2/22 test

Question 1

inflation occurs when…

Answer 1

a rising aggregate price level

Question 2

purchasing power parity

Answer 2

adjust for differences in inflation/prices in two countries

Question 3

principal source of savings

Answer 3

households

Question 4

financial intermediaries

Answer 4

organizations that receive funds from savers and then channel those funds to investors

Question 5

spending on machinery, tools, and factories represent…

Answer 5

capital/economic investment

Question 6

expenditures approach

Answer 6

total spending in our economy to figure out gdp

Question 7

income approach

Answer 7

total earnings in an economy

Question 8

real GDP

Answer 8

gdp adjusted to inflation in a country

Question 9

nominal GDP

Answer 9

gdp calculations that dont include inflation

Question 10

GDP

Answer 10

total value of all newly produced final goods in an economy in 1 year

Question 11

consumption

Answer 11

all spending by households on newly produced consumer goods and services

Question 12

durable goods

Answer 12

an item that can be repaired/lasts more than three years

Question 13

nondurable

Answer 13

ex: clothes and food

items that cannot be repaired and last less than 3 years

Question 14

savings

Answer 14

part of income that is not used (stocks, bonds, savings account)

Question 15

where does most of savings come from?

Answer 15

households

Question 16

where does most of economic investment come from?

Answer 16

firms/businesses

Question 17

gross domestic investment

Answer 17

spending by businesses on newly produced capital goods and services (new homes, factories, equipment/inventories)

Question 18

purchasing stocks and bonds is an example of…

Answer 18

financial investment

Question 19

how do you calculate added value

Answer 19

this years inventory-last years inventories

Question 20

what is included in the income approach

Answer 20

compensation of employees, rent, interest, income tax, income, dividends

Question 21

what are the shortcomings of GDP

Answer 21

does not account for work outside circular flow model, doesnt measure improved livingg conditions, doesnt measure quality improvements, doesnt account for underground economy

Question 22

what is frictional unemployment

Answer 22

temporary loss of jobs

Question 23

structural unemployment

Answer 23

due to structural changes within the economy (advancement in technology)

Question 24

cyclical

Answer 24

caused by a lack of spending in the economy, no workers and no jobs

Question 25

who is the labor force

Answer 25

unemployed and employed people in a community

Question 26

how do you calculate unemployment rate

Answer 26

unemployed/labor force X 100

Question 27

how do you calculate % of labor force

Answer 27

labor force/population over 16 X 100

Question 28

okuns law

Answer 28

for every 1% rise in unemployment above the natural rate of unemployment there is a 2.5% decline in GDP

Question 29

price index

Answer 29

GDP deflator, GDP from base year

Question 30

how to calculate real gdp

Answer 30

nominal GDP/price index X 100

Question 31

demand pull inflation

Answer 31

too many dollars chasing too few goods and services

Question 32

cost push inflation

Answer 32

inflation caused by an increase in the price of inputs

Question 33

who is harmed by inflation

Answer 33

people with fixed income, lenders who lent at fixed rate

Question 34

who benefits from inflation

Answer 34

creditors