Oct.13 test

Question 1

Business Cycle

Answer 1

Series of growing and shrinking periods of economic activity

Question 2

Consumer Price Index (CPI)

Answer 2

Measure of changes in the prices of goods an services commonly purchased by consumers
(market based)

Question 3

Gross Domestic Product (GDP)

Answer 3

The market value of all final goods and services produced in a nation in a given time period

Question 4

Inflation

Answer 4

• A sustained rise in the level of prices

- A sustained fall in the purchasing power of money

Question 5

Net Exports

Answer 5

Goods/Services produced in the nation but sold in foreign nation, minus value of imports

Question 6

Productivity

Answer 6

The amount of output produced from a set amount of inputs

Question 7

Real GDP

Answer 7

GDP corrected for changes in prices from year to year

Question 8

Real GDP Per Capita

Answer 8

Real GDP divided by total population

Question 9

Underemployment

Answer 9

• Part time workers who want full time jobs
• They work below their employment level
• Laid off workers who are temporarily on underpaying jobs

Question 10

Unemployment Rate

Answer 10

Percentage of the labor force that is jobless and looking for work

Question 11

What are the four components of GDP? How do you calculate GDP?

Answer 11

Consumption
Investments
Government Spending
Net Exports

GDP is calculated by adding C+I+G+X
(X=net exports)

Question 12

What are the requirements of GDP?

Answer 12

Has to be a final product or service
Must be produced in a given time period
Must be produced within a nation’s borders

Question 13

What is the usual measure of a nation’s standard of living?

Answer 13

Real GDP per Capita

Question 14

How does productivity increase?

Answer 14

Increase when the inputs produce more output

Question 15

What are the effects of inflation?

Answer 15

Decreases the value of the dollar
Increases interest rates
Decreases real return on savings

Question 16

What are the four types of unemployment ? Explain each type.

Answer 16

Frictional unemployment
Temporary unemployment because people are changing jobs

Seasonal Unemployment:
Unemployment linked to the changing of seasons

Structural Unemployment:
Situation in which the job exists, but workers do not have the necessary skills for the job
Possible Causes:
New technology replaces workers
New industries require specialized education

Cyclical Unemployment:
Unemployment caused by part of the business cycle with decreased economic activity

Question 17

What is the difference between a depression and a recession?

Answer 17

Depression:
extended period of high unemployment and reduced business activity

Recession:
a contraction lasting 2 or more quarters

Question 18

What is the lowest point of the business cycle? What is the highest point?

Answer 18

Lowest point:
Trough

Highest point:
Peak

Question 19

Durable goods

Answer 19

Something that lasts a long time

Question 20

Non-durable goods

Answer 20

Goods for immediate consumption

Question 21

How is economic growth measured?

Answer 21

Percentage changes in real GDP

Question 22

What does GDP measure?

Answer 22

The market value of all final goods and services, produces within a nations borders

Question 23

How is the labor force for each nation calculated?

Answer 23

Labor force is made up of people of 16 who are employed of activity looking and available for work

Question 24

How is the unemployment rate calculated?

Answer 24

Percentage of the labor force that is jobless and looking for work

Question 25

What items are not included in GDP?

Answer 25

Stuff that is not a final product

Not produced in nation’s border

Question 26

What are the our stages of the business cycle?Explain each.

Answer 26

Expansion
A period of economic growth or increase in a nation’s real GDP over a period of time

Peak
The point at which the GDP is the highest

Contraction
Time period of economic slowdown or decline

Trough
The point at which GDP and unemployment stop declining