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Econ Unit 5 Review

The main economic variables that affect business cycles include all of the following EXCEPT
personal savings levels.
When plotted on a Lorenz Curve, the income distribution curve for the town of Lakeview is a straight line from 0 to 100%. This means that
Everyone in Lakeview earns about the same income.
In a typical business cycle, what stage immediately follows a peak?
contraction
As you move from left to right, the aggregate demand curve
slopes downward.
According to the cost-push theory, what is responsible for inflation?
Producers raise prices to meet increased costs.
The amount of money a person has left of his or her income after taxes is called
disposable personal income.
Which of the following is an example of a final good or service?
A cake purchased from a bakery for a wedding
Which of the following families is statistically the most likely to live below the poverty threshold?
a black family headed by a single mother living in the inner city
An example of a nondurable good is
a paperback book.
An accurate statement about the Great Depression would be that
it was the most severe economic downturn in the history of industrial capitalism.
Which of the following is a result of unemployment that is very low?
Companies have difficulties recruiting workers.
How has the distribution of income in the United States changed over the last 20 years?
It has become less equal.
What is the difference between a recession and a depression?
A depression is a particularly deep recession with high levels of unemployment.
What does it mean when a person is underemployed?
The person has a job but they are overqualified for it.
What is a major problem for businesses during a period of chronic inflation?
They cannot anticipate their costs.
Which of the following is most likely to be worried about high inflation?
a retired couple on a fixed income
Which of the following is correct? The unemployment rate is
(labor force – employed)/ labor force ´ 100.
According to the demand-pull theory, what is responsible for inflation?
Demand for goods and services exceeds existing supply.
A knitting factory worker who loses her job because the company has relocated the plant to another country is an example of
structural unemployment.
If Bob loses his job at the GM plant because car manufacturing is slow due to a downturn in the economy, you can conclude that he is
cyclically unemployed.
How do fears of future economic problems affect GDP?
consumers will spend less and save money in case future economic problems affect them; GDP will be reduced
If the number of people employed is 150,000 and the labor force is 160,000, the unemployment rate is
6.25%
All of the following actions promote capital deepening EXCEPT
saving less and spending more of one’s disposable income.
Compared with the income approach to calculating GDP, the expenditure approach is
more practical.
How is nominal GDP converted into real GDP?
through eliminating the effects of price increases on GDP growth
If no foreign companies produce in a country, but many of the country’s companies build products in foreign countries, then it is safe to say that
The country’s GNP is greater than its GDP.
In an economy, when the price level falls, consumers and firms buy more goods and services. This relationship is represented by the
aggregate demand curve.
When the economy is working properly, what is the unemployment rate?
4 to 6 percent
An example of a durable good would be
a used car.
Economists look to which of the following explanations for inflation?
all of the above
All of the following measures help to promote technological progress EXCEPT
increased wages for researchers.
An economy that experiences decreasing real GDP and increasing prices is said to suffer from
stagflation.
What is workfare?
a program that requires work in exchange for assistance
An example of capital deepening would be
paying for an employee to take college courses.
What is the difference between seasonal unemployment and structural unemployment?
Seasonal unemployment occurs because of schedules, whereas structural occurs because people lack skills.
Concern about an international crisis has caused consumers to save their money and postpone big purchases. What is the effect on aggregate demand and aggregate supply?
aggregate supply will decrease, raising the price level and lowering real GDP
The agency that maintains the National Income and Product Accounts (NIPA) is
the U.S. Department of Commerce.
Which of the following would be counted in this year’s GDP?
The bonus check a worker receives this year
What is the possible consequence of the following scenario? Because of high unemployment rates in the country of Lavernia, employers offer higher wages. To meet their higher payroll costs and maintain profits, they charge consumers more for goods and services.
a wage-price spiral of ever-increasing prices
Higher saving leads to higher GDP in the future because
more capital is available for investment, leading to higher output through capital deepening.
Products that would be used in calculating GDP include
The correct answer is: cars manufactured in Tennessee at a factory owned by a Japanese automobile company.
If the CPI for 2001 was 177 and the CPI for 2002 was 180, the rate of inflation between 2001 and 2002 was
1.69%.
How does the Bureau of Labor Statistics determine how the market basket should change over time?
by conducting a Consumer Expenditure Survey
Compared with the expenditure approach to calculating GDP, the income approach is
more accurate.
What do most economists believe about the future of business cycles?
The correct answer is: Business cycles will continue to drive our economy in the future, but the Federal Reserve may be able to better cushion the economy from the worst extremes.
Which of the following people is most likely to be classified as “working poor”?
Carol, a single mother who works 35 hours a week at a job that pays slightly above minimum wage
If Jackson is paid an interest rate of 10% on his savings, but the inflation rate has risen to 20%, the purchasing power of his savings is
decreased by 10%.
What is an example of a positive external shock to aggregate supply?
Good weather leads to an unusually productive harvest for corn farmers.
The “market basket” that is used by the Bureau of Labor Statistics to calculate prices is made up of which of the following?
typical goods and services for an urban household
Which of the following might cause the inflation rate to spike up sharply?
Prices on world oil markets rise steeply due to war in the Middle East.
When Alison, a college math professor, leaves her job at a small rural college and starts looking for a job at large urban university, she is
frictionally unemployed.

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