MACRO TEST 2 CH 6-9
Frictional unemployment
Individuals searching for jobs or waiting to take jobs soon
Higher oil prices are most likely to lead to
a negative supply shock
A college graduate using the summer following graduation to search for a job would best be classified as:
a part of frictional unemployment
Recession
a period where output and living standards decline (2007-2009)
The circular flow diagram
a simple economic model showing a private closed economy in which there is only a private sector consisting of households and businesses who interact with each other in the markets
Personal Consumption Expenditure (C)
all expenditures by households including durable and non durable goods and services
Gross Private Investment (Ig)
all final purchases of machinery, equipment, and tools by businesses, all construction, and changes in inventories
Demand-Pull inflation
is a result of spending increasing faster than production, continues as ling as excess spending continues
Growth is advantageous to a nation because it:
lessens the burden of scarcity
Inflation
looks at the increases in the overall level of prices
GDP
measure of aggregate output, it measures the value of final goods and services produced within the borders of a country during a specific period of time, usually a year
National income accounting
measures economy's overall performance
Nominal GDP
measures the dollar value of the goods and services at their current prices
If depreciation (consumption of fixed capital) exceeds domestic investment, we can conclude that:
net investment is negative
Cost-Push inflation
occurs as prices rise because of a rise in per-unit production costs, ends in recession
The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP in this economy?
$3,237 billion
GDP in an economy is $4,600 billion. Consumer expenditures are $3,500 billion, government purchases are $900 billion, and gross private domestic investment is $400 billion. Net exports are:
-$200 billion
If the annual inflation rate is 5 percent a year, about how many years will it take for the price level to double?
14 years
If the annual growth in a nation's productivity is 2.5 percent rather than 1.5 percent, then the nation's standard of living will double in about:
28 years
A nation has a population of 300 million people. Of these, 80 million are retired, in the military, in institutions, or under sixteen years old. There are 210 million who are employed and 10 million who are unemployed. What is the unemployment rate?
4.5 percent
Rule of 70
Approx # of years required to double real GDP = 70/annual % rate of growth
GDP= (based on expenditure approach)
C+Ig+G+Xn
Cyclical unemployment
Caused by the recession phase of the business cycle
Economic Growth
Increase in real GDP or real GDP per capita over some time period
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
Expansion
Net Exports (Xn)
Exports (X) - Imports (M)
Business cycle
Fluctuations in output and employment
The monetary value of all final goods and services produced by the United States economy during a year is:
GDP
Suppose the total monetary value of all final goods and services produced in a particular country in 2008 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:
GDP in 2008 is $500 billion
Determinants of growth- supply factors
Increase in quantity and quality of natural resources, human resources, capital goods, and improvements in technology
Determinants of growth- efficiency factor
Must achieve economic efficiency and full employment
in which of the following cases would real income rise?
Nominal income rises by 2 percent, and the price level remains unchanged
Structural unemployment
Occurs due to changes in the structure of the demand for labor
Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
Structural
Which would be considered an investment according to economists?
The sale of government bonds by the nation's central bank
Which is best considered a supply factor for long-run economic growth?
The stock of capital goods
The business cycle recession
a decline in total output, income, employment, and trade lasting six months or more; this is sometimes referred to as an economic contraction
Real GDP
adjusted for inflation. calculated by taking nominal GDP, which measures the dollar value of the goods and services at their current prices, and statistically eliminating the price changes that have occurred over time
Critics of economic growth:
argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth
Income approach
based on money flow, adds all income received from households from selling resources
Expenditure approach
based on real flow monetary value of final goods and services, measures GDP as the sum of all of the money spent in buying the output
Who are the principal source of investment?
businesses
What happens in prices are sticky?
businesses change production to match demand or use inventory to help
The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:
capital goods and durable consumer goods
Bureau of Economic Analysis
compiles National Income and Product Accounts
The real flow
consists of resources flowing from households and used in producing products that flow from businesses
Saving occurs when:
current consumption is less than current output
Real GDP measures:
current output at base year prices
Full empolyment
cyclical unemployment is zero
The money flow
facilitates the workings of the economic system
What does the information from the National income accounting and the Bureau of Economic analysis used for?
formulating decisions for the best interest of the nation. like what policy to use
3 main indicators of economic stability or instability
gdp, unemployment and inflation
Net investment =
gross investment - depreciation
Real GDP and nominal GDP differ because the real GDP:
has been adjusted for changes in the price level
Who are the principal source of savings?
households
Determinants of growth- demand factor
households and businesses and government must purchase the economy expanding output
Suppose that real GDP increases by 5 percent while the population of a country increases by 7 percent. Then:
output per person necessarily decreases
Investment occurs when:
resources are devoted to increasing future output
If an economy wants to increase its current level of investment, it must:
sacrifice current consumption
What happens to sales if prices are flexible?
sales are unchanged
What happens to sales if prices are sticky?
sales change
the source of investment is:
saving
The business cycle depicts:
short-run fluctuations in output and employment
A decline in a nation's rate of productivity growth will:
slow the growth of the standard of living
High levels of inflation mean:
that it will cost the average family more to purchase the same goods and services
The business cycle trough
the bottom of the recession period
Government Purchases (G)
the goods and services purchased by all levels of government
What happens is prices are flexible?
the market price will be able to adjust, no short-run fluctuations, production levels would be constant and unemployment won't change
A consumer price index attempts to measure changes in:
the price of a select market basket of goods and services
The GDP tends to:
understate economic welfare because it does not take into account increases in leisure
Demand shocks
unexpected changes in the demand for goods and services
Supply shocks
unexpected changes in the supply of goods and services
Shocks occur when:
unexpected situations occur
The business cycle peak
when business activity reaches a temporary maximum with full employment and near-capacity output
The business cycle expansion
when output and employment are recovering and expanding toward the full employment level
Real gross domestic product:
will increase if there is an increase in the level of output