Smartbook Ch.9 - ECO211

Select all that apply Which of the following are reasons why teenagers have a much higher unemployment rate than adults?

"Fired" more frequently Have lower skill levels Quit more frequently Have less geographic mobility

What causes Business Cycles?

"MR.PI's Bubbles" M-Monetary Factors (Central Bank) R-Resource Changes (Land, Labor, Capital) P-Political Events (War, Terrorism, Govt Defaults etc.) I's-Inventions/Innovations (Light Bulbs to LED Bulbs) (Steam Trains to Bullet Trains etc.) Bubbles - Financial Bubbles (Exaggerated Prices)

What are the stages of the Business Cycle?

-Peak -Recession -Trough -Recovery

What are the 7 Business Cycle Indicators?

1.NBER Business Cycles 2.Conference Board 3.University of Michigan 4.Inverted Yield Curve 5.Stock Market 6.Twin Evils 7.Federal Reserve

If real economic growth is 3%, the inflation rate is 5%, and the nominal interest rate is 7%, then what is the real rate of interest?

2% Reason: The real rate of interest is equal to the nominal interest rate minus the rate of inflation. In this case, 7% - 5% equals 2%.

What are the effects of unanticipated deflation?

Creditors will benefit at the expense of debtors. The real incomes of people with fixed nominal incomes will increase. The purchasing power of savings will increase.

Why does the business cycle affect output and employment in capital and durable goods industries more severely than in industries producing non-durable goods?

During a recession, business investment in new capital goods and consumer spending on new durable goods can be postponed.

True or False: When an economy experiences negative shocks, in the short run, the economy responds primarily through changes in prices. True false question.

False

True or false: The unemployment rate for African Americans and Hispanics is lower than that for whites.

False

Select all that apply Which of the following are excluded from core inflation so that it better reflects the general trend in overall prices?

Food items Energy products

The difference between actual and potential GDP is called a Blank______ gap.

GDP

Select all that apply Which of the following describe why unemployment rates are higher for African Americans and Hispanics than for whites?

Greater concentration in lower-skilled occupations Lower rates of educational attainment

Select all that apply Why do economists almost universally condemn hyperinflation?

It causes businesses to stockpile materials. It has a negative effect on employment. It reduces real output.

How is cost-push inflation unique?

It reduces the overall quantity of real output.

Why does investment decline during periods of hyperinflation?

Lenders know that the value of their loan will decline.

Select all that apply Which of the following are characteristics of lower-skilled workers?

Less likely to be self-employed Longer spells of structural unemployment

What is true about business cycles?

They are made up of alternating rises and declines. They vary in duration and intensity. "Ups" are followed by "downs."

Which of the following is a reason teenagers have a higher unemployment rate than adults?

They have lower skill levels.

Which of the following statements best summarizes when inflation may lead to the redistribution of real income?

When a change in the price level differs from a change in a person's nominal income

What is the formula for a GDP gap?

actual GDP minus potential GDP

What makes up a business cycle?

alternating rises and declines in the level of economic activity

Frictional unemployment is defined as a type of unemployment that is caused by workers who Blank______.

are unemployed as they actively search for a new job.

A key issue in macroeconomics is why the economy sees Blank______.

business cycle fluctuations rather than slow, smooth growth

Firms and industries producing capital goods are affected most by the business cycle and the negative effects of a recession because purchases of capital goods Blank______.

can be postponed

Economists say that the economy is at "full employment" when the Blank______ unemployment rate is zero.

cyclical

What term describes inflation caused by an excess of total spending beyond the economy's capacity to produce?

demand-pull inflation

The rule of 70 says that the number of years it will take for some metric to double, given its annual percentage increase, can be found by Blank______.

dividing 70 by the annual percentage increase

Economic theories are founded on the idea that economic fluctuations are driven by Blank______.

economic shocks

Those who are working are defined as (one word) and those who are not working but actively seeking work are defined as (one word).

employed and unemployed

The labor force is the sum of the Blank______ and Blank______.

employed; unemployed

Select all that apply When prices are sticky in the short run, the economy is forced to respond to shocks in the economy with changes in Blank______.

employment output

An economy is "fully employed" when the unemployment rate Blank______.

equals the structural and frictional unemployment rate

What causes demand-pull inflation?

excess total spending

When inflation occurs each dollar of income will buy Blank______ goods and services than before.

fewer

Which term describes workers that are unemployed because they are "between jobs"?

frictionally unemployed

The difference between actual and potential GDP is called a GDP .

gap

What are real interest rates?

interest rates quoted in the market minus the expected inflation rate

Why the economy sees business cycle fluctuations rather than slow, smooth growth is a central issue of Blank______.

macroeconomics

Food and energy prices often complicate the measurement of inflation because supply and demand for these products Blank______.

often change, creating temporary changes in prices

The basic economic cost of unemployment is forgone Blank______.

output

The phase of the business cycle at which the economy is at or near full employment is known as a(n) .

peak

What is the phase of the business cycle when the economy is near or at full employment and the level of real output is at or near capacity?

peak

A GDP gap equals actual GDP minus GDP. (Enter one word in the blank)

potential

income will be affected if the change in the price level differs from the change in a person's nominal income.

real

How does inflation affect the purchasing power of money?

reduces

Cost-push inflation can contribute to a recession by increasing prices. What effect does this have?

reduces output and leads to lower employment.

Unexpected events that drive economic cycles and fluctuations are called economic .

shocks

The labor force is the Blank______.

sum of the employed and unemployed

Deflation occurs when there is a decline in Blank______.

the price level

The portion of the labor force that is not working but is willing and able to work and actively seeking work is defined as Blank______, and the portion of the labor force that is working part-time or full-time is defined as Blank______.

unemployed; employed

Forgone output is a basic economic cost of Blank______.

unemployment

Workers in lower-skilled occupations have higher Blank______ rates than workers in higher-skilled occupations.

unemployment