economics

in a private closed economy, (a) the average propensity to save is 0.25, (b) consumption at $120 billion. what is the level of income?

$160 billion

in a private closed economy, (a) the average propensity to save is 0.25, (b) consumption at $120 billion, and (c) the level of investment is $40 billion. what is the equilibrium level of income?

$280 billion

Okun's Law

1 percent more unemployment results in 2 percent less output

Recent data for the U.S. reveal the following (all figures in millions). Total population: 307.0 Under 16 or institutionalized: 69.3 Employed: 139.1 Unemployed: 14.6 1.The size of the labor force. 2.The number classified as "not in the labor force." 3.The unemployment rate.

1. 153.7 million people 2. 84.0 million people 3. .095, or 9.5%.

Suppose the natural rate of unemployment is 4.5% and the current unemployment rate is 6%. 1. According to Okun's law, what is the size of the GDP gap? 2. If potential GDP is $1,000 billion, how much output is being lost as a result of the economy being below its potential? 3. Recent data for the U.S. showed an unemployment rate of 9.5%. Suppose the natural rate at the time was 4.5%. What was the size of the GDP gap? 4. At that time, GDP was $14,592 billion. What was potential GDP?

1. The GDP gap is the difference between actual GDP and potential GDP. Okun's law suggests a GDP gap of -2% for every 1% that the unemployment rate exceeds its natural rate. In this case, the GDP gap is (6.0 - 4.5) x -2 = -3%. 2. A GDP gap of -3% implies that $1,000 x .03 = $30 billion of output is being foregone. 3. The GDP gap was (9.5 - 4.5) x -2 = 10.0%. 4. By Okun's law, actual GDP of $14,592 billion was 10.0 percent below its potential. Equivalently, actual GDP is 90% of potential GDP. Potential GDP is then found as $14,592/.90 = $16,213 billion.

which one of the following would not shift the aggregate demand curve

a change in the price level

Alex works in his own home as a homemaker and full-time caretaker of his children. officially he is

not in the labor force

per unit production cost

per unit production cost= total input cost/ total output

nominal income

percent change in real income= percent change in nominal income - percent change in price level (?= 5%- (130-125)/125 =5%-4%=1%)

CPI

price of the most recent market/ price estimate of the market basket in 1982-1884 (ex, 207.3-201.6/201.6 x100= 2.8)

productivity

productivity= total output/total inputs

unemployment rate

# of unemployed/ labor force(employed & unemployed) x 100

an economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. each unit of capital cost $10; each unit of raw materials $4; and each unit, $3. the per unit cost of production in this economy is

$0.10

the unemployment rate in an economy is 7.5 percent. the total population of the economy is 250 million and the size of the civilian labor force is 180 million. the number of employed workers in this economy is

166.5 million

Assume the natural rate of unemployment is 5 percent and the actual rate of unemployment is 7 percent. According to Okun's law, the negative GDP gap as a percent of potential GDP is:

4%

a nation has a population of 260 million people. of these, 60 million are retired, in the military, institutional, or under 16 years old. there are 188 million who are employed and 12 million who are unemployed. what is the unemployment rate

6 percent

assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is

6%

Assuming the total population is 100 million, the civilian labor force is 50 million, and 46 million workers are employed, the unemployment rate is:

8%

assume that the natural rate of unemployment in the U.S. economy is 5 percent and the actual rate of unemployment is 9 percent. according to okuns law, the negative GDP gap as a percentage of potential GDP is

8%

an increase in net exports will shift the AD curve to the

Right by a multiple of the change in net exports

Average propensity to consume (APC)

APC = consumption / income

Suppose a family's consumption exceeds its disposable income. This means that its:

APC is greater than 1

Average Propensity to Save (APS)

APS= saving/income

the level of aggregate expenditures in a mixed open economy consists of

Ca+Ig+Xn+G

APC+APS=1 & MPC+MPS=1

MPC+MPS=APS+APC

Marginal propensity to consume(MPC)

MPC= change in consumption/ change in income

Marginal Propensity to Save (MPS)

MPS= change in saving/change in income

GDP Gap

actual GDP - potential GDP

which of the following would most likely reduce aggregate demand (shift the AD curve to the left)

an appreciation of the U.S. dollar

which of the following would most likely shift the aggregate demand curve to the right

an increase in stock prices that increases consumer wealth

the interest rate effect suggests on

an increase in the price level will increase the demand for money,increase interest rates, and decrease consumption and investment spending

if the MPC is 0.8 and disposable income is $200, then

consumption and savings cannot be determined from the information given

unemployment that occurs when is deficient demand for the goods and services of an economy is called

cyclical unemployment

other things equal, a decrease in the real interest rate will

expand investment and shift the AD curve to the right

in which phrase of the business cycle will the economy most likely experience rising real output and falling unemployment rates

expansion

the natural rate of unemployment is the

full-employment unemployment rate

in an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. we would expect this to

increase aggregate demand

If both the real interest rate and the nominal interest rate are 3 percent, then the:

inflation premium is zero

Multiplier and MPC directly related

multiplier= 1/1-MPC

Multiplier & MPC inversely related

multiplier= 1/MPS

nominal interest rate

nominal interest rate = real interest rate + inflation premium

suppose that real domestic output in an economy is 20 units, the quantity of inputs is 10, and the price of each input is $4. all else being equal, if the price of each input increased from $4 to $6, productivity would

remain unchanged

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

rise by about 15 percent

the phrase of the business cycle in which real GDP is at a maximum is called

the peak

the phrase of the business cycle in which real GDP is at minimum is called

the trough