Economics Ch5 study guide

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an example of a transfer method is

a Social security retirement benefit

in the circular flow diagram, households demand____ and supply___

goods and services; labor

stagflation occurs when the economy's inflation rate is high and..

the unemployment rate is high

the unemployment rate equals...

(labor force - employed)/labor force

If 20 million workers are unemployed and 180 million workers are employed, then the unemployment rate is

10%

if the labor force is 500 and employment is 450, then unemployment rate is...

10%

the concept of "market clearing" is adopted and defended by..

Classical economists

the _________ can change the quantity of money in the economy

Federal Reserve

John Maynard Keynes' most notable published work is entitled

The General Theory of Employment, Interest, and Money

the government wants to encourage consumer spending through cutting income taxes. this is an example of...

a fiscal policy

what is a topic study in macroeconomics?

aggregate behavior of households and industries

unemployment means...

at the going wage rate, there are people who want to work but cannot find work

According to the Classical model, unemployment...

could not persist because wages would fall to eliminate the excess supply of labor

to get the economy out of a slump, Keynes believed that the government should....

decrease taxes and/or increase government spending

a prolonged and deep recession is called...

depression

government policies regarding taxes and expenditures are called..

fiscal policy

a period of very rapid increase in the overall price level is known as

hyperinflation

to bring the economy out of an inflation period, Keynes argued that the government should

increase taxes and/or decrease government spending

suppose the economy suffers a high rate of unemployment. according to Keynesian economists, the government should increase employment by...

increasing government spending

an increase in the overall price level is known as....

inflation

according ti the classical economists, the economy...

is self-correcting

policies designed to affect the quantity of money are...

monetary policies

if the central bank decreases the money supply, it is conducting..

monetary policy

the Federal Reserve affecting the supply of money is known as the...

monetary policy

according to classical models, the level of employment is determined by

prices and wages

According to Classical economists, if the quantity of labor demanded exceeds the quantity supplied, there is a

shortage of labor and wages will rise

Prices that don't always adjust rapidly to maintain equality between quantity supplied and quantity demanded are...

sticky prices

the government implements fiscal policy when it changes

taxes and/or spending

deflation occurs when...

the average price level declines

according to Keynes, the level of employment is determined by...

the level of aggregate demand for goods and services

what market are funds demanded and supplied?

the money market

unemployment implies that in the labor market

there is an excess supply of labor

what is an assumption used by Classical economists?

wages adjust both upward and downward


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