Random Unit 2
What is disposable income?
Income minus taxes
When the economy is in a recession, what type of unemployment are they facing?
CPI from year 1 to year 2 is 220 then 240. What is the inflation rate between the two years?
9%
What are three types of transactions not included in GDP?
Illegal, non-production, intermediate goods.
What is the lowest point in the business cycle called?
Trough
In the circular flow diagram, businesses supply what and demand what?
G&S, Factors of Production
A worker has be laid off and has been replaced by technology. What type of unemployment is this individual facing?
Structural UE
If unanticipated inflation is greater than expected, who benefits? Borrower or lender?
Borrower
You purchase a newly constructed home. What component of GDP would this fall under?
I
During a peak in the business cycle, UE is _____ and inflation is ______.
low, high
Name a cost of inflation and explain what it means
Menu costs - costs associated with reprinting prices
Shoe Leather costs - costs of new shoes
Unit of Account costs
Full employment output
What is the difference between GDP deflator and CPI?
GDP deflator represents the change in prices among all goods and services produced in a country in a year. CPI looks at a fixed market basket throughout the years.
CPI and GDP deflator equal ___ in the base year.
100
When actual UE is less than the NRU, what type of gap is the economy experiencing?
Positive Output Gap
Why can inflation be overstated with the CPI?
New products, substitution bias, product quality
Why does the unemployment rate understate the actual amount of people looking for a job and without a job?
Underemployed and discouraged workers are not accurately represented.
Jane receives a nominal raise of 6% while price levels have increased 10%. How has here real purchasing power changed?
-4%
Consumption, investment, and government purchases represent 103% of a country's total GDP. This can only be possible if the nation's net exports are...?
Negative
If inventories are beginning to increase, what is happening with consumption?
Decreasing
If NGDP fell while RGDP increases, what does this mean about the inflation rate?
It was negative; deflation
What happens to the unemployment rate if a part time worker is able to get a full time worker?
What is the relationship between NGDP and RGDP when the GDP deflator is less than 100? I.e. What does this mean about inflation?
Deflation
If a company produces too much in 2006 then sells those items in 2007, how is the 2006 GDP affected and how is the 2007 GDP affected?
2006 - Investment increases
2007 - Consumption increases, investment decreases
Name the phases of the business cycle in order starting at the highest point.
Peak, contraction, trough, expansion