unit ii test review. what occurs when resource costs force producers to raise prices in order to...
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Unit II Test Review
• What occurs when resource costs force producers to raise prices in order to maintain their profits?
• Cost-push inflation
• What are the 2 most common methods for calculating GDP?
• Expenditure approach and income approach
• General Motors purchases tires for their new cars. Are these tires counted in GDP? If so, which category? If not, why not?
• No, they’re intermediate goods
• How are GDP and unemployment related? • They are inversely related.
• What are the four phases of the business cycle?
• Peak, recession, trough, expansion
• The full-employment unemployment rate is also known as what?
• The natural rate of unemployment
• If nominal GDP is rising but the price level is falling, what is happening to real GDP?
• It must be increasing
• What is the formula for calculating the real interest rate?
• Nominal interest rate – expected inflation rate
• Name 2 groups of people who are unaffected or helped by inflation.
• Flexible income receivers, borrowers
• What is the formula for calculating GDP through the expenditure approach?
• GDP = C+I+G+(X-M)
• The Chevron station purchases 2 new gas pumps. Are these pumps counted in GDP? If so, which category? If not, why not?
• Yes; investment
• A good or service that is overallocated in a competitive market is said to have what?
• Spillover costs
• Evelyn got laid off from her job as a bank teller when her bank added 2 ATMs. Six months ago, she decided to go back to school full-time in a 2 year program to become a paralegal. Evelyn is presently _____________.
• Not unemployed
• What occurs when too much consumer spending causes prices to rise?
• Demand-pull inflation
• Which category of GDP has been negative for many years?
• Net exports
• What is the largest category of GDP? • Consumption
• Mr. Pitt purchases a new house. Is this purchase counted in GDP? If so, which category? If not, why not?
• Yes; investment
• What measurement of production includes production by Americans in the United States as well as the production of American workers and businesses all over the world?
• Gross National Product
• An economy has 5 people in it. 3 people are working. 1 is not working but looking for a job and 1 is retired. What is the unemployment rate?
• 25%
• Why aren’t intermediate goods counted in calculating GDP?
• Their value is incorporated into the final good’s value. They would be double-counted.
• What are the 3 types of businesses? • Sole proprietorship, partnership, corporation
• We are said to be fully employed when what 2 things are equal?
• Job seekers and job vacancies
• The income households have after all personal taxes are paid is called what?
• Disposable income
• A good or service that cannot denied to non-payers is called what?
• A public good
• Newspaper reporters who are laid off because people find it easier or cheaper to get their news from the internet are called what?
• Structurally unemployed
• Which type(s) of unemployment do(es) not exist when the economy is at full employment?
• Cyclical unemployment
• The difference between actual GDP and full employment GDP is called what?
• GDP gap
• If the natural rate of unemployment is 4% and the current unemployment rate is 7%, what is the GDP gap?
• 6%
• Define real GDP. • Nominal GDP adjusted for changes in the price
level.
• You purchase a new truck that was built in November, 2010. In which year’s GDP does this purchase count? In what category is this purchase counted?
• 2010; investment
• People who are not working and have given up looking for work are called what?
• Discouraged workers
• What is the name of the price index used by the government each month to calculate inflation?
• The Consumer Price Index
• If banks anticipate that inflation will increase, what will happen to the nominal interest rate?
• It will rise.
• Name 2 groups of people who are hurt by inflation.
• Savers, lenders, fixed income receivers
• Why are government transfer payments not counted in GDP?
• They don’t produce anything.
• You buy a $50 Best Buy gift card for your dad’s birthday present. Is this purchase counted in GDP? If so, which category? If not, why not?
• No; financial transaction
• Which corporation decided this week to stop producing their catalog after 47 years?
• JC Penney