Click on the unemployment rate range in which the U.S. natural unemployment rate is located.
at 5%

For each curve below, apply the correct label.
officially unemployed -> bottom line:

Unemployed plus discouraged and unemployed workers-> top line

Match the component of GDP national income accounting to the correct expenditure.
A farmer buys a new tractor.
Correct label:
Investment

David buys a new car.
Correct label:
Consumption

Lonnie the police officer cashes her paycheck at the end of the week.
Correct label:
Government spending

Jennifer buys toothpaste.
Correct label:
Consumption

Almonds are grown for sale overseas.
Correct label:
Net exports

A family of three purchases a newly built home.
Correct label:
Investment

A service-based economy is less likely to be a source of prosperity than a goods-based economy.
false

Which of the following may be considered as part of the consumer price index?
Correct Answers:
Food
Housing
Transportation

Incorrect Answer(s)
Taxes
Investments

Apply the appropriate label to each situation.
Your mom made a sweater for you for your birthday.
Correct label:
Non-market good

The neighborhood kids sell lemonade when it is hot outside.
Correct label:
Underground economy

Your child is paid $40 to walk your friends' dog while they are on vacation.
Correct label:
Underground economy

Your neighbors grow and eat their own vegetables from their private garden.
Correct label:
Non-market good

Which of the following statements are true about the underground economy?
Correct Answer(s)
It is not possible to accurately measure the size of the underground economy.
It is possible for the underground economy to have an effect on the legitimate economy.
Incorrect Answer(s)
All of the goods and services traded in the underground economy are illegal.
All underground economic activity is harmful to society.

Apply the correct label to each labor force participation rate line.
male-> top line. Female -> bottom line

Why might the prices of some products decrease while others increase?
advances in technology typically cause the price of some goods to decrease over time

How do intermediate goods factor into the calculation of GDP?
Intermediate goods do not factor into GDP; only final goods are counted.

Use the table to complete the sentence about race and unemployment.
The U.S. unemployment rate of black adult workers is consistently higher than that of white adult workers, and the labor force participation rate is consistently higher for male workers than for female workers.

identify each good as intermediate or final
A memory card bought by a photographer
Correct label:
Final

Tires bought by a driver for her personal vehicle
Correct label:
Final

Lenses bought by a camera manufacturer
Correct label:
Intermediate

Tires used in car manufacture
Correct label:
Intermediate

Correctly classify each situation that GDP cannot measure.
You repair your own pants when you rip them.
Correct label:
Non-market good

Unregulated industries pollute the air.
Correct label:
Quality of environment

A restaurant server takes home $75 in unreported tips each night.
Correct label:
Underground economy

Country A has a very high GDP, but the average person works 60 hours a week.
Correct label:
Leisure time

For purposes of computing GDP, how are net exports calculated?
Net exports = exports - imports

Suppose there is uncertainty about the amount of inflation that will occur during the "Produce" period, between the signing of contracts and the collection of sales revenue. Label each item as being based, ultimately, on a worry that inflation will be higher than expected or that it will be lower than expected.
Will come true if inflation is higher than expected
The workers worry they agreed to lower wages than they should have.
The lender worries that the loan rate is too low.

Will come true if inflation is lower than expected
The business owner worries about not being able to charge high enough prices.
The business owner worries that the loan rate is too high.

Assume Country X has the following statistics:
Total relevant population = 50,000,000
Full-time students = 4,200,000
Not employed and not currently searching for jobs = 6,000,000
Not employed and currently searching for jobs = 2,336,000
Currently employed = 29,664,000
Country X has a labor force of 32,000,000, a labor force participation rate of 64%, and an unemployment rate of 7.3%.

Calculate the GDP for a country that in one year sells 10,000 speedboats for $40,000 each and 5,000 race cars for $90,000 each, and nothing else. A speedboat engine contributes $9000 to the total price, and a race car engine is worth $12,000.
850 million dollars

A country has a non-institutionalized civilian adult population of 263 million. Out of that number:
85 million are students, homemakers, retirees, etc.
11 million are discouraged workers.
122 million are employed full-time.
30 million are employed part-time.
15 million are out of work and actively looking for work.

What is the unemployment rate? Round to one decimal place.
9.0%

Fill in the blanks to complete the explanation of how inflation and deflation affect consumers differently.
Inflation occurs when the overall prices of goods increase. This means that consumers have less purchasing power. Deflation occurs when the overall prices of goods decrease. When this happens, consumers have more purchasing power.

Fill in the blanks to complete the passage explaining why GDP is not always the best measure of a country's well-being.
GDP is the best measure of a nation's economic activity. However, GDP does not take into account many factors that affect quality of life, like the amount of people's leisure time or the cleanliness of the environment. GDP only measures a country's economic output.

Match the situation to the factor that affects the accuracy of the CPI.
Newer cars have built-in GPS and Bluetooth capabilities.
Correct label:
Changes in quality

A new smartphone app solves math problems simply by pointing the camera at the page.
Correct label:
New products

The cost of cable increases. People decide to switch to Netflix instead.
Correct label:
Substitution

New pop-up stores at airports sell clothing, personal electronics, and designer eyewear at low prices.
Correct label:
New locations

Video game consoles offer better graphics and gameplay than they did a decade ago.
Correct label:
Changes in quality

The cost of bananas increases dramatically. Many people switch to oranges because they are cheaper.
Correct label:
Substitution

The per capita GDP and GDP growth rates of Country A and Country B are the same. Nonetheless, the citizens of Country B are clearly better off. How could this be true? Fill in the blanks to complete the passage.
The most natural interpretation of "better off" is that citizens of Country B have a higher quality of life. It is possible that the citizens of Country B spend more time in leisure activities. It is also possible that they live in a cleaner environment. GDP does not measure the quality-of-life indicators that would explain this.

Calculate the percentage change in U.S. nominal GDP for the year 2004. Round your answer to two decimal places.
6.38% = 2004-2003/2003*100

Assuming employee wages are adjusted based on inflation, what could happen if the CPI were under-calculated?
wages will be too low

Which of the following scenarios make it difficult to accurately measure the CPI?
Correct Answer(s)
The price of a ticket to a baseball game increases after the stadium is rebuilt.
A company releases a new product that many consumers adopt.
Incorrect Answer(s)
Consumers need to purchase gas to get to work.
The typical basket of consumer goods does not change.

What are the three reasons why the CPI is hard to measure accurately?
Correct Answer(s)
Consumers substituting one good for another because of price
New products to buy and new ways for consumers to buy them
Changes in the quality of the same good, over time
Incorrect Answer(s)
The difference between nominal and real buying power
Changes in the tax rate and therefore in take-home income