BMAL-590 MACROECONOMICS EXAM
REPORTED QUESTIONS WITH 100%
CORRECT ANSWERS
Which of the following statements are incorrect concerning unemployment insurance
(UI) - Answer-UI has tendency to make people energetic.
Which of the following statements are correct concerning unemployment insurance (UI)
- Answer-UI pays a part of the worker's wages for a limited period after losing a job.
UI can facilitate people to look for jobs that match their skills.
Studies show that the longer a person gets UI, the longer is the duration of
unemployment.
The natural rate of unemployment is closely associated with this percentage - Answer-
0.05
Inflation is closely related to the - Answer-increase in prices, in particular the increase in
the CPI
Gross Domestic Product (GDP) - Answer-tal (gross) amount of everything produced
within a specific economy
Used to analyze economic growth
Can compare regions or nations
Note: Some quality-of-life measures are not easily captured quantitatively.
The market value of all final goods and services produced in a nation within a specific
period of time.
Sum of output from all economic activity
Output = GDP = Income
Why is GDP useful to examine? - Answer-1. Estimate living standards across time and
nations
2. Measure economic growth
3. Determine whether an economy is experiencing a short-run expansion or recession
Why does GDP count the "market value"? - Answer-Quantities do not provide enough
information.
,For example, in 2010, the United States produced:
12 billion bushels of corn
8 million cars
Quantities would suggest that corn is more "important" to GDP relative to cars
We need to compute the market value of goods and services in order to aggregate and
form the measure of GDP. Market value of a good or service can be defined as the
price per unit multiplied by the number of units produced.
The units for various quantities cannot be added together (e.g., gallons of milk, cups of
coffee, pounds of steak, bottles of perfume, etc.).
GDP includes both goods and services: - Answer-- Goods
Tangibles
Food, clothing, cars, houses, etc
- Services
Intangibles
Health care, entertainment, advice, travel, banking, etc
A higher percentage of our GDP comes from services today than ever before.
Today, services account for over two-thirds of total output/GDP.
The composition of our industries and economy has greatly changed over the last 50
years.
Services as a Share of U.S. GDP - Answer-A majority of U.S. GDP is service output
such as financial, transportation, retail, and technology services. This graph shows
services as a share of U.S. GDP since 1960, which have grown from 50 percent in 1960
to about 70 percent in 2013
Intermediate verses Final Goods - Answer-Intermediate goods are goods that firms
repackage or bundle with other goods to be sold at a later stage.
For example, ingredients sold to a coffee shop, such as milk and coffee, are
intermediate goods.
Note: If milk or coffee are sold directly to a consumer (e.g., in a grocery store), the same
goods are now considered final goods.
The tires sold to a car manufacturer are intermediate goods where as those sold directly
to a consumer from an auto store are considered to be final goods.
Final goods
Goods sold to the final users or consumers.
To get an accurate GDP estimate and avoid double counting final goods are included in
GDP and intermediate goods are not.
, NOTE: If intermediate goods were counted as part of GDP, they would essentially be
counted twice. Their value also increases the market value of the final good. Double-
counting would bias the measure of GDP upward.
The Bureau of Economic Analysis (BEA) - Answer-the U.S. government agency that
tallies GDP data. The task is called national income accounting.
Durable goods: - Answer-Goods consumed over a long period of time, such as cars and
appliances.
They are more subject to cyclical fluctuations, as people tend to postpone buying goods
that last for many years when the economy is struggling.
Fore example, if the economy is week (job loss, high levels of uncertainty, lower
incomes), people can usually delay the purchase of a new refrigerator/other appliance
and use the old one for a few more months.
Non-durable goods: - Answer-Goods consumed over a short period of time, such as
groceries, magazines, and medicines.
They are not affected as much by cyclical fluctuations. They are usually purchased
irrespective of the economic environment.
Groceries are an example of non-durable goods. People will always need to eat and will
purchase groceries regardless of economic conditions.
However, people may substitute lower-quality (lower-cost) non-durable goods during
economic contractions.
Investments - Answer-Capital purchases including small purchases such as tools, as
well as other more substantial spending such as equipment, computers, and factories.
Changes in business inventories such as goods that have been produced but not yet
sold, representing a future increase in output.
New residential housing purchases are counted as investments; not consumption.
Note: Investment does not include purchases of stocks and bonds.
Government Purchases - Answer-Government purchases refer to spending by state,
local, and federal governments on goods and services.
Transfer payments are not included.
Transfer payments are government outlays to households, including welfare and social
security. While transfer payments do increase household income, this does not fit into
REPORTED QUESTIONS WITH 100%
CORRECT ANSWERS
Which of the following statements are incorrect concerning unemployment insurance
(UI) - Answer-UI has tendency to make people energetic.
Which of the following statements are correct concerning unemployment insurance (UI)
- Answer-UI pays a part of the worker's wages for a limited period after losing a job.
UI can facilitate people to look for jobs that match their skills.
Studies show that the longer a person gets UI, the longer is the duration of
unemployment.
The natural rate of unemployment is closely associated with this percentage - Answer-
0.05
Inflation is closely related to the - Answer-increase in prices, in particular the increase in
the CPI
Gross Domestic Product (GDP) - Answer-tal (gross) amount of everything produced
within a specific economy
Used to analyze economic growth
Can compare regions or nations
Note: Some quality-of-life measures are not easily captured quantitatively.
The market value of all final goods and services produced in a nation within a specific
period of time.
Sum of output from all economic activity
Output = GDP = Income
Why is GDP useful to examine? - Answer-1. Estimate living standards across time and
nations
2. Measure economic growth
3. Determine whether an economy is experiencing a short-run expansion or recession
Why does GDP count the "market value"? - Answer-Quantities do not provide enough
information.
,For example, in 2010, the United States produced:
12 billion bushels of corn
8 million cars
Quantities would suggest that corn is more "important" to GDP relative to cars
We need to compute the market value of goods and services in order to aggregate and
form the measure of GDP. Market value of a good or service can be defined as the
price per unit multiplied by the number of units produced.
The units for various quantities cannot be added together (e.g., gallons of milk, cups of
coffee, pounds of steak, bottles of perfume, etc.).
GDP includes both goods and services: - Answer-- Goods
Tangibles
Food, clothing, cars, houses, etc
- Services
Intangibles
Health care, entertainment, advice, travel, banking, etc
A higher percentage of our GDP comes from services today than ever before.
Today, services account for over two-thirds of total output/GDP.
The composition of our industries and economy has greatly changed over the last 50
years.
Services as a Share of U.S. GDP - Answer-A majority of U.S. GDP is service output
such as financial, transportation, retail, and technology services. This graph shows
services as a share of U.S. GDP since 1960, which have grown from 50 percent in 1960
to about 70 percent in 2013
Intermediate verses Final Goods - Answer-Intermediate goods are goods that firms
repackage or bundle with other goods to be sold at a later stage.
For example, ingredients sold to a coffee shop, such as milk and coffee, are
intermediate goods.
Note: If milk or coffee are sold directly to a consumer (e.g., in a grocery store), the same
goods are now considered final goods.
The tires sold to a car manufacturer are intermediate goods where as those sold directly
to a consumer from an auto store are considered to be final goods.
Final goods
Goods sold to the final users or consumers.
To get an accurate GDP estimate and avoid double counting final goods are included in
GDP and intermediate goods are not.
, NOTE: If intermediate goods were counted as part of GDP, they would essentially be
counted twice. Their value also increases the market value of the final good. Double-
counting would bias the measure of GDP upward.
The Bureau of Economic Analysis (BEA) - Answer-the U.S. government agency that
tallies GDP data. The task is called national income accounting.
Durable goods: - Answer-Goods consumed over a long period of time, such as cars and
appliances.
They are more subject to cyclical fluctuations, as people tend to postpone buying goods
that last for many years when the economy is struggling.
Fore example, if the economy is week (job loss, high levels of uncertainty, lower
incomes), people can usually delay the purchase of a new refrigerator/other appliance
and use the old one for a few more months.
Non-durable goods: - Answer-Goods consumed over a short period of time, such as
groceries, magazines, and medicines.
They are not affected as much by cyclical fluctuations. They are usually purchased
irrespective of the economic environment.
Groceries are an example of non-durable goods. People will always need to eat and will
purchase groceries regardless of economic conditions.
However, people may substitute lower-quality (lower-cost) non-durable goods during
economic contractions.
Investments - Answer-Capital purchases including small purchases such as tools, as
well as other more substantial spending such as equipment, computers, and factories.
Changes in business inventories such as goods that have been produced but not yet
sold, representing a future increase in output.
New residential housing purchases are counted as investments; not consumption.
Note: Investment does not include purchases of stocks and bonds.
Government Purchases - Answer-Government purchases refer to spending by state,
local, and federal governments on goods and services.
Transfer payments are not included.
Transfer payments are government outlays to households, including welfare and social
security. While transfer payments do increase household income, this does not fit into
