homework 19, 7, 9 practice + exam 2 review

Real GDP refers to:

GDP data that have been adjusted for changes in the price level.

actual unemployment - natural rate of unemployment =

cyclical unemployment

GDP gap

difference between what the economy can and does produce

nonmarket transactions

economic activities that do not generate expenditures in the market

nontariff barriers

forms of restricting imports other than tariffs, such as quotas (ceilings on how many goods of a certain kind can be imported)

Kara voluntarily quit her job as an insurance agent to return to school full time to earn an MBA degree. With degree in hand, she is now searching for a position in management. Kara presently is:

frictionally unemployed

Part-time workers who want full-time work are counted as:

fully employed and therefore the official unemployment rate may understate the level of unemployment.

final goods

goods and services that have been purchased for final use and not for resale or further processing or manufacturing

NAFTA

has reduced most trade barriers between Canada, Mexico, and the US

Country A limits other nations' exports of coal to Country A to 1,000 tons of coal annually. This is an example of a(n)

import quota

Gross Domestic Product (GDP) measures and reports output

in dollar amounts

if i'm some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock

increased by $65 billion

As it relates to international trade, dumping:

is the practice of selling goods in a foreign market at less than cost.

tariffs

may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs)

The presence of discouraged workers

may cause the official unemployment rate to understate the true amount of unemployment.

the primary gain from international trade is

more goods than would be attainable through domestic production alone.

If a nation has a comparative advantage in the production of X, this means the nation

must give up less of other goods than other nations in producing a unit of X.

inflation premium + real interest rate =

nominal interest rate

alex works in his own home as a homemaker and full time caretaker of his children's. officially, he is

not in the labor force

national income accountants can avoid multiple counting by

only counting final goods

what is net private domestic investment?

only investment in the form of added capital

intermediate goods

products that are purchased for resale or further processing or manufacturing

The terms of trade reflect the

ratio at which nations will exchange two goods.

If nominal GDP rises:

real GDP may either rise or fall.

A recession is defined as a period in which:

real gdp falls

nominal interest rate - inflation premium =

real interest rate

which of the following constitute the types of unemployment occurring at the natural rate of unemployment?

structural and frictional unemployment

The value of U.S. imports is:

subtracted from exports when calculating GDP because imports do not constitute production in the United States.

in which of the following cases would real income rise?

Nominal income rises by 2 percent, and the price level remains unchanged.

the greatest benefit to an economy from international trade is

consumption beyond domestic production possibilities.

Inflation initiated by increases in wages or other resource prices is labeled:

cost push inflation

cost of live adjustment clauses (COLAs)

the wage increases to changes in the price level

European Union (EU)

the world's largest common market, composed of 28 European nations

A large underground economy results in an

understated GDP

Assume that a grower of flower bulbs sells its annual output of bulbs to an Internet retailer for $70,000. The retailer, in turn, brings in $130,000 from selling the bulbs directly to final customers. What amount would these two transactions add to personal consumption expenditures and thus to GDP during the year?

$130,000

If potential GDP is $400 billion and there is a negative GDP gap of $15 billion, actual GDP is

$385 billion.

How to calculate real GDP

(Nominal GDP/Price Index) x 100

What is counted in GDP?

-new car -new sweater

if the nominal interest rate is 5% and the real interest rate is 2%, then the inflation premium is

3%

Consumption of fixed capital (depreciation)

An estimate of the amount of capital worn out or used up in producing the gross domestic product

In Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles?

Country A

how to calculate nominal gdp

Price x Quantity

the organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the

World Trade Organization (WTO)

In the treatment of U.S. exports and imports, national income accountants:

add exports, but subtract imports, in calculating GDP.

The increased-domestic-employment argument for tariff protection holds that

an increase in tariffs will increase net exports and stimulate domestic employment.

Most economists agree that the majority of most business cycle variations are caused by

an unexpected change in the level of total spending

Which of the following statements is false?

as a percentage of GDP, US exports are the highest among the industrially advanced nations

what is an example of a nontariff barrier (NTB)?

box by box inspection requirements for imported fruit

Countries engaged in international trade specialize in production based on:

comparative advantage

transfer payments are not included in government purchases because

such payments generate no production

(Last Word) Frederic Bastiat's satirical argument against protectionism called for protecting domestic producers from

sun

the natural rate of unemployment is

that rate of unemployment occurring when the economy is at its potential output.

Euro Zone

the 17 EU countries that currently use the euro as the official currency

If depreciation exceeds gross investment:

the economy's stock of capital is shrinking.

Potential GDP

the level of real GDP attained when all firms are producing at capacity

Real GDP

the production of goods and services valued at constant prices