## Liberty ECON 214 Exam 1 Answers

1. Refer to the following figure to answer the questions that follow:
3. Deflation is best described as:
4. The long run average growth rate of real GDP in the U.S. economy is about:
5. Underemployed workers are:
6. The four major expenditure categories of GDP are:
7. Inflation can create uncertainty by making:
8. Nominal GDP increased from \$14.0 trillion to \$14.7 trillion, and the price level increased from 120 to 126. Which of the following is true?
9. The government purchases category of GDP includes spending by:
10. The signing of long‐term wage and price agreements and the relationship to inflation most likely raises the issue of:
11. A shortcoming of nominal GDP is that:
12. If the relevant population is 268 million people and the number of people in the labor force is 148 million, the labor force participation rate is:
13. What is the consumer price index (CPI)?
14. When actual unemployment is less than its natural rate:
15. Your firm expands its output in a time when demand appears to be increasing. Demand for all goods is increasing because of inflation, and consumers want to buy all goods faster because their real purchasing power is falling due to inflation. This situation could indicate that:
16. To determine living standards for the average person, we calculate:
17. During healthy economic periods, cyclical unemployment:
18. Consider the following data, where GDP values are measured in millions of dollars, to answer the questions that follow.
19. The GDP deflator is a measure of:
20. Hollister Co. stocks up on T‐shirts for the holiday season. This inventory is included in the _______ category of GDP.
21. You bought a popular video game last year for \$75 and sold it to a store this year for \$20. The store sells the used game to a consumer for \$50. This adds _____ to GDP when the store sells the game to the consumer.
22. If the relevant population is 268 million people and the number of people in the labor force is 148 million, the number of people NOT in the labor force is equal to:
23. Consider the following data that identifies real GDP in comparison to the long‐run trend of real GDP to answer the questions that follow. In what quarter did this economy enter a recession?
24. When you buy a new car built by Ford, it is included in the ________ category of GDP.
25. Use the following table to answer the questions that follow: According to the table, the number of employed in this economy is equal to:
26. Let’s say a company invents a very popular device called a Zorgon, which allows you to send small items via a transporter from one place to another. This would affect the consumer price index (CPI) in the sense that the CPI:
27. Asking whether people are unemployed for short spells or whether the duration of joblessness is long term is:
28. Real GDP is GDP adjusted for changes in:
29. If nominal income increases, then:
30. If the consumer price index (CPI) was 100 in the period of 1982–1984, then:
31. Joe has a full‐time construction job and also does odd jobs for people on the weekends. You have purchased the materials needed to construct a fence at your house and you pay Joe \$500 to build the fence. Does the payment to Joe count toward the value of GDP?
32. Consider the following data, where GDP values are measured in millions of dollars, to answer the questions that follow. What is the value of nominal GDP in 2009?
33. Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the questions that follow: Assume that the base year is 2012.
34. The 2007–2009 recession lasted for:
35. The price of a McDonald’s hamburger in 1955 was \$0.15 when the price index was 27; if in 2011, it was \$0.89 when the price index was 220, then the inflation‐adjusted price of a McDonald’s hamburger in 2011 was:
36. All three types of unemployment:
37. During the 2007–2009 Great Recession, the United States witnessed:
38. In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las Vegas currently and your salary is \$57,000. You are offered a promotion and pay raise of \$70,000 to move to San Francisco. If you take the promotion:
39. Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the questions that follow: Assume that the base year is 2012. What was the inflation rate between the two years?
40. Use the following table to answer the questions that follow: According to the table, the unemployment rate in this economy is equal to:
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