Question

The largest component of spending in the circular flow model is:

Investment

Consumption

Net exports

Government spending

We deliberately choose to omit some factors from GDP such as:

Government purchases

Purely financial transactions

Final goods

All of the above.

Which of the following unemployed workers would be an example of structural unemployment?

John loses his job and can’t find a new one as new technology is adopted in his industry.

Mary gives up looking for a job because of the lousy economy.

Mark decides to reenter the labor force after going back to school to study economics.

Alice loses her construction job because of winter weather.

The discouraged worker effect

is when people decide they would rather not work.

is when people voluntary leave one job to look for a better one.

is when people give up looking for a job because there is little likelihood of finding one.

is when people involuntarily have hours cut or have to accept a job under their skill level.

The number of unemployed is calculated by:

a large monthly survey of households conducted for the Bureau of Labor Statistics.

counting the people currently collecting unemployment benefits.

A large quarterly survey of businesses conducted for the Labor Department.

counting the people either currently or recently collecting unemployment benefits.

Stagflation is when the economy has:

high unemployment coupled with low inflation at the same time.

low unemployment and inflation at the same time.

low unemployment coupled with high inflation at the same time.

high unemployment and inflation at the same time.

A “core” inflation rate:

does not include food and energy prices.

tracks prices on the wholesale level..

is the rate of inflation at the natural rate of output.

tracks the inflation of labor costs.

Menu costs are:

the costs of materials.

the cost of changing prices.

particularly low when inflation is high.

a reason that the inflation rate typically underestimates true price level changes.

A market basket costs $150 to buy in the base year and $60 to buy in year X.

A. the price index for year X is 250.

B. Year X probably occurred after the base year.

C. Year X is the base year.

D. the price index for year X is .4 or 40%.

A traditional expansionary gap is created when the aggregate demand curve moves to the:

A. right of the natural rate of output; inflation rises and unemployment falls.

B. left of the natural rate of output; inflation falls and unemployment rises.

C. right of the natural rate of output; inflation falls and unemployment rises.

D. left of the natural rate of output; inflation rises and unemployment falls.

Answer 1

- consumption is correct

Largest spending component is consumption.

- purely financial transactions is correct

Financial transactions are excluded from the GDP calculation because these are transfer of ownership from one party to other. They do not show transfer of FINAL goods. Ha

- John loses his job and cannot find another as new technology is adopted in his industries- is correct.

Structural unemployment results when a person losses job when industries are adopying new technology or reorganizing.

- is when people give up looking for a job as there is little likelihood of finding one- is correct.

A worker gets discouraged that he is not going to get a job and he even gives up looking for it.