Macro Econ Ch.9 Questions

Several possible sources of shocks that can cause business cycles include

- Unexpected political events - irregular innovation -monetary factors -productivity changes

According to McConnell, which of the following are reasons why teenagers have a much higher unemployment rate than adults?

-Have lower skills -"Fired" more frequently - Have less geographic mobility -Quit more frequently

When prices are sticky in the short run, which of the following is a result of an unexpected increase in total spending?

An increase in income

A key issue is why the economy sees

Business cycle fluctuations rather than slow, smooth growth

The formula for the ------ is the price of the most recent market basked in a particular year divided by the price estimate of the market basked 1982-1984 multiplied by 100

Consumer Price Index

Inflation caused by an increase in the per-unit production costs each level of total spending is called

Cost-push

Which of the following is a consequence of unexpected lower total spending in the short-run when prices are sticky

Firms sell fewer units of output

When inflation occurs, people with ----- incomes see their real incomes fall

Fixed

----unemployment workers live in areas where jobs exist and they have marketable skills

Frictionally

The economy attains ---- when the unemployment rate equals the natural rate of unemployment

Full employment

Identify all of the results of unexpected higher total spending in the short run when prices are sticky

GDP rises Employment rises More goods and services are purchased Output rises

Real wages

Have been adjusted for changes in prices over time

------Reduces the purchasing power of money

Inflation

Which of the following are characteristics of lower-skilled workers

Less likely to be self-employed Longer spells of structural unemployment

Income that is received as wages and is not adjusted for inflation is called

Nominal income

Durable consumer goods are effected more by the business cycle than

Nondurable goods

Real income equals nominal income divided by the

Price level

Blank income will be affected if the change in the price level differs from the change in a person's nominal income

Real

in the trough of a ----- output and employment" bottom out" at their lowest levels

Recession

Economic theories are founded on the idea that economic fluctuations are driven by

Shocks

---- unemployment occurs due to the mismatch between skills and jobs

Structural

It is widely accepted that the immediate cause of large cyclical changes in the levels of output and employment is the level of unexpected

Total Spending

By counting part-time workers as fully employed, the BLS's official unemployment rate is

Understated

By not counting discouraged workers as unemployed, the government's official unemployment rate---- the problem of unemployment

Understates

Frictional unemployment is defined as

Unemployment for workers who are searching for jobs or waiting to take jobs in the future

Economic shocks

Unexpected events that drive economic cycles and fluctuations are called

Deflation occurs when there is

a decreasing aggregate price level

Economists say that the economy is at "full employment" when the

cyclical unemployment rate is zero

The phase of the business cycle when the economy is near or at full employment and the level of real output is at or near capacity is called a

peak

Which of the following is a major factor in preventing the economy from rapidly adjusting to shocks

sticky prices

A discouraged worker is an

unemployed worker who drops out of the labor force and no longer seeks work actively