Economic Ups & Downs Activity Test Review
What is real gross domestic product? O Total market value of all final goods and services produced within the borders of a country during a specific year, adjusted for price changes.
Why is it important adjust GDP for price changes when measuring the economy? O Production, consumption & income are ultimately determined by levels of real output not prices
Desribe the three types of unemployment O Frictional O Structural O Cyclical
Why is unemployment considered undesirable? O It lower production, income & consumption levels
Why are inflation and deflation undesirable? O Both arbitrarily redistribute income. They affects different people in different ways, depending largely on how difficult or easy it is for the dollar level of their income to change as price level changes
What happens to unemployment during recessions? O It increases
What generally happens to prices as the economy approaches a peak? O They rise
What are two types of fiscal policy? O Automatic stabilizers O Discretionary fiscal policy
What is Fiscal Policy? O Changes in the overall level of government spending and/or taxes designed to lower unemployment and inflation
Why does the federal government engage in fiscal policy? O To reduce unemployment and inflation, and encourage economic growth
What are the US economic goals? O Full employment O Price stability O Economic Growth