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, 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