Econ Quiz 3
Hoe does the U.S. economy create and destroy millions of jobs each year?
- In the market system, new firms are constantly entering and exiting various industries. - Some businesses are expanding, while others are contracting.
Which of the following causes changes in the CPI to overstate the true inflation rate?
- New product bias - Substitution bias - Increase in quality bias
Even perfectly anticipated inflation imposes costs. Why?
- Paper money loses its purchasing power by the rate of inflation - Menu costs - Some wages will fail to keep up with anticipated inflation
What are the four major categories of expenditure?
Consumption, investment, government purchases, and net exports.
According to Costco's CEO, Jim Sinegal: "Paying good wages and keeping your people working for you is good business...Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you" What is Costco's CEO referring to?
Efficiency wages
Why is GDP an imperfect measurement of total production in the economy?
GDP does not include household production or production from the underground economy.
National income is...
GDP minus depreciation
Since 1948, which of the following best describes the trend in the labor force participation rate?
It is decreasing for men and increasing for women
Disposable personal income is...
Personal income minus personal taxes
A politician makes the following argument: "The economy would operate more efficiently if frictional unemployment were eliminated. Therefore, a goal of government policy should be to reduce the frictional rate of unemployment to the lowest possible level." Eliminating all frictional unemployment
Will not be good for the economy since the presence of frictional unemployment increases economic efficiency
GDP
Y = C + I + G + NX
