question

Frank recently lost his job because the computer manufacturing company he works for recently downsized after poor sales and poor performance of the economy during the last year. Frank is:

answer

Cyclically unemployed

question

Tom recently lost his job as the steel manufacturing firm he worked for moved their plant overseas. The other steel plants in the nation have also been following this trend. Tom is:

answer

Structurally unemployed

question

Julie just graduated from college and is spending the summer traveling before she begins a job with a consulting firm in the fall. Julie is:

answer

Not currently in the labor force - Will be employed after summer

question

Susan recently left her marketing job at a local bank because she found that finance interests her more. She is currently looking for a job as a financial consultant. Susan is:

answer

Frictionally unemployed

question

The most important determinant of consumer spending is:

answer

The level of income

question

If Carol's disposable income increases from $1200 to $1700 and her level of saving increases from -$100 to $100, her marginal propensity to:

answer

Consume is 3/5

question

With an MPS of .4, the MPC will be:

answer

1.0 - .4

question

MPC can be defined as the fraction of a:

answer

Change in income that is spent

question

A decline in disposable income:

answer

Decreases consumption by moving downward along a specific consumption schedule

question

The APC is calculated as:

answer

Consumption/Income

question

The consumption schedule shows:

answer

A direct relationship between aggregate consumption and aggregate income

question

The consumption schedule is drawn on the assumption that as income increases, consumption will:

answer

Increase absolutely, but decline as a percentage of income

question

The consumption schedule is such that:

answer

The MPC is constant and the APC declines as income rises

question

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

answer

Greater than 100 percent

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The size of the MPC is assumed to be:

answer

Greater than zero, but less than one

question

If the MPC is .8 and disposable income is $200, then C and S:

answer

Cannot be determined from the information given

question

C = 20 + .9Y What is the MPC?

answer

.90

question

C = 20 + .9Y At an $800 level of disposable income, the level of savings is:

answer

$60 C = 20 + .9(800)

question

At the point where the consumption schedule intersects the 45-degree line:

answer

The APC is 1.00

question

If Trent's MPC is .80, this means that he will:

answer

Spend 8/10 of any increase in his disposable income

question

Suppose a family's consumption exceeds its disposable income. This means that its:

answer

APC is greater than 1

question

If the equation for the consumption schedule is C = 20 + .8Y, where C is consumption and Y is disposable income, then the average propensity to consume is 1 when disposable income is:

answer

$100

question

The investment demand curve suggests:

answer

There is an inverse relationship between the real rate of interest and the level of investment spending

question

Business Cycles

answer

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

question

In the US, business cycles have occurred against a backdrop of a long-run trend of:

answer

Rising real GDP

question

The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:

answer

Capital goods and durable consumer goods

question

During a severe recession, we would expect output to fall the most in:

answer

The construction industry

question

The phase of the business cycle in which real GDP declines is called:

answer

A recession

question

A recession is a period in which:

answer

Real domestic output falls

question

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

answer

Recovery

question

Which of the following statements is true about causes of business cycle fluctuations?

answer

There are a wide range of theories as to the underlying causes of business cycle movements

question

Which of the following would most likely move the economy into a recession in the short term?

answer

The central bank printing less money than was anticipated

question

The labor force includes:

answer

Employed workers and people who are officially unemployed

question

Alex works in his own home as a homemaker and full-time caretaker of his children. Officially, he is:

answer

Not in the labor force

question

Assuming the total population is 100 million, the civilian labor force is 50 million, and 47 million workers are employed, the unemployment rate is:

answer

6%

question

Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job next week with company B. Kyle will be considered as:

answer

Employed

question

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

answer

A part of frictional unemployment

question

How do you find a GDP Gap?

answer

Actual GDP - Potential GDP

question

The United States' economy is considered to be at full employment when:

answer

About 4-5% of the labor force is unemployed.

question

Recession

answer

The phase of the business cycle in which real GDP declines

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Trough

answer

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

question

Peak

answer

The phase of the business cycle in which the real GDP is at a temporary maximum

question

Expansion

answer

The phase of the business cycle in which real GDP rise

question

Economic growth can be portrayed as:

answer

An outward shift of the production possibilities curve.

question

Economic decline can be portrayed as:

answer

An inward shift of the production possibilities curve.

question

Frictional Unemployment

answer

Unemployment that occurs because of people moving or changing occupations. Voluntary unemployment

question

Structural Unemployment

answer

Unemployment arising from technical change or from changes in the composition of output due to variations in the types of products people demand. Ex: A decline in the demand for typewriters would lead to structurally unemployed workers in the typewriter industry.

question

Cyclical Unemployment

answer

Workers losing their jobs due to business cycle fluctuations in output, i.e. the normal up and down movements in the economy as it cycles through booms and recessions over time.

question

4 Phases of the Business Cycle

answer

Peak, Recession, Trough, Expansion

question

Conditional Convergence

answer

The countries/states/regions have similar culture, preference and belief. Ex: Diminishing Income gap among US States

question

Absolute Convergence

answer

The countries/states/regions may have different culture, preference and belief. Ex: Diminishing Income gap between US and China

question

4 Millennium Development Goals

answer

1. Achieve universal primary education 2. Reduce child mortality 3. Improve maternal health 4. Ensure environmental sustainability

question

Labor Force

answer

Unemployed + Employed

question

Unemployment Rate

answer

(Unemployed/Labor Force) x 100

question

Employment Rate

answer

(Employed/Labor Force) x 100

question

GDP gap

answer

Actual GDP - Potential GDP

question

Potential GDP

answer

Use previous year potential GDP to find current year potential GDP

question

Potential GDP

answer

Use previous year real GDP to calculate current year potential GDP

question

Consumption Schedule

answer

C = A + MPC x GDP

question

Savings Schedule

answer

S = -A + MPS x GDP

question

Consumption

answer

C = Income - Savings

question

Savings

answer

S = Income - C

question

APC

answer

Consumption/Income

question

APS

answer

Savings/Income

question

MPC

answer

Change in C/Change in Income

question

MPS

answer

Change in Savings/Change in Income

question

MPS + MPC =

answer

1

question

APC + APS =

answer

1

question

Multiplier

answer

1/(1-MPC)

question

Fiscal Policy

answer

Change in G, Change in T Changes in the taxing and spending of the federal government for purposes of expanding or contracting the level of aggregate demand.

question

Monetary Policy

answer

Change in money supply Changes in interest rates and money supply to expand or contract aggregate demand.

question

Cost-Push Inflation

answer

Prices have been "pushed up" by increases in costs of any of the four factors of production when companies are already running at full production capacity.

question

Demand Pull Inflation

answer

- Will increase price and quantity Occurs when there is an increase in aggregate demand, categorized by the four sections of the macroeconomy: households, businesses, governments and foreign buyers. When these four sectors concurrently want to purchase more output than the economy can produce, they compete to purchase limited amounts of goods and services.

question

According to the BLS, if your age is below _____, you are not counted in the labor force

answer

16

question

Sticky Wage Rate is ____ upwards, and ____ downwards

answer

Flexible, Rigid

question

Slope of consumption schedule:

answer

Marginal propensity to consume

question

Movement along the curve caused by:

answer

An increase or decrease in GDP

question

Shift of the curve caused by:

answer

Increase/Decrease in wealth Increase/Decrease in Borrowing Good/Bad Expectation Increase/Decrease Real Rate of Interest

question

According to the convergence or catch up theory of growth, poorer regions will grow ____ compared to richer region

answer

Faster

question

Barro and Sala-i-Martin found that US _____ is catching up with the rest of the US

answer

South

question

Labor Force =

answer

Population - Institutionalized Population - People < 16 - People not in LF

question

Why is the HDI a better measuring tool compared to GDP?

answer

More comprehensive - Better picture

question

Convergence

answer

Negative relationship between initial income and the growth rate of income. The income difference between countries/states/regions diminishes over time.

question

Components of HDI

answer

Standard of Living, Health, Education

question

Measurements of Components of HDI

answer

Standard of Living: Gross National Income per-capita, PPP Adjusted Health: Life Expectancy at birth Education: 1. Mean Years of Schooling 2. Expected Years of Schooling

question

The work of Barro and Sala i Martion (1991, 1992) Evidence of Conditional convergence among US States Variables, Time Period and Result

answer

Variables, Time Period and Result - Per-Capita Personal Income (Real, Annual) - 1880-1998 - Evidence of Conditional Convergence - Per-Capita Gross State Product (Real, Annual) -1963-1986 - Evidence of Conditional Convergence

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