Chapter 14 Review- Economics Test

can provide cash to low-income workers

Earned Income Tax Credits

Structural unemployment is usually temporary

False

Full employment is reached when the unemployment rate drops below 7 percent

False (5%)

The two phases of the business cycle are peaks and troughs

False (Expansion and Recession)

The worst downturn of the business cycle in the United States occurred the Cold War

False (The Great Depression)

The _______________ curve shows how much the actual distribution of income varies from an equal distribution of income

Lorenz

curve that shows how much the actual distribution of income varies from an equal distribution

Lorenz curve

All of the recessions between World War II and the 1980s took place fairly regularly

True

Business fluctuations are systematic increases and decreases in real GDP

True

Economic models are used to predict future economic activity

True

The unemployment rate does not take into account the number of part-time workers who want to have full-time jobs

True

The unemployment rate is calculated by dividing the number of unemployed persons by the total number of persons in the civilian labor force

True

The unemployment rate is determined by the Bureau of the Census

True

systematic ups and downs of the real GDP

business cycle

According to the demand- pull theory, inflation is caused by

consumers

An economist who attributes inflation to the increasing prices of producer inputs is holding to the _______________ theory of inflation

cost- push

During the late 1990s, the United States experienced___________________ inflation, at a rate of about 3 percent per year

creeping

inflation in the range of 1 to 3 percent per year

creeping inflation

Unemployment that is directly related to swings in the business cycle is

cyclical unemployment

Although __________________ is very rare, prices of goods did increase during the Great Depression

deflation

decrease in the general price level

deflation

If the economy reaches a state in which large numbers of people are out of work, there are shortages of consumer products, and manufacturing plants sit idle, it is clear that the economy is in a _____________________

depression

state of the economy characterized by high unemployment, acute shortages, and excess production capacity

depression

The equal distribution of income is cause by __________________ levels, wealth, discrimination, ability, and monopoly power

education

location where companies are free of certain local, state, and federal tax laws

enterprise zone

Many cities establish ___________________ to encourage businesses to locate in poorer sections of the region, so that jobs will become available to the working poor

enterprise zones

After the GDP bottoms out, the economy moves into a period of __________________, which is the second phase of the business cycle

expansion

The business cycle since World War II has been characterized by

extended expansions alternating with brief recessions

The government issues _________________ to ensure that people living in poverty receive enough food to eat

food stamps

If inflation reaches 100 to 300 percent, the economy is in a state of ____________________

galloping inflation

intense form of inflation that can go as high as 100 to 300 percent

galloping inflation

inflation in the range of 500 percent a year and above

hyperinflation

monthly statistical series that anticipates changes to the real GDP

index of leading indicators

The forty percent of the population with the lowest income controls

less than 2 percent of the nation's wealth

All of the following account for the growing income gap EXCEPT

lessening wage advantages for the well educated

proposed type of tax that would make cash payments to certain groups who live below the poverty line

negative income tax

point where real GDP stops going up

peak

annual dollar amounts used to determine whether people are living in poverty

poverty guidelines

turnaround point where real GDP stops going down

trough

During swings in the business cycle, _______________ may increase because certain industries will lay off workers until the business climate improves

unemployment

Ideally, the _________________ will remain under 5.0 percent, which indicates nearly full employment

unemployment rate

percent of people out of work divided by the total number of people in the civilian labor force

unemployment rate

The broad term for economic and social programs that provide regular assistance for people in need is _____________________

welfare

economic and social programs that provide regular assistance to the needy

welfare

The income gap has _________________ since the 1980s

widen/ grown

According to the cost-push theory, inflation is caused by

workers

Many states have set up ______________, programs that require people receiving welfare to provide labor in exchange for benefits

workfare

This is proposed market- based antipoverty program designed to encourage work and reduce administrative costs

workfare programs

When the GDP declines foe six months in a row, economists know the economy is in a _________________

recession

period during which real GDP declines for two quarters in a row or for six consecutive months

recession

unemployment resulting from changes in the weather or changes in the demand for certain products

seasonal unemployment

This marketed the beginning of the Great Depression in 1929

stock market crash

Changes in technology and changes in consumer tastes can cause

structural unemployment

caused by a fundamental change in the operations of the economy

structural unemployment

unemployment caused when machines replace people

technological unemployment

The Lorenz curve is used to demonstrate

the degree of income inequality