QUESTIONS 7-20 USES WORD BANK WHICH IS AT THE END OF QUESTION 20

QUESTION 7

1. Note that from year 4 to year 5, the rate of inflation wasA)_______%(enter percentage as a whole number, no decimal points, enter minus sign if appropriate).This phenomenon is known asB)___________.

QUESTION 8

1. Macroeconomists observe that in real life, markets don't work quite as smoothly as indicated in chapter 3. That's because in some markets, prices areA)_______ and don't adjust smoothly to surpluses or shortages.One such example is the wage rate. Because the wage rate is not very flexible, the economy may go through significant periods ofB) _______- where the quantity of labor supplied exceeds the quantity of labor demanded.

QUESTION 9

1. The basic difference between microeconomics and macroeconomics is that micro considers choices made byA)______consumers and producers while macro considers theB)______behavior of producers and consumers.

QUESTION 10

1. In measuring economic performance, we see that the macroeconomy experiences periods of rapid economic fluctuations. A rapid increase in aggregate output is referred to as an economicA)________and a rapid decrease is an economicB)________. Over the long run, however, despite the fluctuations in the business cycle, the trend line rises. This rising trend line of economic fluctuations is referred to as economicC)________. The period of severe economic contraction which occurred during the 1930's is known as theD)_________.

QUESTION 11

1. There are two basic causes or types of inflation. One type, called A)________pull, occurs when there is too much B)_______. In such a case, the price level would rise but the C)_______rate would be low. In the case of cost-push inflation, the level of economic activity (as measured by the D)_________GDP) would go E)________and the unemployment rate would go F)__________.

QUESTION 12

1. In computing the GDP, only the value of A)_______goods are included, while the value of intermediate goods are excluded. If the value of intermediate goods were included, we'd be committing the error of B)________counting.

QUESTION 13

1. Because every cent that is spent will be received by somebody as income, we can compute the GDP by using theA)________approach or theB)________approach.

QUESTION 14

1. Imagine an economy that produces only one good, say widgets. In year 1, it produced 10 widgets widget (which sold for $10 each) and in year twoin produced 8 widgets (which sold for $15 each).From year one to year 2, that economy's nominal GDP went A)______(up/down)and it's real GDP went B)______(up/down).

QUESTION 15

1. The GDP may actually understate the actual level of output in the economy by from five to thirty percent. That's because people have an incentive to avoid taxes or produce illegal goods and services in theA)_____economy.

QUESTION 16

1. Imagine a hypothetical economy with a population of 100 people, 80 of which over sixteen. Forty eight of these people who are working and twelve people who are willing, able and looking for work cannot find jobs. The unemployment rate in this economy is A)_____%(enter percentage as a whole number, not a decimal, no percentage sign).Suppose that 10 of those unemployed people get discouraged and give up looking for work. Now, the unemployment rate is B)________%(enter percentage as a whole number, not a decimal, no percentage sign).

QUESTION 17

1. The short term unemployment that occurs when someone is between jobs is known as A)_______unemployment. The type of unemployment that is due to shifts in the economy like technological change or when a U.S. company moves its operations to a foreign country is known as B)________unemployment. Because these types of unemployment are inevitable in a large, dynamic, technologically progressive, and diverse economy such as ours, the sum of these two rates is known as the C)_______rate of unemployment. Although it is hard to estimate, the general consensus is that it's probably somewhere between D)______% and E)_______%(enter percentage as a whole number, not a decimal).The remainder of the actual unemployment rate (most of which is due to an economic contraction/recession) is called F)________unemployment - referring, of course to fluctuations in the business cycle.

QUESTION 18

1. Inflation is defined as the annual percentage change in the A)______(enter actual acronym). The government agency charged with compiling this index is B)_______.(enter actual acronym).

QUESTION 19

1. If the annual rate of inflation is greater than the increase in your nominal income for that year, your real income goes A)________(up/down).Unanticipated inflation B)_____(hurts/benefits)lenders.

QUESTION 20

1. Imagine a country whose population, in year 1, is 100 people and the real value of output is $5,000. The per-capita level of output isA)_____$(enter dollar value, no decimals or dollar signs).Assume that between year 1 and year 5, its population has grown to 130 and the real value of its output has risen to $6,000. Over this period, this country's per-capita (i.e., per person) output has goneB)______(up/down).Over time, even though the economy goes through expansions and contractions, the long run trend line of the business cycle in the United States is goingC)_______(up/down).This phenomenon is known as economicD)_______.

WORD BANK:

1) aggregate 23) housing 2) balance 24) hurts 3) benefits 25) income 4) bonds 26) individual 5) borrow 27) inverse 6) capital goods 28) investment 7) contraction 29) labor 8) cyclical 30) market 9) deflation 31) multiple 10) demand 32) natural 11) double 33) net exports 12) down 34) nominal 13) efficiently 35) price 14) expansion 36) real 15) expenditures 37) recession 16) final 38) spending 17) flexible 39) sticky 18) fluctuate 40) structural 19) frictional 41) supply 20) Great Depression 42) underground 21) greed 43) unemployment 22) growth 44) up