MACRO: Measurement of Economic Performance Flashcards

Which of the following best describes the concept of 'value added' in computing GDP?

Answer: The difference between a firm's revenue and its purchases of intermediate goods

Value added equals each firm's sales revenue minus the cost of intermediate inputs, ensuring no double-counting in GDP.

If a country's GDP is $500 billion and its population is 50 million, its GDP per capita is:

Answer: $10,000

$500 billion ÷ 50 million people = $10,000 per capita.

Which unemployment type arises when workers search for jobs that match their skills, even in a healthy economy?

Answer: Frictional unemployment

Frictional unemployment results from normal job-search time as workers transition between positions.

The labor force participation rate is calculated as:

Answer: (Labor force ÷ Working-age population) × 100

LFPR measures the share of the working-age population that is either employed or actively seeking work.

Which of the following people would be classified as unemployed by the Bureau of Labor Statistics?

Answer: A person who lost a job last month and is actively applying for new ones

BLS defines unemployed as jobless, currently available, and actively searching — a recent job-loser applying for work fits exactly.

When the economy is operating at the natural rate of unemployment, which type of unemployment has been eliminated?

Answer: Cyclical unemployment

The natural rate of unemployment includes frictional and structural unemployment; cyclical unemployment is zero at full employment.

An increase in the price of oil causes the CPI to rise by 4%. A worker's nominal wage also rises by 4%. What happens to the worker's real wage?

Answer: It remains unchanged

Real wage = nominal wage / price level; if both rise by the same percentage, real purchasing power is unchanged.