Question

1. Firewood received by a music teacher in return for violin lessons would not be included in GDP.

True

False

2. The label "frictional unemployment" is used to describe individuals who are out of work while they are changing jobs.

True

False

3. Natural Rate of Unemployment usually means some frictional and structural unemployment, but no cyclical unemployment.

True

False

4. A meatpacker whose job was eliminated when the company purchased automated packing equipment would be considered frictionally unemployed.

True

False

5. If the price index was 180 in year 3 and then became 190 in year 4, prices must have gone up by 10% between year 3 and year 4.

True

False

Answer 1

1.True;Firewood received by a music teacher in return for violin lessons would not be included in GDP because we do not include inflation or increases in the value of stock.These are just increases in monetary value,not real increases in our production: We do not include money transactions in our GDP measurement. An exchange or change in money does not create anything. When the value of the stock increases, nothing new is produced. We do not include social security payments to the elderly or welfare payments to the poor in our GDP. We do not include private transfer payments in this measurement of GDP either. Or buying and selling stocks, etc. is just exchanging paper assets. Secondhand sales aren't included: Second hand sales were counted in the GDP the year they were first created. You cannot count them again when the product is sold for a second time.

2.True;The label "frictional unemployment" is used to describe individuals who are out of work while they are changing jobs.

3.True;The natural rate of unemployment is the unemployment rate that would exist in a growing and healthy economy. In other words, the natural rate of unemployment includes only frictional and structural unemployment, and not cyclical unemployment.

4.False; A meatpacker whose job was eliminated when the company purchased automated packing equipment would be considered structurally unemployed.

5.True;If the price index was 180 in year 3 and then became 190 in year 4, prices must have gone up by 10% between year 3 and year 4.