Principles of Economics: Business Cycle and Unemployment
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Questions and Answers

What is the definition of economic growth?

  • A decrease in real GDP per capita over a certain time period
  • An increase in real GDP or real GDP per capita over a certain time period (correct)
  • A fluctuation in real GDP with no pattern over a certain time period
  • A steady level of real GDP over a certain time period

What is the formula to calculate the rate of economic growth?

  • New RGDP / Old RGDP * 100
  • Old RGDP / New RGDP * 100
  • Old RGDP - New RGDP / New RGDP * 100
  • New RGDP - Old RGDP / Old RGDP * 100 (correct)

What is the rule of 70 used to approximate?

  • The number of years required to increase real GDP by 10%
  • The number of years required to double real GDP (correct)
  • The number of years required to halve real GDP
  • The number of years required to triple real GDP

What is the result of a decline in real GDP?

<p>A significant increase in unemployment (B)</p> Signup and view all the answers

What is the term used to describe the alternating rises and declines in the level of economic activity?

<p>The business cycle (C)</p> Signup and view all the answers

What is the outcome of rapid economic growth?

<p>Rapid inflation (B)</p> Signup and view all the answers

What is the characteristic of the economy during the peak phase of the business cycle?

<p>The economy is at full employment and the price level is likely to rise. (D)</p> Signup and view all the answers

Which of the following groups is categorized by the Bureau of Labor Statistics as 'not in the labor force'?

<p>People who do not fit either of the above two categories. (C)</p> Signup and view all the answers

What is the characteristic of the trough phase of the business cycle?

<p>Output and employment bottom out at their lowest levels. (D)</p> Signup and view all the answers

What is the characteristic of the recession phase of the business cycle?

<p>A period of decline in total output, income, employment, and trade. (A)</p> Signup and view all the answers

What is the characteristic of the recovery phase of the business cycle?

<p>Output and employment rise toward full employment. (D)</p> Signup and view all the answers

Who is counted as being in the labor force?

<p>Both those who are employed and those who are unemployed but actively seeking work. (D)</p> Signup and view all the answers

What is the labor force?

<p>The total number of workers, including the employed and unemployed (B)</p> Signup and view all the answers

How is the labor force participation rate calculated?

<p>Labor force / population (C)</p> Signup and view all the answers

What is the unemployment rate a measure of?

<p>The percentage of the labor force unemployed (C)</p> Signup and view all the answers

What type of unemployment results from the labor market not operating perfectly?

<p>Frictional unemployment (D)</p> Signup and view all the answers

What is a characteristic of structurally unemployed workers?

<p>They need retraining or additional education to find a new job (C)</p> Signup and view all the answers

What is the formula for calculating the unemployment rate?

<p>Unemployment rate = (unemployed / labor force) x 100 (C)</p> Signup and view all the answers

Flashcards

Economic Growth

Increase in real GDP or real GDP per capita over time.

Economic Growth Rate Formula

(New RGDP - Old RGDP) / Old RGDP * 100

Rule of 70

Approximates the years to double real GDP.

Decline in Real GDP Result

A significant rise in joblessness.

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Business Cycle

Alternating rises and declines in economic activity.

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Outcome of Rapid Economic Growth

Rapid price increases.

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Peak Phase Characteristic

Full employment and rising prices.

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Not in the Labor Force

Individuals not employed or actively seeking work.

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Trough Phase Characteristic

Output and employment at their lowest levels.

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Recession Phase Characteristic

Decline in output, income, jobs, and trade.

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Recovery Phase Characteristic

Output and employment rising.

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Who's in the Labor Force

Employed plus actively seeking unemployed.

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What is the labor force?

Total number of workers, employed and unemployed

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Labor Force Participation Rate Formula

Labor force / population

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Unemployment Rate Measure

Percentage of the labor force unemployed.

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Frictional Unemployment

Joblessness due to labor market imperfections.

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Structurally Unemployed Characteristic

Need retraining or education.

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Unemployment Rate Formula

(Unemployed / Labor Force) x 100

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