ECON ASSIGNMENT 5 – Flashcards

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