Lesson 57 - unit 12

Question 1

What are the three most important macroeconomic variables?

Answer 1

1. Gross domestic product
2. Rate of inflation
3. Rate of unemployment

Question 2

What is the Consumer Price Index (CPI)?

Answer 2

An estimation of what a typical urban consumer has to pay for goods and services.

Question 3

What is the basis for CPI?

Answer 3

The sampling of prices in several cities (the market basket)

Question 4

What are some limitations of the CPI?

Answer 4

1. It doesn’t reflect consumer prices in rural areas
2. It doesn’t reflect changes in buying habits
3. It doesn’t reflect new products
4. It doesn’t reflect how consumers respond to changes in goods and services

Question 5

How is unemployment measured?

Answer 5

A monthly telephone survey of 60,000 homes.

Question 6

What correlation did Arthur Okun find between changes in the real GDP and in the unemployment rate?

Answer 6

For every 2% change in the real GDP above or below the 3% figure, unemployment rate will change by 1%.

Question 7

What is the Leading Economic Index (LEI)?

Answer 7

It gathers information about 10 areas of the economy and produces a single figure in an attempt to forecast future economic activity.

Question 8

What are 2 other kinds of indicators?

Answer 8

Lagging and coincident.

Question 9

Why is unemployment a lagging indicator?

Answer 9

because layoffs generally occur after sales have started to decline and hiring increases after the level of sales has begun to rise.

Question 10

What are some other assessments that measure economic activity?

Answer 10

1. Income
2. Spending
3. Producer prices
4. Durable goods
5. Home sales
6. Productivity