Macro chapter 20

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Which of the following probably occurred as the U.S. economy experienced increasing real GDP in 1954? Check all that apply.

1-Consumer spending increased. 2-Retail sales increased. 3-The unemployment rate declined.

Which of the following probably occurred as the U.S. economy experienced declining real GDP in 1948? Check all that apply.

1-The unemployment rate increased. 2-Corporate profits declined. 3-Total real income declined.

True or False: Short-term fluctuations in real GDP are irregular and unpredictable.

Correct True

True or False: Small ups and downs in real GDP follow a consistent, predictable pattern.

False

Notice that real GDP trends upward over time but experiences ups and downs in the short run. These short-run fluctuations in real GDP are often referred to as the .

business cycle

Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to............... in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore............... , and the number of foreign products purchased by domestic consumers and firms (imports) will............ . Net exports will therefore.............. , causing the quantity of domestic output demanded to................ . This phenomenon is known as the.......................... effect.

fall rise fall rise rise exchange rate

As the price level falls, the purchasing power of households' real wealth will.......... , causing the quantity of output demanded to.............. . This phenomenon is known as the............... effect.

rise rise wealth


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