EC 111

lenders

during a period of deflation ___ are better off

population growth

external shocks include all of the following except population growth natural disasters terrorist attacks wars

consumption, investment, government, net exports

four components of aggregate demand

left

if autonomous consumption decreases, the the AD curve will shift to the ____

demand-pull inflation

if consumers attempt to buy more goods than the economy can produce, the result is

fall

if deflation is 0.5% per year and your receive a 1% decrease in your salary, then your real and nominal income ____

real GDP

if nominal GDP is constant, then the GDP deflator varies inversely with

stabilize

income transfers, such as unemployment insurance, welfare benefits, and food stamps help ____ aggregate demand

dissavings

occurs whenever current consumption exceeds current income

GDP deflator

refers to all goods and services produced in GDP reveals a lower inflation rate than the CPI reflects both price change and market responses

not in the labor force

someone 18 years old who is not employed and is not actively seeking work is considered

Inflation is less than 3% per year

in the full employment and balanced growth act of 1978, price stability means that

real income

income in constant prices is

decreases

inflation ____ the purchasing power of money

fiscal policy

keynesian levers include

full employment

the lowest level of unemployment compatible with price stability if referred to as

lost output for the economy

the macro consequence of unemployment is

right; discouraged worker

according to the new yorker cartoon, one restaurant patron states that since he has recently stopped looking for a job, he has helped to lower the unemployment rate. He is ___ because he became

consumption expenditures

account for approximately two-thirds of total spending

unemployed

actively seeking employment and currently not working

discouraged worker

after a fruitless two-year search for a job, a former executive gives up and decides to live off the land in the Rocky Mountains. This former executive is considered a

lower taxes

all of the following are effects of inflation except: uncertainty speculation bracket creep lower taxes

cost of living adjustments

allow individuals to maintain their purchasing power during inflation

inward

if more teenagers stay in school longer rather than dropping out and entering the labor force, the PPC shifts ___

13.6%

if the CPI increases from 110 to 125 for one year, the rate of inflation for that year is

increases

if the price of iPods rises 10% during a year when the level of average prices rises 3%, the relative price of iPods compared with other goods ___

the producer price index

if you were interested in charting prices of resources used by producers of energy, which of the following would you use?

decreased by $50

if your nominal income remains constant at $3000 while the price of an important product in your budget, such as a cell phone service, rises from $50 to $100, your real income has

increased; increased

if your rent increases from $1000 to $1100 over a period of one year and your income rises from $6000 to $7000 your nominal income has ___ and your real income has ___

underemployment

individuals who are working part time while seeking full-time employment are classified as

has the least effect

the most desirable inflation rate is the rate that

bracket creep

the movement of taxpayers into higher tax brackets as nominal income grow is

number of employed - number in labor force

the number of unemployed people can be found by subtracting

Okun's law

the observation that a 1% increase in unemployment leads to a 2% decrease in real output is known as

item weight

the percentage of total expenditure spent on a specific product is called

frictional unemployment

the type of unemployment that economists generally associate with normal growth of the labor force and expanding job opportunities in a dynamic economy is

increase

According to Keynesian theory, the correct fiscal policy to stimulate the economy would be to ___ government expenditures to increase aggregate demand

raise taxes

According to Keynes, which of the following should the government do when the economy overheats?

classical economists

During the Great Depression, this group of economists assured everyone that the setbacks in production and employment were temporary and would soon vanish:

and wages both fall

If wages and prices are flexible, then a recession is best eliminated when prices

Say's Law

supply creates its own demand

recessionary gap

A ____ ____ implies that aggregate demand is less than aggregate supply at the full-employment price level

decrease

One In the News article titled "Consumer Confidence Index at All-Time Low" indicates that consumer confidence decreased. As a result, autonomous consumption will ____

frictionally unemployed

Sam recently quit her job at the university because she is looking for another job for which she is qualified in a small town. Sam is

structurally unemployed

Tom worked at NASA for 13 years. In the 14th year, his job was automated, resulting in him losing his job. He looked for a new job for 18 months before finding a job in a different line of work that paid less. During his 18 month job search, Tom was considered to be

little aggregate demand

according to Keynes, cyclical unemployment is caused by too

cyclical

___ unemployment moves an economy inside the curve

seasonal

___ unemployment will not affect an adjusted economy

structurally unemployed

a US worker who loses his or her job in an import industry because product demand decreases would be classified as

money illusion

a friend tells you that his income has risen every year by 5%. At the sam time, prices, on average, have risen by 5%. Your friend claims he is better off. Your friend is experiencing ____

long term

a growth recession is said to occur when the economy grows at a rate less than the _____ average

in labor force

a part time store clerk who is looking for another job

underemployment

a person who is not able to use her full capabilities in her job

CPI; real income

a sudden increase in inflation raises the ___ and reduces ____ ____

discouraged worker

an employed worker who wants a job but has given up in the search for a new job is referred to as a/an

inflation

an increase in the average level of prices of goods and services

structural unemployment

arises because (1) the skill set of the worker does not meet the needs or the employer or (2) the job has been moved to a location where the worker can no longer go

on the PPC

at the natural rate of unemployment (frictional + structural), the economy is ___

interest rate

change in ____ ____ will not shift the investment curve

business cycle

changes in real GDP are used to measure

phantom unemployed

count toward the unemployed and artificially inflate the official rate of unemployment

phantom unemployed

count toward unemployment figures but they are not very motivated to seek work

aggregate demand

how total quantity of output demanded varies with the average price level

Keynesian

economic perspectives focuses on the need for government to use spending and taxes to shift aggregate demand and thus correct problems of unemployment and inflation

monetarists

economists believes that there is a natural rate of output that is relatively immune to short-run fluctuations in aggregate demand?

real interest rate

is equal to the nominal interest rate minus the anticipated rate of inflation is stabilized by arms is the inflation-adjusted rate of interest

fiscal policy

is the use of government spending and taxes to alter macroeconomic outcomes

unemployed + employed

labor force

a factory worker who is laid off because of temporary plant closing

largest unemployment category during a recession

labor force increase

people must turn from being discouraged workers into people actively seeking employment

0.25

suppose a consumption function is given as C = $150 + 0.75 Yd. The marginal propensity to save is

20%

suppose a country has 1 billion people. 75% of its citizens are in the labor force, with 90 million unemployed. Full employment occurs at 2%. Based on this information, by what percentage has real output failed to reach its potential according to the revised Okun's law?

increase

the PPC tens to ____ as the population grows

MPC

the ____ indicates the portion of an additional dollar of disposable income that will be spent

unemployment

the active search and inability of labor force participants to find jobs

a fixed reference

the base period used in computing price index is

cyclical

unemployment categories is most clearly related to the rate of growth in real GDP

unemployed divided by labor force

unemployment rate

nominal GDP

value of final output produced, measured in current prices

rises

when an economy enters a recession, the duration of unemployment ____

maintain a stable real interest rate

when inflation suddenly increases, ARMs

cost-push inflation

when natural disasters disrupt supply chains and push up the cost of production, this may result in

seasonally unemployed

when the appropriate production season changes and work is no longer needed until the following year

risen; fallen

when the price of a good decreases more slowly than an index of average prices decreases, the good's relative price has ___ while its absolute price has ___

disposable income level

which of the following is not a determinant of autonomous consumption? disposable income level taxes availability of credit price level

current disposable income

which of the following is not considered to be an important determinant of investment? current disposable income expectations investment rates technological change