Economics Test 2

Question 1

Goals of the Economy

Answer 1

1. Increase GDP
2. Lower unemployment rate
3. Balanced Budget
4. Low Interest Rate
5. Low Inflation Rate
6. Balanced trade
7. Lower taxes

Question 2

to be considered unemployed:

Answer 2

you have to be out of work and looking for a job

Question 3

Types of unemployment

Answer 3

market induced unemployment
policy induced unemployment
cynical unemployment

Question 4

two types of market induced employment

Answer 4

frictional unemployment and structural unemployment

Question 5

• people who are voluntarily out of work

- there is a job out there somewhere, you just do not have all the available information to fund it right away

Answer 5

frictional unemployment

Question 6

• people put out of work due to technology or due to a permanent decrease in the demand for their labor skills
• you have to be retrained in order to get another job

Answer 6

structural

Question 7

people put out of work due to government policies

Answer 7

policy induced unemployment

examples - minimum wage, unemployment compensation

Question 8

Policy Induced unemployment + market induced unemployment =

Answer 8

natural rate of unemployment

Question 9

• people who are put out of work due to a temporary decrease in the demand for their labor skills
• you don’t have to be retrained to get another job

Answer 9

cyclical unemployment

Question 10

a rise in the general price level

Answer 10

inflation

Question 11

CPI

Answer 11

consumer price index

Question 12

measures the change in the cost of typical bundle of goods and sources overtime

Answer 12

CPI

Question 13

the price you pay when you bought it

Answer 13

the nominal price

Question 14

real price

Answer 14

the nominal price adjusted for inflation

Question 15

real price =

Answer 15

nominal price * base year price index/current year price index

Question 16

base year price index

Answer 16

the year you want to convert

Question 17

current year price index

Answer 17

the year you want to change

Question 18

GDP

Answer 18

gross domestic product

Question 19

the final value of all the goods and services produced in the economy during the year

Answer 19

GDP

Question 20

has to be produced in the current year

Answer 20

GDP

Question 21

when GDP is negative two consecutive years, we are officially

Answer 21

in recession

Question 22

GDP =

Answer 22

G + I + C + (E-I)

Question 23

disposable income

Answer 23

income after taxes

Question 24

consumption

Answer 24

how much of your disposable income you spend

Question 25

savings

Answer 25

how much of your disposable income you save

Question 26

APC

Answer 26

Average propensity

Question 27

• percent of income spent at any given level of income . what percentage of your income you spend

Answer 27

APC

Question 28

C/DI

Answer 28

APC

Question 29

APS

Answer 29

S/DI

Question 30

Average Propensity to save

Answer 30

For any given level of income, what of your income you save

Question 31

MPC

Answer 31

marginal propensity to consume

Question 32

for any given change in your income, what preventive of that you spend

Answer 32

MPC

Question 33

/\C//\DI=

Answer 33

MPC

Question 34

MPS

Answer 34

Marginal propensity to save

Question 35

for an given change in income, what percentage of that change you save

Answer 35

MPS

Question 36

/\S//\DI

Answer 36

MPS

Question 37

DI-C=

Answer 37

s

Question 38

how do you get APC

Answer 38

c/di

Question 39

how do you get APS

Answer 39

s/di

Question 40

how do you get MPC

Answer 40

/\C/ /\DI

Question 41

how do you get MPS

Answer 41

/\S/ /\DI

Question 42

how do you get M

Answer 42

1/1-MPC

Question 43

NTM

Answer 43

is always one less than M