MIDTERM 1

Question 1

Real GDP

Answer 1

base year prices, but current quantity

Question 2

Nominal GDP

Answer 2

current year prices and quantity

Question 3

Nominal national income

Answer 3

total national income measured in current dollars

Question 4

Real national income

Answer 4

measured in constant dollars, changes only when quantities change, prices held constant

Question 5

Business Cycle

Answer 5

fluctuations of real national income around its trend value that follow wave like patterns

Question 6

Potential output

Answer 6

the real GDP that the economy would produce if its productive resources were fully employed - potential GDP

Question 7

Output gap

Answer 7

differences between potential output and actual output

Question 8

Recessionary gap

Answer 8

situation where actual output is less than potential output

Question 9

Inflationary gap

Answer 9

situation where actual output exceeds potential output

Question 10

Employement

Answer 10

the number of adult workers in the economy

Question 11

Unemployment (U)

Answer 11

number of adult workers without a job

Question 12

Labour force

Answer 12

the number of people who are employed and unemployed

Question 13

Frictional unemployment

Answer 13

constant turnover of individuals in the workplace

Question 14

Structural unemployment

Answer 14

individual skills are not suited for the job, requires retraining

Question 15

Natural unemployment

Answer 15

the natural rate of unemployment in an economy

Question 16

Cyclical unemployment

Answer 16

during a recession when there are higher than normal natural unemployment rates - during growth when unemployment is lower than natural unemployment

Question 17

Productivity

Answer 17

a measure of the amount of output that the economy produces per unit of input