BEC MCQ 5.2

Question 1

Increase in price level

Answer 1

Is inversely related to purchasing power of money

Question 2

when the aggregate demand shift right and in the short run supply curve shift left.

Answer 2

It is called as demand pull inflation and cost push inflation

Question 3

Not consistent with full employment

Answer 3

cyclical- it is caused by business cycle.. A downtown in aggregrate business activity. IT results from declining GDP

Question 4

Structural frictional seasonal unemployment

Answer 4

Mismatch of skills and jobs is structural-An invention which leads to industry obsolete
Time lag that individual experience between jobs is frictional
unemployment due to seasonal changes

Question 5

cost push inflation

Answer 5

A input in oil costs such as sharp increase in the price of oil will cause short run aggregate supply curve to shift left and thus increase the aggregate price level causing inflation

Question 6

Demand pull inflation

Answer 6

is caused by aggregate shift right

Question 7

Recessions

Answer 7

create cyclical unemployment

Question 8

Expenditure approach computing GDP

Answer 8

GICE-Government expenditures
Capital investment
consumption
Net exports

Question 9

Discount rate charge by federal banks

Answer 9

Rate that the central banks for loans to commercial banks.

Question 10

what is banks reserve ratio

Answer 10

Ratio of banks reserve to its demand deposit

Question 11

How must Federal banks raise money

Answer 11

Through open market bank operations
Buying or selling securities
lowering the discount rate

Question 12

The real interest rate is

Answer 12

nominal interest rate minus inflation rate

Question 13

GDP equals

Answer 13

GICE- Government spending plus Investment Plus consumption minus expenditures

Question 14

CPI is

Answer 14

CPI this period-cpi last period/CPI last period x 100

Question 15

stagflation occurs

Answer 15

when the economy suffers recession that is characterized by falling output, raising unemployment, and raising price level

Question 16

Inflation occurs

Answer 16

The rate of increase in the overall price level of the economy

Question 17

Deflation

Answer 17

A continuous decline in overall price level

Question 18

The consumer price index

Answer 18

measures the cost of a market basket of specific goods commonly purchased by consumers. It measures consumer buying power and is not distorted by items generally bought by industry. The CPI measures what has been paid for items not what consumers will pay for them.

Question 19

Disposable income

Answer 19

is less than personal income as adjusted for personal taxes

Question 20

The percentage change in account balances is logically

Answer 20

Constructed as current balance-prior period bal/prior period bal