True/False 1
Macroeconomics is the kind of economics that shows up in the news most often.
TRUE (0:14)
Because GDP is supposed to give a picture of the whole economy, it includes every transaction that happens in a nation during a particular time frame.
FALSE -- Transactions are only included in GDP if they produce something new. Sales of used cars are not included. Activities are also excluded if they are private instead of commercial; the plumber fixing his own sink is not counted in GDP. (3:42)
Officially, the word “depression” means that the economy has had at least two straight years of decreasing GDP. FALSE -- The term actually has no standard definition -- people use it when they perceive a recession to be severe. (5:19)
FALSE -- The term actually has no standard definition -- people use it when they perceive a recession to be severe. (5:19)
Suppose that a person is trained to make chariot wheels for a living but can’t find a job doing it. This is an example of “structural unemployment.”
TRUE (7:44)
A “contraction” is when the economy is going too slow.
TRUE (10:50)
By the time the Great Depression struck, economists had become fairly expert at measuring the overall economy.
FALSE -- It was the Great Depression that made economists realize they needed a way to measure the strength of the economy as a whole. (1:26)
GDP is measured in number of things produced, no matter what those things were worth
FALSE -- GDP is measured in dollars, which means it can represent the value of production. (4:00)
GDP comparisons of different countries are valid because all economies measure GDP using the same guidelines
FALSE -- Nations differ as to what should and should not be included. (5:36)
The true employment goal nations shoot for is to have no unemployment due to recessions.
TRUE (8:01)
The business cycle is basically a series of booms and busts.
TRUE (11:01)
Economics is classed as a traditional science, much like chemistry and physics.
FALSE -- because what happens in the economy depends on human behavior (and humans can be irrational!) and not on unchanging natural laws, economics is classed as a social science, not a hard science. (2:13)
“Nominal” GDP ignores inflation, but “real” GDP takes it into account
TRUE (4:14)
The unemployment rate only includes unemployed people who are trying to become employed.
TRUE (6:44)
The GDP growth rate and the unemployment rate tend to move in opposite directions -- one falling while the other is rising.
TRUE (8:26)
GDP is made up of a total of two components: consumer spending and business spending.
FALSE -- it is made up of four basic components: those two plus government spending and net exports. (11:30)
Policy makers generally have three major goals. These are: keep the economy growing, limit unemployment, and keep prices high
FALSE -- the third goal is to keep prices stable, not to keep them high. (2:47)
GDP figures indicate that the Greek economy was much worse in 2013 than it was in 2008.
TRUE (4:47)
The unemployment rate has a factor built in to account for people who work but are actually underemployed because they don’t get many hours.
FALSE -- There is no correction for this, which means that the unemployment rate gives a flawed picture of the national economy. (7:10)
Deflation happens when prices are falling.
TRUE (9:08)
In the U.S., consumer spending is more than half of GDP
TRUE -- it is actually about 70% of GDP. (11:40)
The most important measure of an economy is GDP, which stands for gross domestic product
TRUE (3:03)
Officially, the word “recession” means that an economy has had at least six straight months of decreasing GDP
TRUE (5:06)
The goal for most nations is to have a 0% unemployment rate.
FALSE -- Some unemployment is a good thing, since sometimes people wanting a new j
Most economists agree that deflation has a strong positive effect on the economy.
FALSE -- this discourages people from spending since they want to see if prices fall even more. This lowers demand, so companies will cut back on production, which leads to more unemployment. (9:51)
How many ways are there to calculate GDP
3