Chapter 9 HW Qs

If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, real GDP is

$360 billion

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is

$510 billion

UNEMPLOYED: 7 TOTAL POPULATION: 145 EMPLOYED: 95 DISCOURAGED WORKERS: 3 Refer to given information. The labor force of Scoob is:

102 million

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is

11%

A large negative GDP gap implies

a high rate of unemployment

Cost-push inflation may be caused by

a negative supply shock

A college graduate using the summer following graduation to search for a job would best be classified as

a part of frictional unemployment

The phase of the business cycle in which real GDP declines is called

a recession

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

not in the labor force

Demand-pull inflation:

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

During a period of hyperinflation:

people tend to hold goods rather than money

The unemployment rate is the

percentage of the labor force that is unemployed

Full-employment output is also called

potential output

What is the primary reason that changes in total spending lead to cynical changes in output and employment?

prices are sticky in the short run

Inflation means that

prices on average are rising, although some particular prices may be falling

A recession is defined as a period in which

real domestic output falls

In the depth of the Great Depression. the unemployment rate in the United States was about:

25%

If the nominal interest rate is 5% and the real interest rate is 2%, then the inflation premium is

3%

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%

UNEMPLOYED: 7 TOTAL POPULATION: 145 EMPLOYED: 95 DISCOURAGED WORKERS: 3 Refer to given information. The unemployment rate in Scoob is:

6.9%

Assume the natural rate of unemployment in the U.S. economy is 5% and the actual rate of unemployment is 9%. According to Okun's law, the negative GDP gap as a percent of potential GDP is

8%

The government agency responsible for collecting and reporting unemployment data is the

Bureau of Labor Statistics

For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of

Okun's Law

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

about 4-5 percent of the total population is unemployed

The GDP gap measures the difference between

actual GDP and potential GDP

Inflation is undesirable because it

arbitrarily redistributes real income and wealth

Recurring upswings and downswings in an economy's real GDP over time are called

business cycles

Real income is found by

dividing nominal income by the price index (in hundredths)

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are

capital good and durable consumer goods

In which of the following industries of sectors of the economy will business cycle fluctuations likely have the greatest effect on output?

capital goods

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

cost-push inflation

The type of unemployment associated with recessions is called

cyclical unemployment

Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?

cyclical unemployment

UNEMPLOYED: 7 TOTAL POPULATION: 145 EMPLOYED: 95 DISCOURAGED WORKERS: 3 Refer to given information. If the natural rate of unemployment in Scoob is 5%, then:

cyclical unemployment is about 2%

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would

decline

Real income can be determined by

deflating nominal income for inflation

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced

deflation of 3.33%

The phrase "too much money chasing too few goods" best describes

demand-pull inflation

The labor force includes

employed workers and persons who are officially unemployed

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

expansion

Kara 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. Kara presently is

frictionally unemployed

Part-time workers who want full-time work are counted as

fully employed and therefore the official unemployment rate may understate the level of unemployment

Cost-push inflation:

reduces real ouput

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%

In the United States, business cycles have occurred against a backdrop of a long-run trend of

rising real GDP

Which of the following constitute the types of unemployed occurring at the natural rate of unemployment?

structural and frictional unemployment

Susie lost her job in a Vermont textile plant because of import competition. She intends to take a short course in electronics and move to Oregon, where she anticipates that a new job will be available. We can say that Susie is faced with

structural unemployment

Unemployment involving a mismatch of the skills of unemployed workers and the skill required for available jobs is called

structural unemployment

The natural rate of unemployment is

that rate of unemployment occurring when the economy is at its potential output

At the economy's natural rate of unemployment:

the economy achieves its potential output

As it relates to economic growth, the term long-run trend refers to

the long-term expansion or contraction of business activity that occurs over 50 or 100 years

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. 5 million workers switch to full-time workers. As a result:

the official unemployment rate will remain unchanged

The phase of the business cycle in which real GDP is at a minimum is called

the trough

Cost-of-living adjustment clauses (COLAs):

tie wage increases to changes in the price level

Official unemployment statistics:

understate unemployment because discouraged workers are not counted as unemployed