Chapter 7

Question 0

Unemployment ——— during recessions and ——– during expansions

Answer 0

Rises, falls

Question 1

Unemployment moves ———- with output or activity

Answer 1

Inversely

Question 2

Unemployment moves with a —–

Answer 2

Lag. Firms and business take time to decide whether they are laying off or creating new jobs after they perceive a change in production levels

Question 3

The natural unemployment rate which is the has been around —– % over the last fifty years

Answer 3

5 - 6

Question 4

John is a teller at a bank and his position is replaced by an ATM. This is an example of

Answer 4

Structural unemployment

Question 5

Sara finished her schooling at XYZ college and is now looking for a job to match her new qualifications. This is an example of

Answer 5

Frictional unemployment

Question 6

Fred is laid off from company X. The layoffs were prompted by lower sales due to overall decreased demand as the economy

Answer 6

Cyclical

Question 7

Robert is a golf instructor at club XYZ in MI. He is unemployed during the months of December to February

Answer 7

Seasonal unemployment

Question 8

Retraining and acquiring new skills is an example of eliminating what kind of unemployment?

Answer 8

Structural

Question 9

Cyclical unemployment —— during an economic expansion

Answer 9

Decreases

Question 10

The study of behavior of the economy as a whole

Answer 10

Macroeconomics

Question 11

A simplified representation of a reality. Not based on Ssumptions

Answer 11

Modeling

Question 12

Most common factors to determine how the economy is performing

Answer 12

1. GDP
2. inflation
3. Unemployment

Question 13

Unemployment rate is calculated

Answer 13

Unemployed
————— X 100
Labor force

Question 14

A sustained increase in the general or overall price level

Answer 14

Inflation

Question 15

A decrease in the overall price level

Answer 15

Deflation

Question 16

How does inflation move with the state of the economy

Answer 16

Generally inflation tends to increase when economic activity is increasing and vice versa

Question 17

Calculate price index

Answer 17

Cost of market basket today
——————————— X. 100
Cost of market basket base year

Question 18

The real interest rate is calculated by

Answer 18

Nominal rate - expected or anticipated inflation

Question 19

Realized real interest rate

Answer 19

Nominal - inflation rate

Question 20

Unanticipated inflation hurts —— and benefits ———

Answer 20

Creditors, debtors

Question 21

Real GDP is increasing above the trend economy is in a

Answer 21

Expansion

Question 22

Real GDP is decreasing and falling below trend e onto my is in a

Answer 22

Contraction or recession

Question 23

An increase in aggregate output is the same as an increase in

Answer 23

Aggregate income. Because total production level is tied to total income

Question 24

Total domestic product GDP is defined as

Answer 24

Total market value of all final goods and services produced Ina given period within the nations domestic borders

Question 25

Goods that require no further processing and are reedy to be consumed

Answer 25

Final goods

Question 26

Goods that go back to the production process

Answer 26

Intermediate goods such as wheat for bread and steel for cars

Question 27

What kind of good are used to calculate GDP

Answer 27

Final goods---- because the other goods have already been counted and we would overstate production if also included intermediate goods

Question 28

What is a flow variable

Answer 28

Something that is stated over a period of time such as a year or quarter. Savings

Question 29

What is a stock variable

Answer 29

A stock variable accumulates over time and is measured at a specific point in time such as wealth at the end of the year

Question 30

Why do we subtract imports from exports when calculating expenditure approach to GDP

Answer 30

Imports are goods that are not produced in domestic economy therefore they should not be included in our spending components

Question 31

What is the largest portion of GDP?

Answer 31

Personal Consumption

Question 32

If household spending increases or decrease does it affect GDP?

Answer 32

Yes-- it is ugh a large portion of GDP that GDP increases or decreases with personal consumption

Question 33

What is the Most volatile piece of GDP?

Answer 33

Investment which is important because contribution to capital stock in the economy which then affects the long term growth potential of economy

Question 34

Items that do not affect GDP

Answer 34

1. Home production such as cutting grass 2. Does not include financial transactions or transfer because it does not involve new production 3. Not a measure of well being of economy since it does not reflect quality of life do people living in that society

Question 35

Real value is ?

Answer 35

Measure,net of economic values after adjustments have been made for changes in average prices between years

Question 36

Nominal value

Answer 36

Current market value

Question 37

Why must we adjust for inflation?

Answer 37

Nominal GDP can overstate the production level of the economy

Question 38

Real GDP

Answer 38

Nominal GDP --------------- X. 100 GDP deflator