GDP, unemployment, and inflation test review

We typically want inflation to be?

1-3%

Creeping Inflation

1-3% inflation

How much is the GDP of the United States?

18 trillion

what is considered a normal unemployment rate when the economy is working properly?

3.5 - 5%

if a person has money invested at 9 percent and the rate of inflation is 5 percent, how much return are they actually making on their investment?

4 percent

What is Michigan's current unemployment rate?

4.6%

GDP

$ value of all goods/services produced in a country

Which phase of the business cycle do we want to be in for long periods of time?

Expansion

Real GDP

GDP in constant unchanging price

What is the difference between GDP and GNP?

GDP is all goods/services within a country whereas GNP is all goods/services by that country's businesses

Nominal GDP

GDP measured in current prices

Cyclical Unemployment

unemployment tied to the business cycle

Frictional Unemployment

When people take time to find a job

because of low unemployment rates in the country of lountavia, employers offer higher wages. to maintain profits, they charge consumers more goods and services. the resulting effect will most likely be?

a wage-price spiral of ever-increasing prices

Poverty Threshold

below minimum income level to support a family

What are the leading economic indicators used to predict?

business cycles

how can an economist compare the standard of living in two different countries?

by comparing real GDP per capita

which goods would be included in the calculation of GDP?

cars name in tennessee at a factory owned by a japanese car company

the basket mentioned in the preceding question is called the

consumer price index

According to the demand-pull theory, what is responsible for inflation?

demand for goods and services exceeds existing supply

Demand-Pull Theory

demand goes for goods exceeds supply, so price goes up

godzilla hits canada, wiping out all industry. the event sends the economy into a downward spiral. in this case, economists would say the business cycle was influenced by

external shocks

Inflation

general rise in prices

Seasonal Unemployment

happens at the end of the season

Structural Unemployment

happens when skills do not match available jobs

Full employment

happens when there is no cyclical unemployment

Wage-Price Spiral

higher wages = higher prices = higher wages

Cost-Push Theory

increased costs causes producers to raise prices

which of the following are leading indicators?

interest rates and stock prices

What is one limitation of GDP?

it does not measure health and happiness such a quality of life

Why don't government planners try to end seasonal unemployment?

it is a natural part of a healthy economy

what typically happens to the inflation rate when unemployment falls to very low levels?

it rises

An inflation rate of 0% is

lousy, there is no good growth in the economy

Economists try to predict changes in the business cycle by anticipating?

movement in real GDP

Which of the following is a result of unemployment that is very high?

prices may drop due to low demand

which of the following is considered a cause of inflation?

producers raise prices to meet higher costs

why is real GDP per capita considered a more useful figure than real GDP?

real GDP per capita takes population into account

Consumer Price Index

represents the market basket of urban consumer

Chronic Inflation

steady rising inflation over a long period of time

when godzilla, a college math professor, leaves his job at a small rural college and starts looking for a job at a large urban university, he is

structurally unemployed

Deflation

sustained drop in the price level

Which of the following will be most impacted by inflation (in a negative way)?

the elderly

what is the main problem for people on fixed income during a period of chronic inflation?

their income will not increase, so their purchasing power falls

Why do we want there to be some inflation?

there is growth in the economy

What does "full employment" mean?

there is no cyclical unemployment

what is one way economists measure the inflation rate?

they study price changes in the market basket

which of the following has the highest GDP per Capita?

Lichtenstein

My grandfather is always telling me that a dollar went further when he was a child than it does today. He means that

a dollars had more purchasing power when he was young

Quantity Theory

too much money causes inflation

the "market basket" that is used by the Bureau of Labor Statistics to calculate prices (and inflation) is made of which of the following?

typically goods and services for an urban household

which of the following workers is underemployed?

woman who works 20 hours a week but wants to work more

Is deflation a good thing?

yes if caused by new technology