Unit Five Review

Question 1

Real always means

Answer 1

Adjusted for inflation

Question 2

Real GDP

Answer 2

gDP measured in current prices

Question 3

nominal GDP

Answer 3

GDP expressed in constant or unchanging prices

Question 4

What are the limits of GDP

Answer 4

US companies in other countries 
Non market activity 
Black market 
Externalities 
Used goods
Quality of life

Question 5

Frictional unemployment

Answer 5

People change jobs, get laid off, take time off right after finish school,

Question 6

Structural unemployment

Answer 6

When workers skills do not match the jobs that are available
Ex technological advances

Question 7

Seasonal unemployment

Answer 7

When industries slow or shut down for a season or make second shirts in their production schedules

Question 8

Cyclical unemployment

Answer 8

Unemployment that rises during economic downturns and falls when the economy improves
Employment rates during business cycle

Question 9

Unemployment percentages during business cycle

Answer 9

4-6 on expansion
3 at peak
6 on contraction
8 at trough

Question 10

What does inflation do to consumer purchasing power

Answer 10

Decreasing purchasing power and devalues over the years

Question 11

What products are used to calculate GDP

Answer 11

Goods and services produced within a countries borders 
consumer goods and services 
Business goods and services 
Government goods and services 
Income

Question 12

What is the CPI

Answer 12

Consumer price index
Measures how the average price of a standard group of goods changes over time
Can be used to calculate inflation

Question 13

Why does the poverty threshold vary

Answer 13

Income level below which income is sufficient to support a family or household varies depending on family size

Question 14

Relationship between a fixed income and inflation

Answer 14

A fixed income does not increase when prices go up (such as retired people) inflation steadily eats at the real value of their pension check

Question 15

What are the phases of the business cycle

Answer 15

Expansion- Econ growth, rise GDP
Peak- growth stop, GDP stop highest
Contraction- Econ decline, GDP decline
Trough- Econ stop, GDP stop lowest

Question 16

Healthy unemployment rate

Answer 16

4-6%

Question 17

What is the market basket made of

Answer 17

Basket of goods and services everyone uses,
Food
Water
Gas
Technology
Education
Clothes

Question 18

How has distribution of income changed in United States

Answer 18

farther from
Equality curve
drastic separation from rich and poor, no more middle class

Question 19

Why is there an income gap

Answer 19

Differences in skills and education

Inheritances

Question 20

Durable goods

Answer 20

Goods that last a relatively long time such as refrigerators, cars, and DVD players

Question 21

Nondurable goods

Answer 21

Goods that last a short period of time such as food, light bulbs, and sneakers

Question 22

Disposable income

Answer 22

Amount of money a person has after taxes

Question 23

Capital deepening

Answer 23

Process of increasing the amount of capital per worker

Example training programs and on job experience

Question 24

Workfare

Answer 24

Government program to get people jobs

Question 25

Underemployment

Answer 25

Working at a job when the person is over qualified or working part time when full time is deserved

Question 26

Inflation

Answer 26

A general increase in prices

Question 27

Causes of inflation quantity theory

Answer 27

Too much money in economy leads to inflation

Can be tamed by increasing money supply and selling bonds

Question 28

Inflation cost push theory

Answer 28

Inflation occurs when producers raise prices in order to meet increased costs
Can lead to wage price spiral (increase wages increase prices etc)

Question 29

Inflation demand pull theory

Answer 29

Theory that inflation occurs when demand for goods and services exceeds existing supply
Too much money with too few goods