Econ Exam #2

if the cost of association with negative extremities (spillar cost) are not internalized by the producer

the equilibrium output will exceed the most efficient output

Peak

is when business activity reaches temporary maximum with full employment and near - capacity output

Recovery

is when output and employment are expanding toward the full-employment level

about 1/3 of U.S growth comes from

more inputs

demand-pull inflation

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

The equilibrium price in a foreign exchange market is called

the exchange rate

corporate bonds

promises by a corporation to repay money the bondholder has loaned to the corporation

cyclical unemployment

unemployment that occurs during the recession phase of the business cycle, which is sometimes called Deficient demand unemployment

frictional unemployment

unemployment that occurs when people take time to find a job

Government may lessen income inequality by all of the following means:

* Provide transfer payments to the poor * directly modify market prices (ex: establishing a legal min. wage) * using the tax system to tax the wealthy relatively more than the poor

a markets extremities refers to economic costs and benefits of market activities that go to those who are not directly involved in the market transactions

....

Okun's Law

1 percent more unemployment results in 2 percent less output

The United States economy is considered to be at full employment when about

4-5% of the labor force is unemployed (at the natural rate of unemployment)

a real GDP refers to

GDP data that have been adjusted for changes in the price level.

National income

PI

Personal income

PI

DI =

PI - personal taxes

The aggregated cost of unemployment can be measured by the amount by which:

Potential GDP exceeds actual GDP

Net export are negative when

a nation's imports exceed its exports.

in calculations GDP, governmental transfer payments such as

social security or unemployment. Compensation are not counted

Natural employment

the economy is producing its potential output which is what we call natural employment

A partnership

A business in which two or more persons combine their assets and skills under a partnership agreement

The corporate form of business enterprise has promoted the development of large-scale business operations because...

Corporations have been able to marshal large amounts of finance capital through stocks and bongs

Disposable income

DI

"rule of 70"

Divide 70 by the absolute value of a rate of change, and the result is the number of years it takes the underlying quantity to double

a nations gross domestic product (GDP) is the

Dollar value of the total output produced within the borders of that nation, in a given year.

Sole Proprietorship

a business owned and managed by a single individual

in terms of absolute volumes of imports and exports, the worlds leading trading nation is?

United States

a single plant that is owned by and operated by a single form and consists of oil fields, refinery, and gasoline stations best illustrates what?

Vertically integrated firm

cost-push inflation (or supply-side inflation

When prices rise due to an increase in the cost of production.

As defined in national income accounting, investment includes

business expenditures on machinery and equipment

In nations income accounting consumption expenditures include

consumer durable goods, consumer non-durable goods, and services

limited liability

corporate creditors have no legal claim on the personal assets of a corporate stockholder

Inflation initiated by increases in wages or other resource prices is labeled:

cost-push inflation

important quotas are meant to

deter free trade

The number of years required for real GDP to double can be found by:

dividing 70 by the annual growth rate

an economics production capacity is that expanded when

domestic investment exceeds depreciation

Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. Kimberly presently is:

frictionally unemployed

an industry is best described as a

group of firms that produce identical or similar products

The world Trade organization (WTO)

hears and rules trade disputes between nations

4 phases of the business cycle can be

identified over a several year period

about 2/3 of U.S growth

increased productivity

demand-pull inflation

increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand

Recession

is a decline in total output, income, employment, and trade lasting six months or more

Corporation

is a legal entity in and of itself and is distinct from its individual owners (stockholders)

Structrual Unemployment

is due to changes in the structure of demand for labor - when certain skills become obsolete or the geographic distribution of jobs change

Stocks

shares of ownership in a corporation

to find National income we must

subtract from GDP (1) indirect business taxes, such as sole taxes, (2) deprecation

trough

the bottom of the recession period

Exchange rates are particularly important because

they link the price levels of various nations to another

the full employment rate is equal

to the total of frictional and structural unemployment

China has recently emerged as one of the worlds top trading nations in terms of...

total trade volume