Progress check

Disinflation refers to a

Slowdown in the rate of increase in the consumer price index.

Labor unions negotiated a 3-year contract with employers in the automobile industry. They agreed to a 3 percent per year increase in pay over the 3 years. How would each group be affected by an actual inflation rate of 4% next year?

When the actual rate of inflation (4%) is greater than the expected inflation rate (3%), the real value of worker income is reduced, which means that workers are worse off and employers are better off.

Which of the following will happen when the actual inflation rate exceeds the expected inflation rate? A This will benefit lenders with fixed-interest rate loans. B This will harm lenders with variable-interest rate loans. C This will harm lenders with fixed-interest rate loans. D This will harm borrowers with fixed-interest rate loans. E This will benefit borrowers with variable-interest rate loans.

C

Full employment on graph is when

Actual=potential

When an economy is at the trough of the business cycle, which of the following is then true about the state of the economy?

At the trough of a business cycle, there is a recessionary gap because, at the trough, actual output is below potential output.

Which of the following is true about gross domestic product (GDP) ?

Calculations of GDP include the unsold inventories of goods produced within the borders of the country.

As a measure of economic performance, the United States gross domestic product (GDP) accounts for which of the following? A The use of open-source, free Web browsers B A parent's care of children in the home C The street sale of illegal substances D The cleanup of an oil spill E The production of vegetables grown in the backyard and consumed by the family

D

Which of the following describes a limitation of gross domestic product (GDP) ?

GDP measures the final output produced by a nation but does not account for the distribution of income or income inequality.

Real GDP=

Nominal GDP/GDP deflator)×100

Which statement is true about the approaches used to measure the value of a nation's gross domestic product (GDP)

The expenditures approach to calculating GDP sums consumption spending, investment spending, government spending, and net exports.

Which statement is true about the circular flow diagram of an economy?

The market for factors of production connects spending by firms to household income.