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Economics ch 12 and 13

What is an example of a durable good?
a used car
compared with the expenditure approach to calculate GDP, the income approach is…
more accurate
the main economic variables that affect business cycles include all of the following except what?
personal savings level
what is the agency that maintains the national income and product accounts (NIPA)?
the U.S department of commerce
what is an example of capital deepening?
paying for an employee to take college courses
what is something that wouldn’t promote capital deepening?
saving less and spending more of one’s disposable income
Compared with the income approach to calculate GDP, the expenditure approach is…?
more practical
What is GDP expressed in a constant or unchanging, price called?
real GDP
What is the amount of money a person has left of his or her income after taxes are called?
personal income
what would be an accurate statement about the great depression?
it ended largely because of an increase in defense spending related to world war 2
how is nominal GDP converted into real GDP?
through eliminating the effects of price increased on GDP growth?
What is an example of a final good or service?
A cake purchased from a bakery for a wedding
In a typical business cycle what stage immediately follows a peak?
contraction
What is an example of deprecation?
A construction workers truck breaks down more often after 80,000 miles of work related driving
what do most economics believe about the future of business cycles?
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.
what is an example of positive external shock to aggregate supply?
Good weather leads to an unusually productive harvest for corn farmers
An economy that experiences decreasing real GDP and increasing prices is said to suffer from what?
Stagflation
why dose higher savings lead to a higher GDP in the future?
more capital is available for investment, leading to higher output through capital deepening
When the economy is working properly, what is the unemployment rate?
4 to 6 percent
What is the “market basket” that is used by the Bureau of Labor statistics to calculate prices made up of?
typical goods and services for an urban household
What is a major problem for businesses during a period of chronic inflation?
they can’t anticipate their cost
According to the cost-push theory, what is responsible for inflation?
producers raise prices to meet increasing costs
How can you calculate the unemployment rate?
(labor force – unemployment)/labor force * 100
When Alison, a college math professor, leaves her job at a small rural college and starts looking for a job at a large urban university what is she considered?
frictionally unemployed
a knitting factory worker who loses her job because the company has relocated the plant to another country is considered what?
cyclical unemployed
If jackson is paid an interest rate of 10% on his savings, but the inflation rate has risen to 20% what is the purchasing power of his savings?
10%
What is a possible consequence of the following scenario? because of high unemployment rates in the country of Lavernia, employers offer high wages. To meet their higher pay role and maintain profits they charge more for goods and services.
a wage-price spiral of ever increasing prices
Which of the following people is most likely to be qualified as “working poor”?
a single mother who works 35hours a week at a job that pays slightly above minimum wage
what kind of person should be worried about inflation?
a retired couple on a fixed income
Aggregate supply
the total amount of goods and services in the economy available at all possible price level
Depreciation
the loss of the value of capital equipment that results from normal wear and tear
gross domestic product
the dollar value of all goods and services produced within a countries borders in a given year
national income accounting
a system that collects microeconomic statistics on production, investment and savings
recession
a prolonged economic contraction
stagflation
a decline in GDP combined with a rise in the price level
technological progress
an increase in efficiency gained by producing more output within using more input
trough
the lowest point in an economic contraction, when real GDP stops falling
aggregate demand
the amount of goods and services in the economy that will be purchased at all possible price levels
Contraction
a period of economic decline marked by falling real GDP
leading indicator
key economic variables that economists use to predict a new phase of a business cycle
census
a official count of the population
inflation
a general increase in price
discouraged worker
a person who wants a job but has given up looking
unemployment rate
percentage of the nation’s labor force that is not employed
enterprise zone
area where companies can locate free of certain local, state and federal taxes and restrictions
food stamp
government issued coupons that are exchanged for food
fixed economy
income that does not increase even when price goes up
price index
a measurement that shows how the average price of a standard group of goods changes over time
Deflation
a sustained drop in the price level
frictional employment
what occurs when people take time to find a job
wage price- spiral
the idea that too much money in the economy causes inflation
poverty threshold
the income level below which income is insufficient to support a family or a household
block grant
federal funds given to the states in lump sums
quantity theory
inflation that rises steadily from month to month over a long period
creeping inflation
inflation that remains low for a long time
purchasing power
the ability to buy goods and services
Why would an economist use real GDP rather than nominal GDP to measure growth?
Real GDP reflects output more accurately than nominal GDP by using constant prices.
Which of the following economic activities does NOT illustrate the limitations of calculating GDP?
depreciation
In a real economy, which two factors can change the level of nominal GDP?
inflation and deflation
Four factors, both expected and unexpected, perpetuate the business cycle. name three of these factors?
business investments, interest rates and credit, external shocks
What happened following the stock market crash in 1929 to account for the change in real GDP in the 1930s shown in this graph?
During the Great Depression, factories were idle, and thousands of Americans lost their jobs and homes.
Chris decided that this year she would put 25 percent of her income in savings and investments, an increase of 5 percent over the previous year. If a majority of people did this, how would the economy be affected?
The economy would prosper because more investment funds would be available for businesses.
What source of economic growth is reflected in the economy by an increase in productivity without an increase in land, labor, or capital?
technological progress
Describe a person with structural employment
Sonya dropped out of school and now fails to meet the minimum requirements for her job.
According to the principle of cyclical unemployment, what will occur when the demand for goods and services drops during a recession?
The demand for labor drops.
Ten years ago, a house sold for $54,000. Today the same house is valued at $108,000. What has inflation done to consumers’ purchasing power?
reduced it
During a war, the government puts pressure on producers for heavy equipment, supplies, and services, making each more valuable. What theory about inflation does this condition represent?
cost-push
If you lived on a fixed income, how would you be affected by inflation?
You would be financially stressed because your income does not increase when prices go up.
During the 1990s, the inflation and unemployment trends in the United States changed. What was unusual in the 1990s?
Unemployment and inflation maintained the same ratio during the 1990s.
The poverty threshold, or poverty line, varies according to what?
the size of the family
What does the Lorenz Curve show about the distribution of income in 2001?
The distribution of income was not equal.
What is the Consumer Price Index?
an index determined by measuring the price of standard goods bought by urban consumers

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