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