Econ Exam 2

Question 1

Economists measure economic growth as

Answer 1

an increase in real GDP over time or an increase in real GDP per capita over time.

Question 2

What does real GDP fail to account for?

Answer 2

Real GDP fails to fully account for quality improvements, excludes the dollar value of leisure activities, and does not account for the effects of growth on the environment.

Question 3

What are some structures that promote growth?

Answer 3

strong property rights, patents, efficient financial institutions, education, and a competitive market system.

Question 4

The determinants of economic growth include four supply factors are…

Answer 4

increases in the quantity and quality of natural resources, increases in the quantity and quality of human resources, increases in the stock of capital goods, and improvements in technology

Question 5

Explain two ways to measure economic growth.

Answer 5

growth is measured either as an increase in real GDP over time or as an increase in real GDP per capita over time.

Question 6

Describe the phases of the business cycle.

Answer 6

peak, recession, (depression) trough, expansion

Question 7

frictional unemployment

Answer 7

people being in the process of moving from one job to another.

Question 8

structural unemployment

Answer 8

industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.

Question 9

cyclical unemployment.

Answer 9

job loss due to an economic contraction or slow period of economic growth

Question 10

Demand-pull inflation

Answer 10

results from an excess of total spending relative to the economy’s capacity to produce.