Economic Growth
Economic growth is best defined as an increase in this
Real GDP or real GDP per capita
The lowest point in the business cycle
Trough
A recent graduate looking for work, is what type of unemployment?
Frictional
What does CPI measure?
Price of a basket of goods/services
Used during a recession the government increase spending with which fiscal policy?
Expansionary
Why is GDP per capita better than total GDP when comparing countries?
Accounts for population / standard of living
A period of declining GDP and rising unemployment
Recession
A worker replaced by machines, is what type of unemployment?
Structural
Too much spending chasing too few goods, is what type of inflation?
Demand-pull inflation
This type of fiscal policy is used to fight inflation:
Contractionary
Country A’s GDP grows 5% and population grows 5%. What happens to GDP per capita?
No change
Correct order: Peak → ? → ? → ?
Recession → Trough → Expansion
A farm worker laid off after harvest season
Seasonal
Inflation caused by rising production costs
Cost-push inflation
Expansionary fiscal policy does what to taxes?
Decreases them
Using the Rule of 70, how long to double at 2% growth?
35 years
During which phase is GDP increasing and employment rising?
Expansion
What is one reason the official unemployment rate understate true unemployment?
Ignores discouraged workers / part-time / underemployment
The base year basket costs $2,000. This year it costs $2,100.
What is the CPI AND the inflation rate (from base year)?
CPI = (2100 / 2000) × 100 = 105
Inflation = 5%
Time delay before recognizing a problem
Recognition Lag
Name one major cause of economic growth
Technology / human capital / capital / natural resources
GDP growth rates: 4%, -2%, -3%, 2%
Which years represent a recession?
The -2% and -3% years
If 500 employed, 50 unemployed, and 30 discouraged workers… what is the unemployment rate?
50 / 550 = 9.1%
Nominal income rises 3%, inflation is 5%. What happens to real income?
Decreases (~2% loss)
What is the name of the delay between recognizing a problem and implementing policy?
Administrative (or operational) lag