Unit 3

Question 1

Economy

Answer 1

The large set of interrelated economic production and consumption activities which aid in determining how scarce resources are allocated.

Question 2

Gross Domestic Product (GDP)

Answer 2

The total value of all goods and services produced within a country in a specific period.

Question 3

Economic Fluctuations (Business Cycle)

Answer 3

Periods of economic expansion and contraction in an economy.

Question 4

Depression

Answer 4

A severe and prolonged downturn in economic activity.

Question 5

Recession

Answer 5

A period of temporary economic decline during which trade and industrial activity are reduced.

Question 6

Real GDP

Answer 6

GDP adjusted for inflation

Question 7

Three reasons for US production increase

Answer 7

Technological advancements, increase in capital stock, and improved labor productivity.

Question 8

Contraction

Answer 8

A phase of the business cycle where GDP declines.

Question 9

Expansion

Answer 9

A phase of the business cycle where GDP increases.

Question 10

Leading Economic Indicators

Answer 10

Predict future economic activity.
Examples: Stock market returns, new business startups.

Question 11

Coincident Economic Indicators

Answer 11

Move simultaneously with the economy.
Examples: GDP, employment levels.

Question 12

Lagging Economic Indicators

Answer 12

Reflect the economy’s performance after changes occur.
Examples: Unemployment rate, corporate profits.

Question 13

Aggregate Output

Answer 13

The total quantity of goods and services produced in an economy.

Question 14

Aggregate Demand

Answer 14

The total demand for goods and services within an economy.

Question 15

Price Level

Answer 15

The average of current prices across the entire spectrum of goods and services produced in the economy.

Question 16

Real Gross Domestic Product

Answer 16

The value of all final goods and services produced within a country, adjusted for inflation.

Question 17

US Civilian Noninstitutional Adult Population

Answer 17

Includes all civilians 16 years of age and older, excluding those in institutions (e.g., prisons, nursing homes) and active-duty military.

Question 18

Labor Force

Answer 18

Includes all civilians in the US Civilian Noninstitutional Adult Population who are either employed or actively seeking employment.

Question 19

Unemployment Rate

Answer 19

The percentage of the labor force that is unemployed.

Question 20

Discouraged Workers

Answer 20

Individuals who have stopped looking for work because they believe no jobs are available for them.

Question 21

Are there higher unemployment rates in adults or teenagers?

Answer 21

Higher unemployment rates among teenagers compared to adults due to factors like less experience and fewer job opportunities.

Question 22

Frictional Unemployment

Answer 22

Short-term unemployment that arises from the process of matching workers with jobs.

Question 23

Seasonal Unemployment

Answer 23

Unemployment linked to seasonal work.

Question 24

Structural Unemployment

Answer 24

Unemployment resulting from industrial reorganization, typically due to technological change.

Question 25

Cyclical Unemployment

Answer 25

Unemployment caused by economic downturns

Question 26

Full Employment

Answer 26

The level of employment reached when there is no cyclical unemployment.

Question 27

Unemployment Compensation

Answer 27

Benefits are provided to unemployed individuals who meet certain eligibility requirements.
Examples: Social Security Act of 1935

Question 28

Underemployment

Answer 28

When workers are employed in jobs that do not utilize their skills or provide less than full-time work.

Question 29

Hyperinflation

Answer 29

Extremely high and typically accelerating inflation.

Question 30

Deflation

Answer 30

A decrease in the general price level of goods and services.

Question 31

Disinflation

Answer 31

A reduction in the rate of inflation.

Question 32

Demand-Pull Inflation

Answer 32

When demand for goods and services exceeds supply.

Question 33

Cost-Push Inflation

Answer 33

When the costs of production increase, leading to a decrease in supply.

Question 34

Consumer Price Index (CPI)

Answer 34

Measures changes in the price level of a market basket of consumer goods and services.

Question 35

Median Wage

Answer 35

The wage at the midpoint of the wage distribution.

Question 36

Official Poverty Level

Answer 36

Determined by the US government based on income thresholds.

Question 37

Poverty Line

Answer 37

The minimum level of income deemed adequate in a particular country.

Question 38

International Poverty Line

Answer 38

A standard used to measure global poverty, typically set by the World Bank.

Question 39

First Line of Defense

Answer 39

Government policies to promote economic stability.

Question 40

Social Insurance

Answer 40

Programs to protect individuals from economic risks

Question 41

Social Security

Answer 41

Provides financial support to retirees and disabled individuals.

Question 42

Medicare

Answer 42

Provides health insurance to individuals 65 and older.

Question 43

Income Assistance Programs

Answer 43

Provide financial support to low-income individuals

Question 44

Cash Transfers

Answer 44

TANF (Temporary Assistance for Needy Families) and SSI (Supplemental Security Income).

Question 45

Medicaid:

Answer 45

Provides health coverage to low-income individuals.

Question 46

Food Stamps

Answer 46

Food Stamps

Question 47

Feminization of Poverty

Answer 47

The increasing concentration of poverty among women.

Question 48

Regressive Taxes

Answer 48

Taxes that take a larger percentage of income from low-income earners than from high-income earners.

Question 49

Proportional Taxes

Answer 49

Taxes that take the same percentage of income from all income earners.
Examples: Flat income tax.
Criticisms: Whether regressive taxes are fair and their impact on low-income earners.