ECO 372T Wk 2 – Practice: Knowledge Check

Year Quantity of Labor   Productivity of Labor

1     2,000      $200

2     2,000      210

3     2,000      210

The table shows the quantity of labor (measured in hours) and the productivity of labor (measured in real GDP per hour) in a hypothetical economy in three different years. Between Year 1 and Year 2, real GDP increased by

Multiple Choice

• 1.5 percent.
• 2.5 percent.
• 5.0 percent.
• 6.0 percent.

The invention of the steam engine ushered in the following developments, except

Multiple Choice

• mass-production in industrial factories, for the first time.
• much easier and cheaper transportation of resources and products.
• a sharp reduction in trade as many societies specialized.
• major population shifts, from farms to towns and cities.

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors?

Multiple Choice

• gold market and stock market
• international trade and foreign exchange markets
• real estate and financial markets
• consumer and government spending

A review of the trends in labor productivity growth in the U.S. for the periods 1973–1995, 1995–2010, and 2010–2018 suggests which of the following patterns?

Multiple Choice

• a persistently strong growth averaging about 2.5 percent per year throughout the three periods
• an initial strong growth averaging 2.5 percent per year in the period 1973–1995, followed by weak growth in 1995–2010, and a sharp rise again in 2010–2018
• an initial modest growth averaging 1.5 percent per year in 1973–1995, followed by much higher growth in 1995–2010, then a collapse to very slow growth in 2010–2018
• a relatively steady and modest growth throughout all three periods, averaging about 1.5 percent

A nation’s average annual real GDP growth rate is 2.5 percent. Based on the rule of 70, the approximate number of years that it would take for this nation’s real GDP to double is

Multiple Choice

• 175 years.
• 40 years.
• 28 years.
• 17.5 years.

(Last Word) The entry of women into the workforce since the 1960s resulted in

Multiple Choice

• a shift outward in the production possibilities curve of the United States.
• a shift inward in the production possibilities curve of the United States.
• a movement along the existing production possibilities curve of the United States.
• a falling real wage for female workers in the United States.

In the depth of the Great Depression, the unemployment rate in the United States was about

Multiple Choice

• 15 percent.
• 33 percent.
• 25 percent.
• 40 percent.

A nation’s real GDP will increase by increasing the following, except

Multiple Choice

• number of workers.
• labor productivity.
• technological progress.

Unemployment that occurs when there is insufficient demand for the goods and services of an economy is called

Multiple Choice

• frictional unemployment.
• cyclical unemployment.
• structural unemployment.

Full-employment output is also called

Multiple Choice

• zero-unemployment output.
• equilibrium output.
• potential output.
• zero-savings output.

Suppose that an economy’s labor productivity and total worker-hours each grew by 3 percent between year 1 and year 2. We could conclude that this economy’s

Multiple Choice

• real GDP remained constant.
• capital stock increased by 3 percent.
• production possibilities curve shifted inward.
• production possibilities curve shifted outward.

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

Multiple Choice

• military goods
• capital goods
• textile products
• agricultural commodities

Inflation that occurs when total spending is greater than the economy’s ability to produce output at the existing price level is

Multiple Choice

• anticipated inflation.
• demand-pull inflation.
• cost-push inflation.
• unanticipated inflation.

The percentage of U.S. adults with a high school education has

Multiple Choice

• remained constant since the 1960s.
• risen from 8 percent in 1960 to 35 percent in 2018.
• risen to 100 percent in the 21st century.
• risen from 44 percent in 1960 to 90 percent in 2018.

Critics of economic growth

Multiple Choice

• contend that growth and industrialization reduce pollution.
• argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.
• point out that growth results in greater economic security for workers.
• say that its benefits accrue nearly exclusively to white males.

One concern regarding educational attainment in the U.S. is that

Multiple Choice

• the percentage of adults finishing college is falling.
• there are fewer college graduates in science and engineering.
• students are graduating later and later.
• fewer high school graduates are going on to college.

Given the annual rate of economic growth, the “rule of 70” allows one to

Multiple Choice

• determine the accompanying rate of inflation.
• calculate the size of the GDP gap.
• calculate the number of years required for real GDP to double.
• determine the growth rate of per capita GDP.

The unemployment rate is interpreted as the percentage of the

Multiple Choice

• adult population who are unemployed.
• labor force that are not employed.
• able-bodied population who are not working.
• workforce that have been laid off.

Economies of scale refers to

Multiple Choice

• the idea that proprietorships are less bureaucratic and therefore more efficient than corporations.
• public investments in highways, schools, utilities, and such.
• the fact that large producers may be able to use more efficient technologies than smaller producers.
• the reallocation of labor from less-productive to more-productive uses.

Labor productivity in the U.S. in the periods 1973–1995 and 1995–2010 grew at average rates of

Multiple Choice

• 7.5 percent and 5.2 percent, respectively.
• 1.5 percent and 2.8 percent, respectively.
• 3.1 percent and 1.5 percent, respectively.
• 4.1 percent and 4.3 percent, respectively.

Modern economic growth often results in the following, except

Multiple Choice

• less time for ordinary people to enjoy leisure activities because the primary focus is on production and work.
• vast increases in wealth and living standards for many groups in the economy.
• the spread of universal education and elimination of ancient social norms.
• movement toward democracy and the abolition of feudalism.

Inflation is a rise in

Multiple Choice

• the general level of prices over time.
• the standard of living over time.
• unemployment over time.
• real GDP over time.

The natural rate of unemployment is

Multiple Choice

• higher than the full-employment rate of unemployment.
• lower than the full-employment rate of unemployment.
• that rate of unemployment occurring when the economy is at its potential output.
• found by dividing total unemployment by the size of the labor force.

Unemployed   7

Total Population     145

Employed       95

Discouraged Workers     3

The table contains information about the hypothetical economy of Scoob. All figures are in millions. If the natural rate of unemployment in Scoob is 5 percent, then

Multiple Choice

• structural unemployment is about 3 percent.
• frictional unemployment is about 2 percent.
• cyclical unemployment is about 2 percent.
• hidden unemployment is about 5 percent.

Inflation rates in the United States reached double-digit rates in the

Multiple Choice

• 1960s.
• 1970s.
• 1990s.
• 2000s.

Which of the following formulas is ? Percentage change in

Multiple Choice

• price level approximates percentage change in real income minus percentage change in nominal income.
• real income approximates percentage change in nominal income minus percentage change in price level.
• nominal income approximates percentage change in price level minus percentage change in real income.
• real income approximates percentage change in price level minus percentage change in nominal income.

The full-employment unemployment rate for the United States economy is now generally considered to be

Multiple Choice

• 2 percent of the labor force.
• 6 percent of the labor force.
• 4 to 5 percent of the labor force.
• 8 to 9 percent of the labor force.

In the accompanying diagram, the phases of the business cycle from points A to D are

Multiple Choice

• peak, recession, expansion, trough, respectively.
• trough, recovery, expansion, peak, respectively.
• expansion, recession, trough, peak, respectively.
• peak, recession, trough, expansion, respectively.

Which of the following factors is projected to be the dominant source of economic growth in the U.S. from now until 2029?

Multiple Choice

an increase in hours per worker

an increase in the labor force

an increase in the population

an increase in labor productivity

Which of the following is a  statement?

Multiple Choice

It is relatively easy to distinguish between cost-push and demand-pull inflation even if you don’t know the source of the inflation.

A supply shock will cause a variation of demand-pull inflation that can lead to hyperinflation.

Demand-pull inflation will continue so long as there is excess total spending in the economy.

Demand-pull inflation is usually accompanied by higher unemployment rates