ECON ASSIGNMENT 5 – Flashcards
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Inflation means that the prices of all items in the economy are increasing. T/F
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FALSE
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If the CPI rises from 125 to 140 from one year to the next, then the rate of inflation is 15 percent. T/F
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FALSE
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A recession is defined as a situation where the average price level in the economy is increasing. T/F
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FALSE
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If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is:
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4 percent
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Unemployment that is the result of deregulation, corporate downsizing, and the closure of military bases is best categorized as frictional unemployment. T/F
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FALSE
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If households do not spend any extra income they receive but instead save the entire extra amount, then the multiplier will be zero. T/F
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FALSE
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Refer to the diagram above. The straight line E drawn through the wavy lines would provide an estimate of the:
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Economic growth trend
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The multiplier measures the change in real GDP that results from a given change in the price level. T/F
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FALSE
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Saving equals disposable income plus consumption. T/F
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FALSE
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Refer to the data above. The marginal propensity to consume is:
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.60
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A change in the amount saved due to a change in income is represented by a:
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Movement along the saving schedule
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General sources of shocks that can cause business cycles include the following, except:
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Unemployment jumps and production drops
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Refer to the data above. If plotted on a graph, the slope of the consumption schedule would be:
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.9
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A business firm will purchase additional capital goods if the real rate of interest in the economy is less than the expected rate of return from the investment. T/F
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TRUE
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If households see the value of their financial assets increase significantly, then the saving schedule will shift upward. T/F
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FALSE
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Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed. T/F
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FALSE
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Which measure of inflation would include consumer goods and capital goods?
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The GDP Price Index
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Given the expected rate of return on all possible investment opportunities in the economy, a(n):
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Decrease in the real rate of interest will tend to increase the level of investment
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Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:
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Cyclical unemployment
