When calculating GDP, the purchase of a new factory is counted as
an investment
Shirley was recently laid off from her job at a manufacturing plant when the company she worked for brought in a machine to replace her. This is classified as what type of unemployment?
Technological unemployment
A market basket represents a long list of goods and services that the average household buys in a given time period. By dividing the price of a market basket of goods and services from one time period by the price of a market basket form another time peri
Inflation rate
Unemployment that occurs as a result of a recession or an economic downturn is
Cyclical unemployment
How can competition in a scarce labor market affect wages?
With more competition that would mean more workers to choose from. And because of high supply, employers have more ability to change the wages. Low competition would mean the opposite. Less available workers mean that they have the power to change wages b
Assume an economy is having high unemployment and low GDP. Which fiscal policy would be MOST appropriate to correct this situation?
Expansionary fiscal policy.
Adding everything the U.S. government owes calculates the national
Debt
The consumer price index is used primarily to measure the
Variation in prices.
When aggregate demand exceeds aggregate supply in an economy, the MOST IMMEDIATE result is
Shortage
Unemployment characterized by large numbers of workers who have recently been replaced by machines or laid-off due to
technological unemployment
improvements is considered to be which kind of unemployment?
Technological unemployment.
The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing what?
Contractionary fiscal policy.
Assume the U.S. Government's most recent fiscal policy slowly caused the economy to speed up and enter an expansion. The government MOST LIKELY
Reduced taxes.
Which set of information would indicate that an economy is on the recovery phase of the business cycle? (what happens to inflation, unemployment, and GDP?)
There is a steady rise in output, income, profit and employment. Inflation begins to rise.
What happens when aggregate demand for goods and services in an economy rises faster than the economy can supply the goods or when prices of the production process increases.
Inflation
What is MOST LIKELY true if the Fed increases the reserve requirement and the discount rate?
There would be less loans and the money supply would decrease and we would experience deflation.
If Congress and the President agree to lower taxes and raise government spending, one likely result of these policies will be more
national debt
The Federal Reserve system is comprised of
central, independent government agencies and 12 regional Federal Reserve Banks.
When the Fed is conducting open market operations, they are
deciding if interest rate is to high or too low or just right
If an economy experiences the following: 12% inflation (very high), 2.5% unemployment (very low), and high investment, the economy is MOST LIKELY on which part of the business cycle?
The peak.
Aggregate demand differs from regular demand in that
Aggregate supply is the total value of all goods at a specific period of time at various price levels and aggregate demand is the total value of all goods and services demanded at different prices.
Which is the Fed MOST LIKELY to do in the event of a recession?
They could give more people money by reducing taxes so they encourage spending. Basically expansionary fiscal policy.
Monetary policy is defined as
Actions by the Federal Reserve System to expand or contract the money supply in order to affect the cost and availability of credit.
Fiscal policy is the government's attempt to
use government spending and revenue collection to influence the economy.
Peggy, a recent college graduate, decides to look for a job instead of going to graduate school. If she is unable to find a job that suits her interests right away, what type of unemployment is she MOST LIKELY experiencing?
Frictional unemployment
A person trying to find the unemployment rate in a country needs which two pieces of information?
People that are unemployed over the labor force.
If the CPI for the last three months as been 100, 101, and 104, then what DEFINITE conclusion can you make about the economy?
Prices are increasing and so is inflation.
National deficits are different than the national debt because
Deficit is the amount of money the government borrows for 1 budget, representing 1 fiscal year. Debt is the sum of all the government borrowing up to that time, minus the borrowings that have been repaid.
Suppose the U.S. government decides to lower the income tax rates. How will this affect the aggregate supply or aggregate demand curves for consumer goods?
The price of goods and services will be higher so the demand will be lower.
If an economy is in a trough on the business cycle what happens to unemployment, real GDP, and inflation?
Real GDP stops declining and begins to expand, inflation is low and unemployment is high.
The total amount of goods and services produced throughout the economy is
Gross Domestic Product (GDP).
The study of unemployment is part of macroeconomics because what does unemployment affect?
The whole economy.
The BEST example of structural unemployment in an economy is someone
That is affected by the economy.
Over a two year period, the nation of Parthia experiences a steep decline in unemployment rate, a rise in real GDP, and a stabilized price level. Parthia appears to be
in a depression
Which component of Federal Reserve System holds the most power in regards to day to day monetary policy?
Federal Open Market Committee (FOMC)
Does a shareholder in a corporation own part of the business? If so, how?
Yes. A shareholder owns stocks in a company.
Minimum wage causes what kind of disequilibrium situation to exist?
Price floor.
Give 4 examples of public goods.
Highways, street lights, air and a public park.
How are equilibrium price and quantity determined in most markets in the U.S. economy?
The equilibrium price is determined when the demand of a good is equal to the supply of the same good.
What are examples of investments in human capital?
Education, training, skills, experience...
All of the students in your school want to buy the same new game. Only one store has a few of the games left. What will MOST LIKELY happen?
The price will increase.
Growth, efficiency, and freedom are broad social goals that are typically associated with which type of economic system? (market, command, traditional, mixed)
Market economy.
Technology causes a ____________ in supply and demand.
increase
When buyers and sellers interact in a market, what is the result?
Market transactions.
What basic economic problem do both higher-income nations and lower-income nations have in common?
Supply will never meet our unlimited wants.
One important assumption underlying market economies is that ____________ promotes efficiency.
Competition
Interdependence and price leadership are characteristics of firms in what kind of market structure? (monopoly, oligopoly, monopolistic competition, perfect competition)
Oligopoly
Country X has decided that economic growth will be their primary goal for the next several years.
The best way to achieve this would be to
Expansionary growth.
Joe rents his office to Homework, Inc., a company that provides tutoring services. What market (factor or product) does this transaction occur in?
Factor.