1. Which of the following doesNOTaccurately describe the relationship between the economy and government spending?

government spendingincrease when the economy weakens, even without a change in policy

a weaker economy leads to higher unemployment and increased poverty, resulting in higher social spending by the government even without a change in policy

a stronger economy results in the government collecting more tax revenue even without an increase in tax rates, potentially enabling an increase ingovernment spending.

an increase ingovernment spendingtends to lead to weaker economic growth in the short run

1. A low rate of unemployment is a possible indicator of all of the followingEXCEPT:

strong economy

possible inflationary pressures

companies may have a difficult time hiring qualified workers

not enough jobs available

1. The following is a quote from an interview with former chair of the Fed, BenBernanke:

"Bernankesaid slow productivity growth is weighing on the economy,...The lower growth in the U.S. economy is not a hangover from the Great Recession,Bernankesaid, noting that more capital investment is needed to boost growth...Bernankewas interviewed as the currentFederal Reservefaces new challenges from a slowing China and whether the economic freeze there might put a lid on U.S. growth.

In what way does slow productivity growth weigh on the economy?

It results in fewer jobs

It means the economy is producing less, resulting in a decline in GDP

It is likely to result in lower unit labor costs and thus lower prices and less profit

It means that potential GDP is less likely to increase as quickly, resulting in slower long-run economic growth

1. Recently released US data indicate that capacity utilization in the industry has dropped from 79.6 % in November 2018 to 78.8 % in March 2019. Considering only this information, which one of the following statements is NOT likely to be correct?

Unemployment may increase

Firms will increase investment boosting economic growth

the inflation rate may decrease

This is a possible indicator of a slowdown in the economy

1. Structural unemployment refers to:

unemployment generated by business cycles

the unemployment related to the time it takes to find a job

the mismatch between skills of the unemployed and skills needed by employers

unemployed nationals looking for jobs abroad

According to data from the US Bureau of Labor Statistics, manufacturing share of US employment has steadily declined from around 33% in 1947 to less than 10 % in 2015. According to the Bureau of Economic Analysis, during the same period the sector's contribution to nominal US GDP has declined from a little over 25% to around 13%. This steady decline has prompted calls by US politicians to "save" US manufacturing. Yet, if one considers manufacturing's share of real US GDP during the same period, it has been fairly constant ranging from 11.3 % to 13.6 % with 11.7 % in 2015. (each answer should not exceed 3 lines)

1. Using economics, explain why it makes more sense to use real rather nominal GDP to capture the sector's contribution to the US economy. (0.5 point)
2. Given manufacturing's roughly constant share of real GDP and its declining employment share, what economic factor may be driving the manufacturing sector relative to the overall economy? Explain using economics. (0.5 point)
3. Given that the US labor force increased from under 70 million to almost 160 million people during the period, which sector of the economy is providing most jobs to these people? (0.5 point)