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ECON 2105
Home Work #2
Chapters 4 – 8
You may work together on the home work, however, you must hand in your own
answers. Please type or print neatly on a separate paper (you may want this sheet to
study from). I will give no credit for unreadable or ambiguous answers.
Part I (20 points): Matching
Match the correct definition to the word or phrase below
1.
2.
3.
4.
5.
6.
7.
8.
9.
A government imposed limit on how high a price may go
A government imposed limit on how low a price may go
A market situation in which there is no pressure for prices to change
A market situation is which there is pressure for prices to fall
Habits or customs that guide people in approaches to production
New labor force entrants looking for jobs and people in the process of changing jobs
People in an economy willing and able to work
People out of work because the labor market no longer values their skills
Skills a person has learned through experience, education, and on-the-job training that
aid in production
10. The total market value of all goods and services produced in an economy in a oneyear period
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
Equilibrium
Frictional unemployment
GDP
Human capital
Labor force
Price ceiling
Price floor
Shortage
Social capital
Structural unemployment
Surplus
Part II (25 points): True/False, Explain
State whether the following statements are true or false and explain your answer. No
points will be awarded for unsupported answers.
1. The unemployment rate is calculated by dividing the number of people without jobs
but looking for work by the population and multiplying by 100.
2. If there were no measurement errors in its calculation, real per capita GDP would be a
good representation of a country’s welfare in a given year.
3. People’s knowledge and skill is a form of capital that is important to an economy.
4. Inflation redistributes income from people who do not raise their prices (including
wages) to people who do raise their prices in response to the inflation.
5. If the demand for a good shifts and the supply of the good shifts simultaneously, there
is no way of determining what will happen to either equilibrium price or equilibrium
quantity.
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ECON 2105
Home Work #2
Chapters 4 – 8
Part III (30 points): Multiple Choice
Choose the best answer for each of the following questions.
1.
If output increases by three percent and population growth is two percent, per
capita output:
A) falls by five percent.
B) falls by one percent.
C) grows by one percent.
D) grows by five percent.
2.
If only those people in the top third of the income distribution receive higher
incomes:
A) median income will not change but average income will rise.
B) both median income and average income will rise.
C) median income will rise but average income will stay the same.
D) median income will fall but average income will rise.
3.
Suppose Thailand’s GDP grows at a rate of eight percent per year, Malaysia’s
GDP grows at a rate of six percent per year, and both countries have the same
initial per capita GDP. Using the rule of 72, it follows that in 36 years:
A) Thailand’s GDP will be 25 percent larger than Malaysia’s GDP.
B) Thailand’s GDP will be 33 percent larger than Malaysia’s GDP
C) Thailand’s GDP will be 50 percent larger than Malaysia’s GDP
D) Thailand’s GDP will be 100 percent larger than Malaysia’s GDP
4.
Suppose that nominal GDP increases but real GDP decreases. It can be concluded
that:
A) the price level rose.
B) the price level fell.
C) both output and the price level fell, but output fell at a faster rate.
D) both output and the price level fell, but the price level fell at a faster rate.
5.
Gross investment differs from net investment by:
A) net exports.
B) net imports.
C) depreciation.
D) transfer payments.
6.
The business cycle is:
A) the term used to describe fluctuations in output around its long-term trend.
B) the length of time it required by a firm to buy inputs and produce and sell
output.
C) the pattern of increases and decreases in the money supply.
D) regular and predictable.
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ECON 2105
Home Work #2
Chapters 4 – 8
Part II (continued)
7.
Use the table below answer the following question.
Bill. $s
Exports
30
Imports
20
Gross investment
200
Net foreign factor
income
Social security
taxes
Personal income
taxes
Net non-business
interest income
3
37
92
Bill. $s
Corporate
retained earnings
Indirect business
taxes
Government
transfer payments
Government
expenditures
Personal
consumption
Depreciation
49
44
70
190
550
65
2
Disposable personal income is equal to:
A) $665billion.
B) $669 billion.
C) $738 billion.
D) $757 billion.
8.
9.
For many years the price of personal computers has fallen while the quantity sold
has risen. This can best be attributed to:
A) improved technology which has caused supply to shift rightward.
B) improved technology which has caused supply to shift leftward.
C) greater popularity which has caused demand to shift rightward.
D) An increase in the number of computer users which has caused demand to
shift rightward.
Malaysian workers can sew clothes cheaper than workers in North Carolina. In
the interest of free trade, the U.S. has removed all restrictions on importation of
Malaysian clothing. Clothing manufacturers in North Carolina have had to shut
down. Many of the workers have not been able to find new jobs because the skill
required to work in a clothing shop are industry specific. What type of
unemployment characterizes these workers’ condition?
A) Cyclical unemployment.
B) Full unemployment.
C) Structural unemployment.
D) Frictional unemployment.
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ECON 2105
Home Work #2
Chapters 4 – 8
Part II (continued)
10.
Price
S0
D0
D1
Quantity
Which story below is best described by the above graph?
A) An increase in income increases the consumption of fine imported wine.
B) A restriction on rent landlords can charge decreases the number of apartments
available at the controlled price.
C) A new diet explains that donuts are the cause of most weight gain in men.
D) A new picture editing program makes pictures easier to share over the
internet.
Part IV (25 points): Understanding the Data – Observations and Essays
Write your answers in complete sentences.
A. Go to my web site for this class. Go to the “Links of Interest” page. Click on the
“Georgia at a Glance: Labor Force Data” page (http://www.bls.gov/eag/eag.ga.htm).
1. As of December 2004, what major industry group employs the largest number
of Georgians?
2. What major industry has lost the largest percentage of its workers from
December 2003 to December 2004?
3. What major industry gained the largest percentage of workers from December
2003 to December 2004?
3. Now, go back and click on the “Macon, GA at a Glance: Labor Force Data”
link. Answer the same three questions for Macon as you did for Georgia.
B. Go to the Federal Reserve Bank’s January “Beige Book” (a link can be found on my
web site) and read the Atlanta Fed’s (a link can be found on the left of the summary page)
most recent summary of economic activity in the 6th Federal Reserve District. What is
the general tone of the report (positive, negative, indifferent)? Based on what you have
seen in Georgia over the past three months, do you agree or disagree with the report?
Explain and state specific examples from your observations.
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