Economics Chapter 9 Flash Cards

If the inflation rate is 3% and the real interest is 5%, then the nominal interest rate is:

8%

Inflation is when there is:

a rising aggregate price level

A business cycle is:

a short-run alternation between economic upturns and downturns

Savers are hurt by unanticipated inflation because:

as price rises, the real value of savings decreases

A key issue in macroeconomics is why the economy sees:

business cycle fluctuations rather than slow, smooth growth.

Changes in unemployment that occur as the economy expands and contracts is called:

cyclical unemployment

What is a consequence of unexpected lower total spending in the short-run when prices are sticky?

firms sell fewer units of output

When inflation occurs _________, people with incomes see their real incomes ________.

fixed and fall

Workers that are unemployed because they are "between jobs" are a part of:

frictional unemployment

The difference between actual and potential GDP is the GDP:

gap

On average, less-educated workers have _________ unemployment rates than workers with more education.

higher

What is the result of unexpected higher total spending in the short-run when prices are sticky?

incomes rise

__________ redistributes total real income

inflation

_______________ reduces the purchasing power of money.

inflation

People who are __________ are hurt by unanticipated inflation.

on fixed incomes, savers, creditors

When prices are sticky in the short-run, the economy is forced to respond by changes in:

output and employment

An expansion is a period in which:

output rises & the price level may rise

Real income equal nominal income divided by the __________ ___________.

price index

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

real

Inflation redistributes:

real income

In the trough of a ____________, output and employment "bottom out" at their lowest levels.

recession

The phase of the business cycle that describes a decline in total output, income and employment is called a(n):

recession

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

shocks

The major source of cost-push inflation has been so called _________ shocks.

supply

The labor force is:

the sum of the employed and unemployed

The unemployment rate can be most accurately described as the number of _______ divided by the labor force multiplied by 100.

unemployed

A discouraged worked is a(n)

unemployed worker, no longer seeking actively work