# Macroeconomics Machine-graded Assessment Items Module: Macroeconomic Measures of Performance

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7 spending on the American economy is greater than what it can produce. spending by American households, businesses, and government is greater than GDP.* spending on the American economy is less that what it can produce. imports are greater than exports.* // Content Page - Reading: Measuring Total Output 6.2.a.0 Explain the expenditure approach to calculating GDP Short Title: Expenditure Approach to Calculating GDP 6.2.a.1 When calculating the GDP using the expenditure approach, what must happen to exports of a nation? They must be ignored, because they are not bought in the domestic market. They must be added to the other components of GDP.* They must be subtracted, because they are included in the consumption of a foreign country. They must be subtracted if foreign firms buy the exports for investment purposes. When calculating GDP as the sum total of all spending, the components of spending should include: purchases of consumer durables.* savings. government transfer payments. government purchases of labor, goods, and services.* // Content page - Reading: Calculating GDP 6.2.a.2 Which of the following would be included in the computation of GDP in a particular year? Government expenditure on public schools* Social security payments to retirees An increase in inventories* // Content page - Reading: Calculating GDP 6.2.a.3 GDP measured from the expenditure side include(s): Spending on capital goods* Tax payments Foreign spending on American output* Purchases of public goods and services* // Content page - Reading: Calculating GDP // Udpated 10/29/2015 answer choices edited Which of the following components of GDP has the largest immediate impact on GDP. Changes in 1. government spending 1. consumption spending* 1. business investment 1. services provision 6.2.b.0 Explain the national income approach to calculating GDP Short Title: National Income Approach to Calculating GDP 6.2.b.1 are now the largest single component of the supply side of GDP, representing over half of GDP. Durable goods Services* Nondurable goods

10 Short Title: The Unemployment Rate Calculate the unemployment rate based on the following data for a country: Population: 200, Employed workers: 140, Labor Force: 160, Discouraged workers: % %* % % // Content page - Reading: Calculating Unemployment If out of 125 people in the labor force, the number of employed workers is 100 and number of unemployed workers is 25, then the unemployment rate is 20%* 10% 30% 25% // Content page - Reading: Calculating Unemployment // Updated 10/29/2015 question and answer choices edited What is the formula with which to calculate the official unemployment rate? The number in the labor force divided by the population The number of unemployed workers divided by the sum of employed and unemployed workers* The number of discouraged workers divided by the number of civilian workers The number of people seeking work divided by the number quitting their jobs // Content page - Reading: Calculating Unemployment Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered: out of the labor force.* unemployed. employed in the underground economy. underemployed. // Content page - Reading: Calculating Unemployment If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: 32% 25%* 20% 8% // Content page - Reading: Calculating Unemployment Calculation of the unemployment rate requires data on Percent of the adult population in the labor force who are unemployed.* Percent of the adult population who are unemployed. Percent of the adult population not in the labor force. // Content page - Reading: Calculating Unemployment 6.4.a.0 Critique the unemployment rate as a measure of the unemployment problem Short Title: Critiquing the Unemployment Rate 6.4.a.1 If the unemployment rate is 8 percent, then this means:

11 8 percent of the population is unemployed. 8 percent of the labor force is unemployed.* the number of unemployed persons equals 8 percent of the employed persons. // Content page - Reading: Difficulties Measuring Unemployment 6.4.a.2 Which of the following could cause unemployment? a depression* a prolonged war competition* // Content page - Reading: Difficulties Measuring Unemployment Some critics of the unemployment rate say that it under- reports the actual unemployment problem by: overlooking people who are working in the informal (underground) economy. not capturing instances when skills are underutilized by the workplace.* considering discouraged workers to be out of the labor force.* including people who are working in the informal (underground) economy. // Content Page Reading: Criticisms of Measuring Unemployment 6.4.a.3 Complete the following sentence. Calculations of the official unemployment rate exclude: labor force employed discouraged workers* unemployed, but seeking work // Content page - Reading: Criticisms of Measuring Unemployment Identify and differentiate between the different types of unemployment Short Title: Types of Unemployment Bill is a construction worker who was laid off because the market for new homes has been adversely affected in the recession. Bill s unemployment experience is referred to Cyclical unemployment* Seasonal unemployment Frictional unemployment Structural unemployment // Content page - Reading: Types of Unemployment Fill in the blank. If the print media is taken over by the electronic media, thereby causing employees in the print media industry to be permanently laid off, unemployment would increase. Cyclical Seasonal Frictional Structural* // Content page - Reading: Types of Unemployment When the macroeconomy is experiencing a higher than natural rate of unemployment, it must be because: potential real GDP is less than current real GDP. current real GDP Is less than potential real GDP.* wages cannot adjust downward quickly and easily.* wages respond instantaneously to labor market shifts. // Content Page Reading: Changes in Unemployment Over the Long Run

12 A contraction in the business cycle is likely to result in which form of unemployment increasing? frictional cyclical* seasonal structural // Content page - Reading: Changes in Unemployment Over the Short Run // Updated 10/29/2015 question edited Which form of unemployment suggests workers need to seek education and training and to update their skill sets? Functional Cyclical Structural* Seasonal // Content page - Reading: Types of Unemployment Employment generally during recessions and during expansions. falls : rises* rises : falls rises : rises // Content page - Reading: Patterns of Unemployment When prices do not respond quickly to bring forces of supply and forces of demand to the equilibrium point, they are called: sticky prices.* market prices. market structure prices. // Content page - Reading: Changes in Unemployment over the Short Run Which types of unemployment exist at all times, and determine the natural rate of unemployment? I. frictional unemployment II. structural unemployment III. cyclical unemployment 1. I & II* 1. II & III 1. I & III // Content page - Reading: Types of Unemployment Which types of unemployment exist at all times and determine the natural rate of unemployment? Frictional unemployment and structural unemployment.* Structural unemployment and cyclical unemployment. Frictional unemployment and cyclical unemployment. // Content page - Reading: Types of Unemployment Frictional unemployment occurs because it takes for people to find jobs. time* money resources // Content page - Reading: Types of Unemployment

13 The idea that firms will get the most for their money when they pay wages higher than the equilibrium wage is called: efficiency- wage theory.* optimal- wage theory. equilibrium- wage theory. // Content page - Reading: Changes in Unemployment over the Short Run // Updated 10/29/2015 question edited A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be: frictionally unemployed.* underemployed. cyclically unemployed. structurally unemployed. // Content page - Reading: Types of Unemployment If a nation s labor force receives a significant influx of young workers: the natural rate of unemployment is likely to increase.* the natural rate of unemployment is likely to decrease. the natural rate of unemployment is unlikely to change frictional unemployment will likely decrease to zero. // Content page - Reading: Changes in Unemployment over the Long Run Workers hired during the US holiday season lower: cyclical unemployment * the natural rate of unemployment seasonal unemployment* frictional unemployment // Content Page Reading: Changes in Unemployment Tom graduated from college in June but was still looking for work in August. This is an example of: structural unemployment. frictional unemployment.* cyclical unemployment. // Content page - Reading: Types of Unemployment Explain the concept of a price index and explain how price indices are derived Short Title: Price Indexes When Anders took out his first two- year membership with Maxima Gym in 2004, the fee was \$ He renewed his membership three times: in 2006 for \$580.00, in 2008, for \$600.00, and again in 2010, for \$ What is the overall rate of inflation for Anders s gym membership? 8.6% 5.4% 7.87% 16.66%* // Content page - Reading: Price Indexes In only one year the consumer price index goes up from 150 to 450. This means that: the inflation rate was less than 200%. the inflation rate was over 200%. prices doubled.

16 P Q P Q P Q Tourism \$ \$ \$ Popcorn \$ \$ \$ Carrots \$ \$ \$ Berries \$ \$ \$ : \$67,750; 2005: \$92,563; 2015: \$139, : \$106,641; 2005: \$159,750; 2015: \$278, : \$280, 2005: \$485, 2015: \$670* 1985: \$1235, 2005: \$1576; 2015: \$2, : \$130, 2005: \$185, 2015: \$270 // Content page - Reading: How Changes in the Cost of Living Are Measured 6.6.b.4 In Fairwind Country, there are only 4 goods: tourism, popcorn, carrots, and berries. Using the data in the following table, please calculate the CPI values for 2005 and 2015, using 1985 as a base year. The CPI basket includes 500 units of tourism, 600 units of popcorn, 1500 units of carrots and 1250 units of berries. (Please round to the nearest whole number) P Q P Q P Q Tourism \$ \$ \$ Popcorn \$ \$ \$ Carrots \$ \$ \$ Berries \$ \$ \$ : 137, 2015: :137, 2015: : 128, 2015: 176 * 2005: 128, 2015: : 142, 2015: : 142, 2015: 146 In Fairwind Country, there are only 4 goods: tourism, popcorn, carrots, and berries. Using the data in the following table, please calculate the CPI values for 2005 and 2015, using 1985 as a base year. The average family purchased the market basket indicated by the columns "Items" and "Quantity." Items Quantity Year: 1985 Year: 2005 Year: 2015 Price Amount Spent Price Amount Spent Price Amount Spent

17 Tourism 2 \$ \$ \$ Popcorn 25 \$4.00 \$5.00 \$7.00 Carrots 10 \$0.75 \$2.25 \$3.50 Berries 15 \$1.50 \$2.50 \$4.00 Total 2005:137, 2015: : 128, 2015: 176 * 2005: 128, 2015: : 142, 2015: 208 // NEW // Content Page Reading: How Changes in the Cost of Living Are Measured in- the- cost- of- living/ Define the rate of inflation; Explain how the rate of inflation is calculated Short Title: Rate of Inflation If the Consumer Price Index was at the end of last year and at the end of this year, the country experienced which of the following? An inflation rate of 3.59 percent. An inflation rate of 3.72 percent. A deflation rate of 3.59 percent.* A deflation rate of 3.72 percent. // Content page - Reading: Computing the Rate of Inflation If the Consumer Price Index was 120 at the end of last year and 125 at the end of this year, Americans experienced which of the following? Inflation* Deflation A decrease in the purchasing power of a dollar* A rise in the purchasing power of a dollar // Content page - Reading: Introduction to Inflation // Updated 10/29/2015 question and answer choices edited Inflation: is an increase in the cost of a given basket of goods.* means that the price of every good and service is rising. reduces the real value of anything expressed in dollars.* can occur even when many goods are falling in price.* // Content page - Reading: Changes in the Cost of Living; Reading: Price Indexes // Updated 10/29/2015 answer choices edited Identify the consequences of price instability (i.e., inflation) Short Title: Consequences of Price Instability During the 1970s when inflation accelerated, middle- class Americans benefited primarily because nominal wages fell. the value of their mortgage debts decreased in real terms.*

19 Define the GDP price index (also known as the GDP deflator or the Implicit Price Deflator) Short Title: Defining the GDP Price Index If the nominal GDP is \$3 trillion and the GDP deflator is 120, then what is the real GDP? \$2.5 trillion* \$0.25 trillion \$4 trillion \$400 trillion // Content page - Reading: The Implicit Price Deflator Which of the measures below describes a basket of goods comprised of all the components of GDP? Consumer Price Index Core CPI GDP Deflator* // Content page - Reading: The Implicit Price Deflator // Updated 10/29/2015 question and answer choices edited The GDP deflator is a price index that includes the following components of GDP: Consumption Consumption plus Investment but not Exports Consumption, Investment plus Exports minus Imports Consumption, Investment, Government plus Exports minus Imports* // Content page - Reading: How Changes in the Cost of Living Are Measured Alex wants to measure the nominal 1998 GDP of \$993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be? \$430 billion \$835 billion \$2,063 billion \$2,449 billion* // Content page - Reading: Price Indexes and the Implicit Price Deflator In the base year in a small island macroeconomy, nominal GDP was \$400m. In a later year when the general level of all prices was twice as high, nominal GDP reached \$1000m. Between the base year and the later year: there was real GDP growth, but by less than 100%.* there was real GDP growth by more than 100%. real GDP declined. inflation occurred.* // Content Page Reading: Introduction to Inflation Differentiate between nominal GDP and real GDP Short Title: Nominal and Real GDP Which of the following statements regarding nominal GDP is accurate? The expenditure approach to GDP includes disposable income. Nominal GDP presents a dollar amount adjusted for inflation Nominal GDP is the value of final goods and services produced in an economy at a point in time Nominal GDP:

20 is sensitive to changes in prices.* is sensitive to changes in real output.* can be meaningfully compared from one year to the next without price level data. // Content Page - Reading: Real GDP Which of the following best defines real GDP? Real GDP is defined as the total dollar value of final goods and services produced within a country in one year before adjustment for inflation. Real GDP is defined as the current total dollar value of final goods and services produced within a country. Real GDP is defined as the total dollar value of final goods and services produced within a country in one year after adjustment for inflation.* // Content page - Reading: Real GDP The distinction between real GDP and nominal GDP is important to determine which of the following? The change in economic welfare. The growth in the government sector. The change in real GDP per person. The change in real output produced.* // Content page - Reading: Converting Nominal to Real GDP // Updated 10/29/2015 answer choices edited The difference between nominal GDP and real GDP is: nominal GDP measures actual productivity nominal GDP adjusts for inflation real GDP adjusts for inflation* real GDP excludes imports and exports // Content page - Reading: Converting Nominal to Real GDP The following table shows the production within a very small country s economy in two consecutive years. What was the real GDP for the base year of 2017? Year Item Quantity Produced Price Per Unit 2017 Oranges 1000 pounds \$ Haircuts 2000 haircuts \$ Oranges 1500 pounds \$ Haircuts 3000 pounds \$7.50 \$11,000* \$12,500 \$16,500 // Content page - Reading: Converting Nominal to Real GDP // Updated 10/29/2015 question edited The following table shows the production of a country s economy in two consecutive years. What was the real GDP for year 2018? Year Item Quantity Produced Price Per Unit 2017 Oranges 1000 pounds \$1.00

21 2017 Haircuts 2000 haircuts \$ Oranges 1500 pounds \$ Haircuts 3000 pounds \$7.50 \$16,500 \$15,000 \$23,250* \$22,500 // Content page - Reading: Converting Nominal to Real GDP // Updated 10/29/2015 question and answer choices edited The following table shows Tropicalia Äôs production in two consecutive years. The rate of (real) GDP growth in year 1998 relative to year 1997 is Year Item Quantity Produced Price Per Unit 1997 Oranges 1000 pounds \$ Haircuts 2000 haircuts \$ Oranges 1500 pounds \$ Haircuts 3000 pounds \$ % % 1. 20% // Content page - Reading: Converting Nominal to Real GDP The national debt doubled in nominal terms during a time when the GDP Deflator increased from 200 to 300. This implies that the national debt: is smaller in real terms. has increased in real terms, but it has less than doubled.* has more than doubled in real terms. // Content Page Reading: Converting Nominal to Real GDP 6.11.a.0 Use the GDP price index to compute real GDP from nominal GDP Short Title: Converting Nominal to Real GDP 6.11.a.1 If Nominal GDP = \$4.5 trillion and the GDP deflator is 150, then real GDP is equal to: \$3 trillion.* \$4.3 trillion. \$6 trillion. // Content page - Reading: Converting Nominal to Real GDP // Updated 10/29/2015 question and answer choices edited 6.11.a.2 Suppose the European Union has a Real GDP of 12.2 trillion Euros, and their GDP deflator is 125. What is the European Union s nominal GDP? trillion Euros * trillion Euros

22 trillion Euros // Content page - Reading: Converting Nominal to Real GDP 6.11.a.3 If Nominal GDP is \$17,000 billion and the GDP deflator is 0.75, then Real GDP is: \$22.67 billion * \$12.75 billion \$16.50 billion // Content page - Reading: Converting Nominal to Real GDP Measure the distribution of income using the Lorenz curve Short Title: The Lorenz Curve What is the image below? (img: us- west- 2.amazonaws.com/oerfiles/Assessments/economics/gates- outcome- 6- lorenz.png) income curve inequality curve Lorenz Curve* // Content page - Reading: The Lorenz Curve The image below shows: the inequality of the American capitalist system. distribution of income among groups of people.* the impact on unions on wage earners.

23 // Content page - Reading: The Lorenz Curve A Lorenz curve refers to a graphic illustration of the share of population on the and the cumulative percentage of total income received on the. horizontal axis : vertical axis* left quintile : right quintile vertical axis : horizontal axis // Content page - Reading: The Lorenz Curve Incomes rise for low- income and high- income workers, but rise more for the high- income earners. How will this change affect income inequality? 1. poverty falls, inequality rises* 1. poverty rises, inequality falls 1. no change // Content page - Reading: The Lorenz Curve When real incomes rise for the rich more rapidly than they rise for those with lower incomes? Poverty falls but inequality rises.* Poverty rises but inequality falls. The Lorenz curve will reflect the change with a greater bow. * The Lorenz curve will reflect the change with a smaller bow. // Content page - Reading: The Lorenz Curve A Lorenz curve shows: what percentage of a population has incomes below the poverty line. how a population s total income is distributed in relative terms among its members.* how income mobility has changed over time. // Content page - Reading: The Lorenz Curve // Updated 10/29/2015 answer choices edited

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