Quiz #4 Review

Question 1

Gross Domestic Product (GDP)

Answer 1

value of all new production in a nation in a given period of time

Question 2

Actual GDP (Y)

Answer 2

actual amount of production

Question 3

Potential GDP (YF)

Answer 3

highest amount of production that an economy can achieve and sustain (based on the amount of available resources)

Question 4

Y = YF

Answer 4

Healthy Economy

Question 5

Y < YF

Answer 5

Resources Not Fully Used

Question 6

Y > YF

Answer 6

Beyond Sustainability

Question 7

Recession

Answer 7

actual GDP falls for two consecutive quarters or more

Question 8

Depression

Answer 8

prolonged, deep decline in GDP

Question 9

How does GDP relate to unemployment?

Answer 9

If the actual GDP falls below the potential GDP, then there is unemployment in the economy

Question 10

Frictional Unemployment

Answer 10

enough jobs, but haven’t found a job yet. Happens because job search takes time

Question 11

Structural Unemployment

Answer 11

enough jobs, but a mismatch between skills and jobs. Happens because economy grows/changes

Question 12

Demand-deficient Unemployment

Answer 12

not enough jobs for all actively seeking unemployment (unhealthy economy)

Question 13

Natural Rate of Unemployment

Answer 13

sum of frictional and structural rates

Question 14

Why do some argue that the unemployment rate understates the true amount of unemployment in the economy?

Answer 14

discouraged worker, underemployed (high skill but are working in a low skill job)

Question 15

Price Level

Answer 15

an aggregate measure of prices in the economy

Question 16

Inflation

Answer 16

the price level rises, purchasing power of money falls

Question 17

Deflation

Answer 17

the price level falls, purchasing power of money rises

Question 18

Nominal value

Answer 18

a value measured in current dollars, does not account for changes overtime

Question 19

Real value

Answer 19

a value measured in constant dollars overtimes, accounts for changes overtime

Question 20

Consumer Price Index (CPI)

Answer 20

measures price changes of goods the typical household buys (most widely used measure of inflation)