Economics Test 5 Flashcards
Products that will be worn out within a year
Consumer Nondurable goods
A lack of government restrictions on foreign trade
Free trade
Total dollar value of all final goods and services produced by a nation in one year
Gross domestic product
When the government does put restrictions on foreign trade
Protectionism
A negative balance of trade
Trade deficit
A positive balance of trade
Trade surplus
people who are unemployed because they are temporarily between jobs (such as those seeking a better job)
Frictional unemployment
those who are out of work because of seasonal factors (this is very common in agricultural countries)
Seasonal unemployment
Caused by recession
Cyclical unemployment
when a worker’s skills do not match available jobs; this may occur for two reasons
Structural unemployment
people who have been out of work for six months or longer and the government assumes they have stopped looking for work
Discouraged workers
gross private domestic investment
GPDI
measures the changes in the prices that affect a selected group of goods and services
Consumer price index
the gross domestic product adjusted for inflation
Real GNP/GDP
a true measure of a nation’s wealth
Per capita real GNP/GDP
when a nation’s businesses raise prices, workers demand higher wages which further pushes up prices so that the businesses may compensate in profits
Cost-push inflation
consumers begin demanding more of everything which causes prices to rise, higher wages must be paid, and prices rise again
Demand-Pull inflation
a sustained rise in the average price level
Inflation
the ability of the government to affect output and employment through taxes borrowing and spending
Fiscal policy
a tax the government levies on the sale of certain targeted consumer goods
Excise tax
takes a greater percentage of a person’s income as the income increases
Progressive tax
takes a small percentage of a person’s income as the income rises
Regressive tax
all people pay the same percentage (Flat Tax)
Proportional tax
During a recession the government borrows and spends to “prime” the economy
“Pump priming”
the means by which any given change in expenditures causes a greater change in national income
Expenditure multiplier
Which group is hurt most from free trade
The noncompetitive industries
What decreases during an expansion phase in a business cycle
The unemployment rate
What factor triggers a recessionary phase in the business cycle
The unwillingness of the consumer to pay higher prices
Who is hurt the most from protectionist legislation
Domestic consumers
How long must a person remain unemplyed before he is no longer considered part of the labor force
6 months
what are the minimum and maximum ages of people included in unemployment statistics
16 & 64
Which phase of the business cycle does not occur every cycle
Depression
Supporters of free trade believe the protection of which group is more important
Consumers
Progressive personal income taxes tend to decrease or increase people’s incentive to work harder
Decrease
The U.S. has experienced inflation every year since this year
1961
Is 0% unemployment an ideal goal for a country
no
When an employer has to raise the minimum wage for its UNSKILLED workers, what does the employer also do to balance their overhead costs
layoff workers
which group benefits the most from inflation
Borrowers
which group is harmed the most from inflation
Creditors (lenders)
What becomes a major problem when government uses spending as a tool of fiscal policy
Uncertainty of the expenditure multiplier
What is the largest expenditure in the federal budget
Income security programs
How does fiscal policy destroy a nation’s future productivity
Borrows money that businesses need
What is the greatest source of federal tax revenue
Personal income tax
What aspect of fiscal policy has the most devastating effect on the national work ethic
Progressive taxation
List in order the phases of the business cycle
○ Expansion ○ Peak ○ Recession ○ Trough Depression
List the three theories that explain the business cycle
○ Sunspot
○ Psychological
○ Monetary
List the basic economic groups that are used to estimate GDP:
Households
○ Businesses
○ Government
Foreign Buyers
Why is frictional unemployment not necessarily bad for an economy
They are looking for a better job which is good.
Define frictional unemployment
Why isn’t it bad.
Employers have freedom to replace employees with more productive employes.
Demonstrates that the labor market is competitive
Products with a life expectancy of at least one year
Consumer durable goods
