Chapter 19 Flashcards
An equivalent term for “real national income” is
a) nominal national income
b) current-dollar national income
c) constant-dollar national income
d) actual national income
e) potential national income
c) constant-dollar national income
An upward trend in real national income over an extended period of time is called
a) an inflationary boom
b) aggregate output
c) constant-dollar national income
d) potential national income
e) economic growth
e) economic growth
to compare the economy’s aggregate output in two different time periods, economists compare the
a) nominal national income for the two periods
b) potential national incomes for the two periods
c) real national income for the two periods
d) unemployment rates for the two periods
e) inflation rates for the two periods
c) real national income for the two periods
consider a small economy with 3 individuals where each individual produce and sells $1000 worth of final goods and services. The national income for this economy is
a) $3000
b) less than $3000 if some of the income is saved
c) more than $3000 if some of the income is invested
d) less than $3000 if there are taxes in this economy
e) more than $3000 if the individual are earning profits
a) $3000
Which of the following correctly describes the meaning of the expression Y
a) actual output is less than potential output - recessionary gap
- the table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in constant-dollar terms. Refer to table 19-1 in which years was this economy experiencing a recessionary gap?
a) 2015, 2016
b) 2012, 2013, 2017
c) 2014, 2018
d) 2012, 2013, 2014
e) 2016, 2017, 2018
b) 2012, 2013, 2017
- the table below provides macroeconomic data for a hypothetical economy. Dollar amounts are all in constant-dollar terms. Refer to table 19-1. In which years are the factors of production in this economy said to be “fully employed”?
a) 2012, 2013, 2017
b) 2014, 2018
c) 2015, 2016
d) all years
e) none of the years
b) 2014, 2018
If a country’s labour force is 15 million people, and 1.35 million of those are unemployed, the country’s unemployment rate is
a) 2.5%
b) 3.3%
c) 4.5%
d) 6.7%
e) 9.0 %
e) 9.0%
Suppose a country has an unemployment rate of 20%. If we know the population is 38 million and the labour force is 25 million, then the number of people unemployed must be
a) 5 million
b) 13 million
c) 20 million
d) 7.6 million
e) 2.6 million
a) 5 million
if the price index is P1 in year 1 and p2 in year 3, the average inflation rate per year over this period is calculated as
a) (p2-p1) x (100/2)
b) [(p2-p1)/p1] x 100
c) [(p2-p1)/p1] x [100/2]
d) [(p1-p2)/p2] x 100
e) [(p1-p2)/p2] x [100/2]
c) [(p2-p1)/p1] x [100/2]
define macroecoenomics
study of the determination of economic aggregates, such as total output, total employment, the price level, and the rate of economic growth
define nominal national income
total national income measured in current dollars. also called current-dollar national income
define real national income
national income measured in constant (base-period) dollars. It changers only when quantities change
define recession
a fall in the level of real GDP. Often defined precisely as two consecutive quarters of negative growth in real GDP
define business cycle
fluctuations of real national income around its trend value that follow a more or less wavelike pattern
define potential output (Y*)
the real GDP that the economy would produce if its product resources were fully employed. Also called potential GDP
define output gap
actual output minus potential output, Y-Y*
define recessionary gap
a situation in which actual output is less than potential output, Y
define inflationary gap
a situation in which actual output exceeds potential output, Y>Y*
define employment
the number of persons 15 years of age or older who have jobs
define unemployment
the number of persons 15 years of age or order who are not employed and are actively searching for a job
define labour force
the number of persons employed plus the number of persons unemployed
define unemployment rate
unemployment expressed as a percentage of the labour force
why is there always some frictional unemployment?
natural turnover in the labour market and some structural unemployment due to mismatch between jobs and workers
define labour productivity
the level of real GDP divided by the level of employment (or total hours worked)
define price level
the average level of all prices in the economy expressed as an index number
define inflatoin
a rise in the average level of all prices (the price level)
define consumer price index (CPI)
An index of the average prices of goods and services commonly bought by households
how does inflation affect purchasing power and the real value of any sum?
reduces both
define purchasing power of money
the amount of goods and services that can be purchased with a unit of money
anticipated inflation has a (smaller/larger) effect on the economy than unanticipated inflation
smaller
define interest rate
the price paid per dollar borrowed per period of time, expressed either as a proportion or as a percentage
define nominal interest rate
price paid per dollar borrowed per period of time
what does the burden of borrowing depend on?
the real rate of interest (not nominal)
define real interest rate
the nominal rate of interest adjusted for the change in purchasing power of money. equal to the nominal interest rate minus the rate of inflation
define exchange rate
the number of units of domestic currency required to purchase one unit of foreign currency
define foreign exchange
foreign currencies that are traded on the foreign-exchange market
define foreign-exchange market
the market in which different national currencies are traded
define depreciation
a rise in the exchange rate - it takes more units of domestic currency to purchase one unit of foreign currency
define appreciation
a fall in the exchange rate - it takes fewer units of domestic currency to purchase one unit of foreign currency
