Podcast
Questions and Answers
Which of the following is true when an economy is operating at its full employment rate of output?
Which of the following is true when an economy is operating at its full employment rate of output?
- The rate of unemployment will be zero.
- The economy's potential rate of output will exceed actual GDP.
- The actual rate of unemployment will equal the natural rate. (correct)
- Output will exceed the economy's maximum sustainable rate.
When full employment is present, which statement is true?
When full employment is present, which statement is true?
- The actual rate of unemployment will be less than the actual rate.
- The actual rate of unemployment will equal the natural rate. (correct)
- Everyone who would like to have a job will be employed.
- The actual rate of unemployment will exceed the natural rate.
When is the economy considered to be at full employment?
When is the economy considered to be at full employment?
- When the leading economic indicators are unchanged for two consecutive quarters.
- When structural unemployment is zero.
- When the actual rate of unemployment is less than the natural rate.
- When frictional plus structural unemployment is less than the natural rate.
- When the rate of cyclical unemployment is zero. (correct)
If nominal GDP increased 2 percent during a year, while real GDP increased 4 percent, what can be inferred?
If nominal GDP increased 2 percent during a year, while real GDP increased 4 percent, what can be inferred?
Which of the following statements about real GDP per person is true?
Which of the following statements about real GDP per person is true?
A professor of economics gets a $100 a month raise. Given her scenario, which statement is true?
A professor of economics gets a $100 a month raise. Given her scenario, which statement is true?
If an economy operates at a short-run equilibrium output that exceeds its long-run capacity, which of the following is most likely?
If an economy operates at a short-run equilibrium output that exceeds its long-run capacity, which of the following is most likely?
The stability of consumption over the business cycle indicates that?
The stability of consumption over the business cycle indicates that?
How will increased usage of the Internet by employers and employees influence the job search process?
How will increased usage of the Internet by employers and employees influence the job search process?
Suppose, over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. What can be inferred?
Suppose, over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. What can be inferred?
Sally is on a temporary layoff from her factory job. If Sally participates in the BLS survey, how will she be classified?
Sally is on a temporary layoff from her factory job. If Sally participates in the BLS survey, how will she be classified?
Tom loses his job and immediately begins looking for another. What happens to the unemployment rate?
Tom loses his job and immediately begins looking for another. What happens to the unemployment rate?
Over time, people have come to rely on market-produced goods rather than self-produced goods. By itself, what has this change caused?
Over time, people have come to rely on market-produced goods rather than self-produced goods. By itself, what has this change caused?
If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980, and the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2009, what can be concluded?
If the nominal interest rate was 12 percent and the inflation rate was 10 percent in 1980, and the nominal interest rate was 7 percent and the inflation rate was 2 percent in 2009, what can be concluded?
Which of the following will most likely accompany an unanticipated increase in short-run aggregate supply?
Which of the following will most likely accompany an unanticipated increase in short-run aggregate supply?
When the economy is operating at an output rate below its full-employment level, what occurs?
When the economy is operating at an output rate below its full-employment level, what occurs?
Which of the following would cause prices and real GDP to rise in the short run?
Which of the following would cause prices and real GDP to rise in the short run?
Which of the following will most likely occur in the United States as a result of an unexpected rapid growth in real income in Canada and Mexico?
Which of the following will most likely occur in the United States as a result of an unexpected rapid growth in real income in Canada and Mexico?
As the dollar appreciates, which of the following is most likely to occur?
As the dollar appreciates, which of the following is most likely to occur?
Imagine that there are only two nations in the world, the United States and Mexico. What happens if Americans buy more goods made in Mexico?
Imagine that there are only two nations in the world, the United States and Mexico. What happens if Americans buy more goods made in Mexico?
If net exports are positive, then:
If net exports are positive, then:
The actual rate of unemployment will be greater than the natural rate of unemployment when?
The actual rate of unemployment will be greater than the natural rate of unemployment when?
Which of the following is true if the actual price level is lower than the expected price level reflected in long-term contracts?
Which of the following is true if the actual price level is lower than the expected price level reflected in long-term contracts?
When an economy is in long run equilibrium, which statement is true?
When an economy is in long run equilibrium, which statement is true?
What is the effect on GDP if a used car dealer purchases a used car for $3,000, refurbishes it, and sells it for $8,000?
What is the effect on GDP if a used car dealer purchases a used car for $3,000, refurbishes it, and sells it for $8,000?
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Study Notes
Full Employment and Unemployment Rates
- Full employment does not imply zero unemployment; the actual rate equals the natural rate.
- Full employment occurs when the actual rate of unemployment matches the natural rate.
- Cyclical unemployment must be zero for the economy to be considered at full employment.
GDP Concepts
- A nominal GDP increase of 2% alongside a real GDP increase of 4% suggests a decrease in the price level.
- Real GDP per person allows better comparison across time and countries compared to nominal GDP.
- GDP can rise when reliance on market-produced goods increases, reflecting greater economic activity.
Real vs. Nominal Salary
- A nominal salary increase may not reflect an increase in real purchasing power if inflation is higher than the nominal increase, indicating a decline in real salary.
Aggregate Supply and Demand
- When short-run equilibrium output exceeds long-run capacity, resource prices will likely increase, shifting the short-run aggregate supply curve left.
- An unexpected increase in short-run aggregate supply typically results in higher real GDP.
Interest Rates and Savings
- The dollar value of savings can increase while the value measured in goods may rise less or even fall, depending on real and inflation rates.
Unemployment Classifications
- Individuals on temporary layoffs are classified as unemployed and part of the labor force.
- An individual losing their job and seeking new employment increases the unemployment rate but does not affect the labor-force participation rate.
Exchange Rates and Market Dynamics
- An appreciation of the dollar usually leads to increased travel abroad by Americans.
- Increased American purchases of Mexican goods will shift the U.S. demand curve for pesos rightward.
Net Exports and Capital Flow
- Positive net exports indicate that American assets bought by foreigners exceed the foreign assets bought by Americans, resulting in capital outflow.
Price Levels and Unemployment Rates
- If actual prices fall below expected levels, unemployment will typically exceed the natural rate.
- Long-run equilibrium occurs when actual and natural unemployment rates align, suggesting sustainability in economic output.
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