Unit 2

Question 1

Negative Investment

Answer 1

is when inventories shrink year to year

Question 2

stagflation

Answer 2

when unemployment and inflation are both high

Question 3

BLS

Answer 3

tracks CPI data, wage, and employment stats

Question 4

if inflation rises, nominal interest rates

Answer 4

increase

Question 5

menu costs

Answer 5

the costs that is costs a business to change their prices constantly (they need to employ someone to change the prices on products constantly)

Question 6

in circular flow model total spending equals

Answer 6

total income

Question 7

inflationary gap

Answer 7

actual - potential = pos
when a country’s actual GDP is greater than its potential GDP, which means there is more demand for goods and services than there is available supply.

Question 8

additions to business inventories

Answer 8

included in gdp

Question 9

decrease in consumer spending causes

Answer 9

economic slowdown or recession

Question 10

gdp does not account for

Answer 10

depletion of natural resources

Question 11

unanticipated inflation benefits

Answer 11

borrowers

Question 12

output gap

Answer 12

difference between actual and potential gdp

ex. inflationary or recessionary gaps

Question 13

recessionary gap

Answer 13

actual - potential = neg
when a country’s actual gdp is less than the potential gdp and there is lots of unemployment