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For a nation's real GDP per capita to rise during a year

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real GDP must increase more rapidly than population

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Given the annual rate of economic growth, the "rule of 70" allows one to

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calculate the number of years required for real GDP to double

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Recurring upswings and downswings in an economy's real GDP over time are called

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business cycles

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The phase of the business cycle in which real GDP is at a minimum is called

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the trough

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A recessions is a period in which

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real domestic output falls

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To be officially unemployed a person must

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be in the labor force

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If the unemployment rate is 9% and the natural rate of unemployment is 5% then the

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cyclical unemployment rate is 4%

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The presence of discouraged workers

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may cause the official unemployment rate to understate the amount of unemployment

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Part-time workers are counted as

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fully employed and therefore the official unemployment rate may understate the level of unemployment

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The natural rate of unemployment is the

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full-employment unemployment rate

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The full-employment unemployment rate means an unemployment rate of about

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4 to 5%

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Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, the official unemployment rate would:

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decline

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A college graduate using the summer following graduation to search for a job would be best classified as

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a part of frictional unemployment

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Dr. Homer Simpson, an economics professor, decided to take a year off from teaching to run a commercial fishing boat in Alaska. That year, Professor Simpson would officially counted as:

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employed

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Frictional unemployment

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unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

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Structural Unemployment

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unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

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Demand-Pull Inflation

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occurs when total spending in the economy is excessive

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Inflation initiated by increases in wages or other resource prices is labeled

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Cost-Push Inflation

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Fiscal Policy is Carried out Primarily by

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The Federal Government

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Fiscal Policy Refers to the

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manipulation of government spending and taxes to stabilize domestic output, employment, and the price level

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Contractionary Fiscal Policy is so named because it

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is aimed at reducing the size of government

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Assume the economy is at full employment and that investment spending declines dramatically. Under these conditions government fiscal policy should be directed towards

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an excess of government expenditures over tax receipts

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An appropriate fiscal policy for a severe recession is

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a decrease in tax rates

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Built-in stability means that

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with given tax rates and expenditures policies, a rise in domestic income will reduce a budget r produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus

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The full-employment budget refers to

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the size of the Federal Government's budgetary surplus or deficit when the economy is operating at full employment

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the crowding out effect of expansionary fiscal policy suggests that:

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government spending is increasing at the expense of private investment

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The twin problems of the U.S. health care industry are

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rapidly rising costs and unequal access to health care

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Aggregate U.S. health care spending in 2001 was about

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14% of domestic output

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Between 1960 and 2001, U.S. health care spending as percentage of domestic output

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more than doubled

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In the past several decades U.S. health care expenditures have

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risen absolutely and as a percentage of GDP

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Roughly what portion of U.S. total health spending is paid for by private and public insurance?

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4/5's

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Rapidly rising U.S. health care costs have (3)

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1. Slowed the growth of real wages 2. diminished labor mobility 3. Caused some employers to use more part-time and temporary workers

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The unemployed are disproportionately represented among the insured

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most workers obtain health insurance through their employers

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Defensive medicine refers to the idea that...

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physicians may require unnecessary testing as a mean of protecting themselves against malpractice suits

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Under a system of national health insurance these things would occur (3)

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1. Federal Government would provide a basic health care package to all citizens at no direct cost 2. health care would be financed out of tax revenues 3. Government could negotiate to reduce the fees charged by doctors and hospitals.

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What are the leading indicators of the economy?

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1. Average workweek 2. Initial claims for unemployment 3. New orders for consumer goods 4. Vendor Performance (if a vendor delivers faster it is an indicator that the economy is slow) 5. New orders for capital goods 6. Building Permits 7. Stock Prices 8. Money Supply 9. Interest rates 10. Consumer Expectations

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During a budgetary surplus governments should

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Pay down debts or impound (save) the money

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Okun's Law

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For every 1% beyond the natural rate of unemployment, GDP drops 2%

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Expansionary Fiscal Policy is aimed at fighting

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unemployment

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Contractionary Fiscal Policy is aimed at fighting

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inflation

Economics 104 – Flashcards

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