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ECO 202 (Homework Review) – Questions & Answers
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ECO 202 (Homework Review) – Questions & Answers
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ECO 202 (Homework Review) – Questions & AnswersThe total market value of final goods and services produced in the economy
during a period of time Right Ans - Gross Domestic Product
In the circular flow model, the value of total income for an economy ____ the
value of total production. Right Ans - equals
The largest component of spending in the US Right Ans - Consumption
Spending
GDP product understates the total production of final goods and services
because of the omission of: Right Ans - household production
Real GPD will increase Right Ans - only if the price level falls
Someone who is available for work but has not actively looked for work in the
past 4 weeks: Right Ans - not in the labor force
Short-term unemployment arising from the process of matching workers with
jobs. Normal labor market turnover from creative destruction, and entry, and
reentry of people into the labor force. ADVICE -> Keep looking, you've got
game! Right Ans - Frictional unemployment
Unemployment arising from a persistent mismatch between the skills and
characteristics of workers and the requirements of jobs. Caused by change in
the structure of economy. Advice -> retrain, get better skills Right Ans -
structural unemployment
Most of the unemployment in the Great Depression was this. Unemployment
caused by a business cycle recession or slowdown. Advice -> keep looking, not
your fault, stay in school Right Ans - cyclical unemployment
Causes the unemployment rate as measured by the Bureau of Labor Statistics
to understate the true extent of joblessness: Right Ans - discouraged
workers
, Causes the unemployment rate as measured by the Bureau of Labor Statistics
to overstate the true extent of joblessness: Right Ans - unemployed persons
falsely report themselves to be actively looking for a job
Economists consider full employment to occur when: Right Ans - the
unemployment rate consists only of frictional and structural unemployment
If cyclical unemployment is eliminated in the economy, then... Right Ans -
the economy is considered to be at full employment
Best measure of cost of living: Right Ans - consumer price index
Average of the prices of the goods and services purchased by a typical urban
family of four: Right Ans - Consumer price index (CPI)
The CPI implicitly assumes that the demand curve for each good and service in
the representative market basket is: Right Ans - vertical
Would decrease consumption spending: Right Ans - a decrease in housing
prices and stock prices
the key idea in the aggregate expenditure model: Right Ans - in any
particular year, the level of GDP is determined mainly by the level of aggregate
expenditure
Effect on inventories, GDP, and employment when aggregate expenditure
(total spending) exceeds GDP Right Ans - Inventories decrease, GDP
increases, and employment increases
The multiplier... Right Ans - rises as the MPC rises
a decrease in gov. spending affects the aggregate expenditure line because....
Right Ans - it shifts the aggregate expenditure line downward.
a decrease in the interest rate would cause the... Right Ans - aggregate
expenditure line to shift upward, increasing equilibrium real GDP
An increase in interest rates would... Right Ans - Decrease investment
spending on new plant and equipment
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