Midterm 3 ECON

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?

• the trade-deficit

• inflation rate

• GDP

• unemployment rate

Bob is looking for work after school, but everywhere he fills out an application the managers say they always have a lot more applications than open positions. Tom has a law degree. Several firms have made him offers, but he thinks he might be able to find a firm where his talents could be put to better use.

• Bob is frictionally unemployed, and Tom is structurally unemployed.

• Bob and Tom are both structurally unemployed.

• Bob and Tom are both frictionally unemployed.

• Bob is structurally unemployed, and Tom is frictionally unemployed.

If the Fed makes open market purchases of bonds,

• the money supply increases by more than the amount of bonds purchased.

• the money supply increases by less than the amount of bonds purchased.

• the money supply decreases by more than the amount of bonds purchased.

• the money supply decreases by less than the amount of bonds purchased.

In the calculation of CPI, coffee is given greater weight than tea if

• consumers buy more coffee than tea

• the price of coffee is higher than the price of tea

• it costs more to produce coffee than it does to produce tea.

• coffee is more readily available than is tea to the typical customer.

By far the largest category of goods and services in the CPI basket is

• transportation

• housing

• food and apparel

• food and beverages

Ralph puts money in the bank and earns a 5 percent nominal interest rate. Then, if the inflation rate is 3 percent,

• Ralph will have 3 percent more money, which will purchase 2 percent more goods.

• Ralph will have 3 percent more money, which will purchase 8 percent more goods.

• Ralph will have 5 percent more money, which will purchase 8 more percent of goods.

• Ralph will have 5percent more money, which will purchase 2 more percent of goods.

Which of the following adds to U.S GDP for 2006?

• In 2006, Ashley sells a car that she bought in 2002 to William for $5,000

• When John and Jennifer were both single, they lived in separate apartments and each paid $750 in rent. John and Jennifer got married in 2006 and they bought a house that, according to reliable estimates, could be rented for $1,600 per month.

• An American management consultant works in Mexico during the summer of 2006 and earns the equivalent of $30,000 during that time.

• None of the above transactions adds to GDP for 2006

The substitution bias in the consumer price index refers to the

• substitution by consumers of new goods for old goods

• substitution by consumers of a smaller number of high-quality goods for a larger number of low-quality goods.

• fact that consumers substitute toward goods that have become relatively less expensive.

• substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.

Anna has just finished high school and started looking for her first job, but has not yet found one. As a result, the unemployment rate

• increases, and the labor-force participation rate increases.

• substitution by consumers of a smaller number of high-quality goods for a larger number of low-quality goods.

• fact that consumers substitute toward goods that have become relatively less expensive.

• substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.

In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. President Hoover’s 1931 salary was equivalent to a 2005 salary of about

• $1,455,995.

• $1,254,262

• $1,125,008

• $962,171.