Multiple Choice Quiz on GDP, well-being, and unemployment rate
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Questions and Answers

Why has GDP been criticized as a measure of well-being?

  • It ignores the value of intermediate goods.
  • It ignores the value of services.
  • It ignores the value of financial transactions and sales of used items.
  • It fails to take into account the distribution of income. (correct)

    • What does the official unemployment rate fail to consider?

  • Underemployed and discouraged workers. (correct)
  • Frictionally unemployed workers.
  • All unemployed teenagers.
  • Jobs created in the underground economy.
  • The duration of unemployment.

    • What is excluded from the official unemployment rate calculation?

  • All unemployed teenagers.
  • Jobs created but not in the underground economy. (correct)
  • Frictionally unemployed workers.
  • Underemployed and discouraged workers.

    • Which of the following is true about per capita GDP?

    <p>It is unaffected by changes in the population size.</p> Signup and view all the answers

    Which of the following best explains why the long-run aggregate supply curve corresponds to the production possibilities curve?

    <p>Both curves illustrate the maximum sustainable capacity</p> Signup and view all the answers

    What happens when there is a decrease in labor productivity in an economy?

    <p>Shift the aggregate demand curve to the left</p> Signup and view all the answers

    What does the natural rate of unemployment represent?

    <p>The unemployment rate when all workers seeking employment have taken jobs</p> Signup and view all the answers

    If an economy has zero unemployment, what type of unemployment is present?

    <p>Only structural and cyclical unemployment</p> Signup and view all the answers

    What is the formula to calculate the unemployment rate?

    <p>Number of people not working divided by the population</p> Signup and view all the answers

    In the given scenario, what is the potential output of the economy?

    <p>$2,600,000</p> Signup and view all the answers

    What is the impact of increasing government spending by $33,333 according to the Keynesian economist?

    <p>Increase in government spending by $100,000</p> Signup and view all the answers

    What will most likely result if wages in an economy rise faster than workers’ productivity in the short run?

    <p>An increase in firms’ profit</p> Signup and view all the answers

    Study Notes

    Limitations of GDP and Unemployment Rate

    • GDP has been criticized as a measure of well-being because it only measures economic activity, not overall well-being or happiness.
    • The official unemployment rate fails to consider discouraged workers, underemployed workers, and those working part-time for economic reasons.

    Unemployment Rate Calculation

    • The official unemployment rate calculation excludes discouraged workers, underemployed workers, and those working part-time for economic reasons.

    Per Capita GDP

    • Per capita GDP is not a perfect measure of standard of living, as it does not account for income inequality within a country.

    Long-Run Aggregate Supply Curve

    • The long-run aggregate supply curve corresponds to the production possibilities curve because it represents the maximum potential output of an economy.

    Impact of Labor Productivity

    • A decrease in labor productivity in an economy leads to a decrease in the production possibilities curve, shifting it to the left.

    Natural Rate of Unemployment

    • The natural rate of unemployment represents the rate of unemployment that exists when the labor market is in equilibrium, and it includes frictional and structural unemployment.

    Types of Unemployment

    • If an economy has zero unemployment, it means that there is full employment, and the only type of unemployment present is frictional unemployment.

    Unemployment Rate Formula

    • The formula to calculate the unemployment rate is: Unemployment Rate = (Number of Unemployed / Labor Force) × 100

    Potential Output

    • The potential output of an economy is the maximum amount of production that an economy can achieve when all resources are fully utilized.

    Keynesian Economics

    • According to Keynesian economists, increasing government spending by $33,333 will stimulate economic growth and increase aggregate demand.

    Wages and Productivity

    • If wages in an economy rise faster than workers' productivity in the short run, it will likely lead to higher production costs and higher inflation.

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    Description

    Test your knowledge on GDP, well-being, and the unemployment rate with this multiple-choice quiz. Questions cover topics such as the criticisms of GDP as a measure of well-being and the official unemployment rate.

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