Economic Concepts Quiz: Unemployment & GDP

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Questions and Answers

Cyclical unemployment results from:

A deficiency of aggregate spending (correct)

Technological change

The everyday dynamics of a free labor market

The decreasing relative importance of goods and the increasing relative importance of services in the US economy

Economic growth is best defined as an increase in:

Either real GDP or real GDP per capita (correct)

Nominal GDP

Total consumption expenditures

Wealth in the economy

By summing the values added at each stage in the production of some good we obtain:

The price of that good

The total income generated by that good's production

The total cost (including profits) of that product

All of the above (correct)

The type of unemployment associated with recessions is called:

Cyclical unemployment Signup and view all the answers

Cost-push inflation may be caused by:

A negative supply shock Signup and view all the answers

The full employment unemployment rate means an unemployment rate of about:

4-5 percent Signup and view all the answers

Which of the following best defines national income?

All incomes earned by US resource suppliers for their current contributions to production Signup and view all the answers

The largest item in the income or earnings and costs approach to GDP is:

Wages or compensation of employees Signup and view all the answers

Which of the following is included in the calculation of the GDP?

The cost of catfish sold to a supermarket Signup and view all the answers

Which of the following would be included in the calculation of the GDP?

The purchase of a new home from a builder Signup and view all the answers

Which of the following would be counted as investment when calculating GDP?

The construction of a new house Signup and view all the answers

If actual GDP is $500 billion and there is a negative GDP gap of $10 billion, potential GDP is:

$510 billion Signup and view all the answers

A recession is a period in which:

Real domestic output falls Signup and view all the answers

Demand-pull inflation:

Occurs when total spending exceeds the economy's ability to provide output at the existing price level Signup and view all the answers

Real GDP measures:

Current output at base year prices Signup and view all the answers

A price index is:

A comparison of the price of a market basket from a fixed point of reference Signup and view all the answers

A nation's gross domestic product (GDP) is:

The dollar value of the total output produced within the borders of the nation Signup and view all the answers

In product markets:

Business firms sell goods and services to households Signup and view all the answers

In resource or factor markets:

Households sell resources to business firms Signup and view all the answers

Which of the following economic indicators is the best measure of production or output of an economy?

Gross domestic product Signup and view all the answers

The market value of all final goods and services produced in the economy in a given year is the:

Gross domestic product Signup and view all the answers

Which of the following would cause the unemployment rate to increase?

A woman who quits her job and begins looking for a new job in another city Signup and view all the answers

The largest item in the expenditure or flow of a product approach to GDP is:

Consumer spending Signup and view all the answers

Market economies have been characterized by:

Occasional instability of employment and price levels Signup and view all the answers

If the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

Deflation of 3.33 percent Signup and view all the answers

The unemployment rate is the:

Percentage of the labor force that is out of work Signup and view all the answers

Final goods and services refers to:

Goods and services purchased by ultimate users, rather than for resale or further processing Signup and view all the answers

Historically, real GDP has increased less rapidly than nominal GDP because:

The general price level has increased Signup and view all the answers

Nominal GDP is:

The sum of all monetary transactions involving final goods and services that occur in the economy in a year Signup and view all the answers

Nominal GDP was $130 and $150 in Years 1 and 2 respectively. Real GDP was $100 and $110 in Years 1 and 2 respectively. On the basis of this information we can conclude that:

The price level increased between Years 1 and 2 Signup and view all the answers

The type of unemployment that affects workers who have worked during the past year but are unemployed during other parts of the year due to changes in the weather is called:

Seasonal unemployment Signup and view all the answers

Unemployment involving mismatches between job seekers and job openings due to lack of skills or education is called:

Structural unemployment Signup and view all the answers

Unemployment that rises in a recession and may be caused by too little spending in the economy is called:

Cyclical unemployment Signup and view all the answers

Unemployment that includes people who are temporarily between jobs is called:

Frictional unemployment Signup and view all the answers

Real output in the economy increasing and the unemployment rate declining is termed:

Expansionary Signup and view all the answers

The stage of the economy where real output is high and unemployment relatively low is called:

Peak Signup and view all the answers

Real output in the economy decreasing and the unemployment rate rising is termed:

Contractionary Signup and view all the answers

The lowest point of real GDP reached during a business cycle is known as:

Trough Signup and view all the answers

An economic situation where the level of output falls to especially low levels and unemployment climbs to very high levels is termed:

Depression Signup and view all the answers

The normal unemployment rate typically ranges between:

4-6% Signup and view all the answers

GDP is the market value of:

All final goods and services produced in a nation in one year Signup and view all the answers

GDP is considered the most important measurement of:

Production and output Signup and view all the answers

GDP only counts:

Final goods and services; it does not count intermediate goods Signup and view all the answers

Nation income accounting measures include:

Net national product (NNP), national income (NI), personal income (PI), disposable personal income (DPI) Signup and view all the answers

GNP includes profits earned by US owned companies overseas and income earned by US citizens working abroad, but it does not include profits earned by foreign owned companies in the US or income earned by foreigners working in this country.

True Signup and view all the answers

The formula for calculating the price index is:

Current year prices/base year prices x100 Signup and view all the answers

A price index is used to measure:

Price changes in the economy Signup and view all the answers

Inflation is defined as a:

General increase in the overall price level Signup and view all the answers

Unanticipated inflation affects:

Savers, lenders, and people on fixed income are hurt; borrowers gain Signup and view all the answers

The business cycle measures:

The ups and downs of economic activity over a period of years Signup and view all the answers

Nominal GDP is defined as:

Not adjusted for price changes Signup and view all the answers

Unemployment occurs when:

People who are willing and able to work cannot find jobs at satisfactory wages Signup and view all the answers

The unemployment rate represents:

The percentage of the labor force that cannot find work on acceptable terms Signup and view all the answers

PPI stands for:

Producer Price Index Signup and view all the answers

CPI stands for:

Consumer Price Index Signup and view all the answers

The prime rate is defined as:

Interest rate banks charge their best commercial customers Signup and view all the answers

Economic growth exists when:

The economy produces increasing amounts of goods and services over the long term Signup and view all the answers

GDP and GNP do not include:

Purchases of intermediate goods, buying and selling second-hand goods, buying and selling stocks or bonds, money transfers Signup and view all the answers

National income is an estimate of:

The factor cost of production, and it measures the flow of income accruing to the labor and property resources used in producing current output Signup and view all the answers

Personal income is defined as:

National income minus corporate income taxes, undistributed corporate profits, and social security taxes plus transfer payments and interest paid by persons Signup and view all the answers

DPI stands for:

Disposable Personal Income Signup and view all the answers

Study Notes

Unemployment Types

Cyclical Unemployment: Caused by economic downturns, characterized by decreased aggregate demand.
Structural Unemployment: Results from a mismatch of skills and job opportunities, often due to technological changes.
Frictional Unemployment: Temporary unemployment during transitions between jobs or after graduation.
Seasonal Unemployment: Occurs at specific times of the year, often tied to seasonal industries.

Economic Growth

Defined as an increase in real GDP or real GDP per capita, reflecting improvements in an economy's production capabilities.

GDP and National Income

Gross Domestic Product (GDP): Measures the total value of all final goods and services produced in a nation over a specified period; excludes intermediate goods and financial transactions.
National Income: The total income earned by a country's factors of production; includes wages, rents, interest, and profits.

Inflation Types

Cost-Push Inflation: Arises from rising production costs, often due to supply shocks, leading to inflation without growth.
Demand-Pull Inflation: Occurs when aggregate demand exceeds supply at existing price levels, driving prices upward.

Economic Indicators

Consumer Price Index (CPI): Reflects the average change in prices paid by urban consumers for a basket of goods and services.
Producer Price Index (PPI): Measures price changes received by producers before products reach consumers.
Nominal GDP: Measures total monetary value of goods and services without adjusting for inflation.
Real GDP: Adjusted for inflation, reflects the true growth in an economy's output.

Business Cycle Phases

Expansion: Period of increasing economic activity characterized by rising real output and declining unemployment.
Peak: Economic output is at a high level, often accompanied by low unemployment and potential inflation.
Contraction: Decreasing economic activity and rising unemployment, with a decrease in inflation rates.
Trough: The lowest point in the business cycle, indicating significant economic downturns.

Price Indices

Price Index Calculation: Compares the cost of a market basket over time to gauge inflation or deflation trends.
Inflation: The overall increase in prices across the economy, eroding purchasing power.

Personal and Disposable Income

Personal Income: Total income earned by individuals, minus indirect taxes and including transfer payments.
Disposable Personal Income (DPI): The amount available for spending or saving after personal income taxes.

Other Important Concepts

Investment in GDP: Includes investments made by businesses in capital goods, residential construction, and changes in inventory.
Negative GDP Gap: Indicates when actual GDP is less than potential GDP, signifying underutilized economic capacity.
Unemployment Rate: The percentage of the labor force actively seeking work but unable to find employment.

These notes encapsulate core concepts relevant to macroeconomic principles and labor dynamics, providing a concise overview for studies.

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Description

Test your knowledge on various types of unemployment, economic growth, and the intricate details of GDP and national income. This quiz covers fundamental economic concepts you need to understand for a solid foundation in economics.