of the above

 

True/ false questions

23- If inflation is lower than expected, lenders will likely to gain

24- Business cycle is the upward or downward movement of economic activity that occurs around the growth trend.

25- If the nominal rate of interest is 6% and the inflation rate is 4 %, then the real rate of interest is 2%

26- If current dollar GDP increases by 5%, we can definitely conclude that the economy is doing better.

27- Second hand commodities are included in calculating GD

28-  financial transactions are not included in GDP

HW2.

Work out the following questions from the textbook.

Chapter 22, under problems and exercises on pages507-508, solve questions 1 and two.

 

For chapter 23, answer questions, #5 and #7(again under problems and exercises) on page 531.

Note homework 2 will due on Thursday of next week. It is also required that you should type them neatly and turn them.