GDP
What do the letters "GDP" stand for?
Gross Domestic Product
What term is defined as "everyone who is 16 or older and either has a job, or doesn't have a job yet, but is looking for a job"?
the labor force
Purchasing power decreases when prices rise.
Expansion
Which parts of the U.S. government can implement fiscal policy?
Congress and the President
What is the "expenditure approach" formula for calculating GDP?
C+I+G+NX = GDP
Ethel is 99 years old and is bedridden. Is Ethel unemployed (by the U.S. gov't. definition)? Explain.
No, she is not unemployed. She is not looking for a job.
If prices rise at a rate of 1-3%, what level of inflation is the economy experiencing?
creeping inflation
What is the term for the last three months of a period of expansion?
Peak
What is fiscal policy?
When the gov't changes taxes, transfer payments, and gov't spending to fix problems in the economy
Bruce buys Oreo cookies (made in Virginia) at Kroger. How does this purchase affect U.S. GDP? (Will GDP increase, decrease, or not change?) Explain.
U.S. GDP will increase, because this is an example of consumer spending.
What macroeconomic goal do we reach when the economy has NO cyclical unemployment?
Full employment
If prices rise because people are spending a lot of money, what cause of inflation is that?
demand - pull inflation
The unemployment rate is low and the inflation rate is high. Where is this economy on the business cycle?
Expansion
What are the three contractionary fiscal policy actions?
raise taxes, decrease transfer payments, decrease gov't. spending
Bruster's buys Oreo cookies (made in Virginia) for their cookies and cream ice cream. How does this affect U.S. GDP? (Will it increase, decrease, or not change?) Explain.
GDP will not change. This is a purchase of intermediate goods (ingredients in a final product), so it does not affect GDP.
Econoland has a population of 1000. 900 are in the labor force. 45 are unemployed. Calculate the unemployment rate.
(45/900) x 100
.05 x 100 = 5%
If prices rise because of an increase in the price of resources, what cause of inflation is that?
cost-push inflation
What type of unemployment is most likely to occur when the economy is in contraction?
Cyclical
The economy is in recession. What would be an appropriate fiscal policy action?
Either lower taxes, increase government spending, or increase transfer payments (or all of the above)
In 2025, Econoland imported $500 worth of goods. They exported $800 worth of goods. Consumers spent $2000. Businesses invested $1000. The government spent $1200. Calculate Econoland's 2025 GDP.
C+I+G+NX (Exports - imports)
2000 + 1000 + 1200 + 800 - $500 = $4500
A stay-at-home mom decides to re-enter the workforce when her children graduate high school. She hasn't found a job yet, but she is looking for one. What type of unemployment is this?
Frictional. It is a voluntary search for a job that will most likely be temporary.
Which CAUSE of inflation is the one that usually leads to hyperinflation?
Government printing too much money too quickly
What level of inflation is most likely to occur when the economy is in expansion?
creeping inflation
budget deficits and increased national debt