ECO 2305 TEST 3 TTU QUESTIONS WITH 100 % CORRECT ANSWERS | VERIFIED

GDP does not directly include intermediate goods because - Answer-that would count the intermediate goods twice. Let C represent consumption expenditure, S saving, I gross private domestic investment, G government expenditure on goods and services, and X - M net exports of goods and services. Then GDP equals - Answer-C + I + G + X - M. Two methods of measuring GDP are - Answer-the income approach and the expenditure approach Nominal GDP is the value of final goods and services - Answer-at the prices of that year. Of the following, which is CORRECT? - Answer-Nominal GDP increases when the prices of goods and services increase. The ________ is the total number of people aged 16 years and older (and not in jail, hospital or institutional care) while the ________ is the number of people employed and the unemployed. - Answer-working-age population; labor force In an economy, 42 million people are in the labor force, 38 million are employed, and 47 million are of working age. How many people are not in the labor force? - Answer-5 million Based on the following data for the country of Tiny Town, the unemployment rate equals - Answer- 10/80 × 100. Which of the following pieces of information do you need to calculate the labor force participation rate? - Answer-I. the number of employed persons II. the number of unemployed persons IV. the working age population Suppose the labor force in Tiny Town is 100 people. If the ________ in Tiny Town is 150 people, the labor force participation rate equals ________ multiplied by 100. - Answer-working age population; 100/150An individual who has stopped looking for a job because he is convinced that he cannot find a job is referred to as - Answer-a discouraged worker. Frictional unemployment is the result of - Answer-normal labor market turnover. Suppose that over a period of years the country of Quasiland switched from being an agriculturallybased economy to a technologically-based economy. As a result, many people lost jobs because they lacked the correct skills. As they search for new jobs, these people are part of - Answer-structural unemployment. An increase in the price level is defined as - Answer-inflation. If the CPI is 120, this means that - Answer-prices are 20 percent higher than in the reference base period Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years? - Answer-5.4 percent Aside from being a means of payment, the other functions of money are - Answer-medium of exchange, unit of account, and store of value. If an economy tried to use bananas as money, which function would bananas likely have the most difficult time fulfilling? - Answer-a store of value Which of the following is money? - Answer-checking deposits Which of the following is NOT included in M1? - Answer-saving deposits The definition of M2 includes - Answer-time deposits, savings deposits, M1 Which of the following is the central bank of the United States? - Answer-Federal Reserve System Which of the following is NOT one of the Fed's monetary policy tools? - Answer-the income tax rateAn open market purchase of securities by the Fed - Answer-increases banks' reserves and decreases banks' securities. The demand for money is ________ related to the nominal interest rate. - Answer-negatively An increase in the nominal interest rate - Answer-leads to an upward movement along the demand for money curve. An increase in real GDP - Answer-shifts the demand for money curve rightward. In the above figure, suppose the economy is initially on the demand for money curve MD1. What is 28) the effect of an increase in financial innovation such as the introduction of ATMs? - Answer-The demand for money curve would shift leftward to MD0. In the above figure, if the interest rate is 4 percent, people - Answer-sell bonds so as to convert them into money. When the interest rate falls in the money market, the quantity of money demanded ________ and the quantity of money supplied ________. - Answer-increases; stays the same