Econ 111 Final Exam || A+ GRADED SOLUTIONS!!
What are the 3 Macroeconomic Goals? correct answers 1. Economic Growth
2. Price Stability
3. Full Employment
Long run trend or "Potential GDP" associated (3%)
Remember-more stuff per person means a higher standard of living
GDP= another name for aggregated supply
C+G+I+(Xg-M)= another name for aggregated demand correct answers Economic Growth
Why the continued growth of the economy? correct answers US is very (x10) good at
producing stuff and has continued to get even better
Why are we so good at producing stuff? correct answers We have high worker productivity
What are the Determinants of Worker Productivity? correct answers 1. Educated, healthy,
skilled workers, and parents--HUMAN CAPITAL
2. Quality capital and technology
3. Incentives provided by a market economy
Parents make us productive, make us go to school, etc.
U.S. has a 99% literacy rate
-85% of those over 25 have a HS degree (some only 60-65%) correct answers Educated,
healthy, skilled workers, and parents--HUMAN CAPITAL
% of population that has completed the fourth grade correct answers Literacy Rate
Tools, equipment, buildings, ability, skill, creativity to innovate
Develop sophisticated production methods
New technologies are the single most important source of productivity improvement correct
answers Quality capital and technology
No one works harder than when working for themselves/their family
W/ strong legal and social framework
-encourages productivity and entrepreneurship
Are necessary to reward risk taking
The ability to earn profit, high wages, and own property are powerful incentives in market
economies correct answers Incentives provided by a market economy
How is price stability measured? correct answers Inflation Rate
% increase from one year to the next in the average prices of goods and services in the typical
market basket for average consumer
-"market basket"=shopping cart
-taking prices every month on the same items
-data available monthly from the BLS (Bureau of Labor Statistics) correct answers Inflation
Rate
Most common used measure of inflation rate correct answers Consumer Price Index (CPI)
, "All items less food and energy"
-take out food and energy bc fluctuates the most correct answers Core CPI
How much inflation is too much? Too little? correct answers Comfort level for most
economists are ok with 2% (The goal is to reach 2%)
Falling price level-DEFLATION NOT GOOD
-cell phone plans are contributing to this bc competing
Real vs Nominal, whats the big deal?
(Remember real means adjusted) correct answers Assume you get a 3% raise and you know
that the inflation rate is 3%
What is the real value of your raise? 0
How did we get that answer? correct answers Nominal rate= 3%
Inflation rate= 3%
____________________________
Real Rate
21% (prime interest rate)
14% (CPI)
_________________
7% (real rate) correct answers 7% is the "real burden of debt"
This is a burden for the borrower, for the lender it is the "real return"
2.05% correct answers Very unusual "zero" real interest in some markets
Trying to anticipate inflation is very important
How do they Calculate the Unemployment Rate? correct answers U.S. Bureau of Labor
Statistics surveys 60,000 households monthly
Asks a series of questions to all
Based on responses all individuals in household are placed into categories
What are the categories of Employment? correct answers 1. Employed
-Worked for pay during survey week or on vacation or sick, bad weather, strike
2. Unemployed
-Did not work for pay and ACTIVELY looking for one in the past 4 weeks
3. Not in the labor force
-Did not work for pay and DID NOT ACTIVELY look
-Retired, disabled, students
Labor Force= correct answers Employed + Unemployed
% of population at least 16 working (employed) or searching for employment (unemployed)
-this rate reached a high record of 67.3% in 2000--- declined to 63% by 2017 correct answers
Labor Force Participation Rate
% of labor force defined as unemployed
-Current rate 4.1% correct answers Unemployment Rate
What are the 3 Macroeconomic Goals? correct answers 1. Economic Growth
2. Price Stability
3. Full Employment
Long run trend or "Potential GDP" associated (3%)
Remember-more stuff per person means a higher standard of living
GDP= another name for aggregated supply
C+G+I+(Xg-M)= another name for aggregated demand correct answers Economic Growth
Why the continued growth of the economy? correct answers US is very (x10) good at
producing stuff and has continued to get even better
Why are we so good at producing stuff? correct answers We have high worker productivity
What are the Determinants of Worker Productivity? correct answers 1. Educated, healthy,
skilled workers, and parents--HUMAN CAPITAL
2. Quality capital and technology
3. Incentives provided by a market economy
Parents make us productive, make us go to school, etc.
U.S. has a 99% literacy rate
-85% of those over 25 have a HS degree (some only 60-65%) correct answers Educated,
healthy, skilled workers, and parents--HUMAN CAPITAL
% of population that has completed the fourth grade correct answers Literacy Rate
Tools, equipment, buildings, ability, skill, creativity to innovate
Develop sophisticated production methods
New technologies are the single most important source of productivity improvement correct
answers Quality capital and technology
No one works harder than when working for themselves/their family
W/ strong legal and social framework
-encourages productivity and entrepreneurship
Are necessary to reward risk taking
The ability to earn profit, high wages, and own property are powerful incentives in market
economies correct answers Incentives provided by a market economy
How is price stability measured? correct answers Inflation Rate
% increase from one year to the next in the average prices of goods and services in the typical
market basket for average consumer
-"market basket"=shopping cart
-taking prices every month on the same items
-data available monthly from the BLS (Bureau of Labor Statistics) correct answers Inflation
Rate
Most common used measure of inflation rate correct answers Consumer Price Index (CPI)
, "All items less food and energy"
-take out food and energy bc fluctuates the most correct answers Core CPI
How much inflation is too much? Too little? correct answers Comfort level for most
economists are ok with 2% (The goal is to reach 2%)
Falling price level-DEFLATION NOT GOOD
-cell phone plans are contributing to this bc competing
Real vs Nominal, whats the big deal?
(Remember real means adjusted) correct answers Assume you get a 3% raise and you know
that the inflation rate is 3%
What is the real value of your raise? 0
How did we get that answer? correct answers Nominal rate= 3%
Inflation rate= 3%
____________________________
Real Rate
21% (prime interest rate)
14% (CPI)
_________________
7% (real rate) correct answers 7% is the "real burden of debt"
This is a burden for the borrower, for the lender it is the "real return"
2.05% correct answers Very unusual "zero" real interest in some markets
Trying to anticipate inflation is very important
How do they Calculate the Unemployment Rate? correct answers U.S. Bureau of Labor
Statistics surveys 60,000 households monthly
Asks a series of questions to all
Based on responses all individuals in household are placed into categories
What are the categories of Employment? correct answers 1. Employed
-Worked for pay during survey week or on vacation or sick, bad weather, strike
2. Unemployed
-Did not work for pay and ACTIVELY looking for one in the past 4 weeks
3. Not in the labor force
-Did not work for pay and DID NOT ACTIVELY look
-Retired, disabled, students
Labor Force= correct answers Employed + Unemployed
% of population at least 16 working (employed) or searching for employment (unemployed)
-this rate reached a high record of 67.3% in 2000--- declined to 63% by 2017 correct answers
Labor Force Participation Rate
% of labor force defined as unemployed
-Current rate 4.1% correct answers Unemployment Rate
