Econ exam 6 MMHS

What is the difference between real GDP and nominal GDP?

Real GDP is based on constant prices; nominal GDP is based on the current year's prices

What term describes the dollar value of all final goods and services produced within a country's borders in a given year?

Gross domestic product (GDP)

What term describes a system that collects macroeconomic statistics on production, income, investment, and savings?

National income accounting

How does the government calculate GDP?

Expenditure approach, Income Approach

What term describes the loss of the value of capital equipment that results from normal wear and tear?

Depreciation

How does an economist calculate GDP for one year using the expenditure approach?

Add together all the amounts spent on final goods and services

What are intermediate goods?

Goods used in the production of final goods

What is an example of a nondurable good?

Gasoline

What is the underground economy?

The products and income that are not reported as incomes to the government

What term describes consumer goods that last for a long time?

Durable goods

What keeps a business cycle going?

All answers are correct

What happens to consumer and business spending when the interest rates go up?

Both types of spending decreases

What term describes a period of macroeconomic expansion followed by a period of contraction?

Business cycle

What term describes the lowest point in an economic contraction?

Trough

What term describes a steady, long-term increase in real GDP?

Economic growth

What term describes the height of an economic expansion?

Peak

What term describes a decline in real GDP combined with a rise in price level?

Stagflation

What are the leading economic indicators supposed to predict?

Business cycles

What term describes a prolonged economic contraction?

Recession

What eventually caused the United States economy to recover from the Great Depression?

World War II

How can a trade deficit actually increase the productivity of an economy?

By importing goods for long term investment or capital deepening

What is one way to measure technological progress?

Total growth minus increases in capital and labor

If the government uses tax money to pay for long-term investments such as roads or other infrastructure, what happens to the economy?

Increased capital deepening

How does an economist compare the standard of living in two different countries?

By comparing real GDP per capita

What term describes an increase in efficiency gained by producing more output without using more inputs?

Technological progress

What term describes income that is not used for consumption?

Saving

What term describes the process of increasing the amount of capital per worker?

Capital deepening

What is labor productivity?

The amount of output produced per worker

What term describes GDP expressed in unchanging prices, divided by the total population?

Real GDP per capita

How does one describe the saving rate?

Proportion of disposable income that is saved

What does the unemployment rate represent?

The percentage of the total labor force that is unemployed

What can happen to the economy when the level of unemployment is very low?

It can cause wages and prices to rise

What term describes when the skills of workers do not match the jobs that are available?

Structural unemployment

What term describes when a period of steady work is followed by a period of unemployment each year?

Seasonal unemployment

What is the term for a situation in which a person is overqualified for the job he or she has?

Underemployment

What term describes when people change jobs or get laid off?

Frictional unemployment

How can changes in technology or consumer demand make it difficult for people to get jobs?

By changing number or kind of jobs available

What does "full employment" mean?

There is no cyclical unemployment

What term describes when unemployment rises during economic downturns and falls when the economy improves?

Cyclical unemployment

Why do no government planners try to end seasonal unemployment??

It is a natural part of a healthy economy

What term describes the ability to purchase goods and services?

Purchasing power

What term describes income that does not increase even when prices go up?

Fixed income

If a person has money invested at 9% and the rate of inflation is 5%, how much return are they actually making on their investment?

4%

What term describes rising wages causing higher prices which cause higher wages?

Wage-price spiral

Respectively, what term describes the rate of inflation excluding the effects of food and energy prices and what term describes the percentage rate of change in price levels over time?

Core inflation rate, inflation rate

What term describes a measurement that shows the average cost of goods or services changes over time?

Price index

How does the cost push theory explain inflation?

Producers raise prices in order to meet increased costs

What typically happens to the inflation rate when unemployment falls to very low levels?

It rises?

Which theory says that inflation occurs when the demand for goods exceeds the existing supply?

Demand-pull theory

What term describes a price index determined by measuring the price of goods meant to represent the "market basket" of a typical urban consumer?

Consumer Price Index (CPI)

What term describes a program requiring work in exchange for temporary assistance

Workfare

What age group in the United States has the largest percentage of its members living in poverty?

Children

Respectively, what term describes federal funds given to the states in lump sums and what term describes an area where companies can relocate free of certain local,state, and federal taxes and restrictions?

Block grants, enterprise zones

What is a cause of poverty?

All answers are correct

What does the Lorenz curve illustrate about the economy?

The distribution of income

What term describes the income level below which income is insufficient to support a family or household?

Poverty threshold

How long can a family collect aid from the Temporary Assistance for Needy Families (TANF) program?

A Maximum of 5 years

Approximately how much total income does a family of four need to earn to be considered above the poverty line?

More than $22,000

What term describes the percentage of people in a particular group who live in households with income below the poverty threshold?

Poverty rate

Why is the 2008 American median household income of $51,000 misleading?

It does not take into account income distribution