Which of the following would increase GDP?
Answer(s): C
Since GDP is the total market value of all final goods and services produced domestically during a specific period, the purchase of any good that was produced within the U.S. will positively contribute to the calculation of GDP. Despite the fact that the transaction profits a foreign company, the good was produced within the U.S.and therefore is counted in GDP.The hamburger buns do not contribute to GDP because they are an intermediate good. The house is a re-sold item, which would have been counted in GDP when it was produced, therefore is not recounted when sold.
According to the quantity theory of money, which one of the following economic variables would change in response to an increase in the money supply?
Answer(s): A
The quantity theory of money implies that the existing money stock M multiplied by velocity V equals the nominal GDP (output times the price level). In order to maintain the equality, if M increases, the price level P must also increase.
Higher unemployment insurance benefits tend to increase unemployment because they
A change that reduced the job seeker's cost of continued search would lead to more lengthy periods of search.If unemployment benefits increase, it is less costly to continue looking for a preferred job. This reduction in the cost of job search would induce job seekers to expand their search time.Unemployment would be pushed upward.
Which one of the following would be classified as employed?
Answer(s): D
A person who is not actively looking for a job is not a member of the labor force and therefore is not employed.An individual who is not a member of the formal market and works at home without wages is not a member of the formal labor force. An auto worker who is waiting to be re-hired or who was laid off is considered unemployed.
If unemployment was deemed too high by policy makers, which of the following policy tools might be utilized?
Answer(s): B
One method to reduce unemployment is to engage in expansionary fiscal policy. This requires the government to spend more than it collects in taxes. The result is a net increase in aggregate demand, which will increase the quantity supplied, and therefore reduce unemployment.
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