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29 Cards in this Set

  • Front
  • Back
Classical economists believed that ...
a) the economy was naturally self regulating
b) falling wages could reduce high unemployment
c) flexible interest rates would equalize savings and investment
d) all of the above
d) all of the above
Keynesian economic theory was first developed in ...
a) 1776
b) 1842
c) 1936
d) 1949
c) 1936
Classical economic theory is based on wages and prices ____ but in a modern economy, wages and prices are often ____.
a) rising, falling
b) falling, rising
c) being flexible, sticky
d) set by government, set by market forces
c) being flexible, being sticky
Which of the following allows for substitution in its market basket and therefore more closely resembles actual consumer behavior?
a) a fixed weight price index
b) a chain weighted price index
b) a chain weighted price index
In the circular flow of spending and income, taxes are a/an ____ and therefore act to ____ the economy.
a) leakage, slow down
b) leakage, stimulate
c) injection, slow down
d) injection, stimulate
a) leakage, slow down
An example of income earned but not received is ...
a) welfare payments.
b) undistributed corporate profits.
c) Social Security benfeit payments.
d) all of the above
b) undistributed corporate profits.
If the natural rate of unemployment is 5% and the actual rate of unemployment is now 3.5%, wages will likely be ...
a) rising
b) falling
c) none of the above
a) rising
The CPI was 117.6 in one year and 121.3 the following year. What was the inflation rate over that period?
a) 3.7%
b) 3.15%
c) 0.03%
d) 1.03%
e) none of the above
b) 3.15%

(difference divided by original cpi)
Melissa's salary in year 1 was $30,000. In year 2 she was paid #34,000. The CPI was 140.1 in year 1 and 146.7 in year 2. Based on this information, Melissa's real income ____ from year 1 to year 2.
a) increased
b) decreased
c) remained constant
a) increased
Refer to the following table for the next question:
For X quantity = 10, price = $1.00, base year price = $1.00. For Y quantity = 20, price = $.96, base year price = $1.00. For Z quantity = 30, price = $1.13, and base year price = $1.00.

Based on the table, the CPI for the current year is ...
a) 1.03
b) 97.1
c) 105.17
d) 95.1
e) 103
c) 105.17
Refer to the following information for the next question:

For A:
base year quantity = 10
base year price = $2
present year quantity = 15
present year price = $3

For B:
base year quantity = 30
base year price = $5
present year quantity = 40
present year price = $10

For C:
base year quantity = 50
base year price = $8
present year quantity = 40
present year price = $10

Based on that, Real GDP for the present year is ...
a) $605
b) $106.14
c) $570
d) $94.21
e) $550
e) $550

(real gdp = base year prices x current year quantity)
A fixed weight price index has a tendency to ____ the rate of inflation.
a) overstate
b) understate
a) overstate
A 20 year old college sophomore who is going to school full time and does not intend to look for a job until after graduation would be classified as ...
a) in the labor force
b) employed
c) not in the labor force
d) unemployed
c) not in the labor force
The noninstitutional adult civilian population can be broken down into ...
a) employed persons and unemployed persons
b) persons working and persons not working
c) persons working in manufacturing and persons working in services
d) persons in the labor force and persons not in the labor force
d) persons in the labor force and persons not in the labor force
Someone who worked 8 hours in the past week at a part time job would be classified as ...
a) an employed person
b) a discouraged worker
c) an unemployed person
d) not in the labor force
a) an employed person
There is a noninstitutional adult civilian population of 250 million people, a civillian labor force of 200 million, and 175 million employed persons. What is the unemployment rate?
a) 70%
b) 10%
c) 87.5 %
d) 12.5%
e) 30%
d) 12.5%

(unemployed persons/civillian labor force)
A student has recently graduated with a degree in economics and finance and is now looking for a job as an investment analyst at a brokerage firm. This person is now ...
a) not in the labor force
b) structurally unemployed
c) frictionally unemployed
d) out of luck
c) frictionally unemployed
When the economy is at full employment, which will not exist?
a) frictional unemployment
b) cyclical unemployment
c) structural unemployment
d) none of the above (because a, b, and c always exist)
b) cyclical unemployment
Assume that full employment is achieved at 4.5% unemployment. If that is true, an unemployment rate of 3.8% would likely be ...
a) inflationary
b) a labor surplus
c) impossible
a) inflationary
Regarding a price index, which of the following is true?
a) base year prices are always lower than current year prices
b) the base year index is 100
c) in the index is 112 one year and 123 the next year, prices went up by 11%
d) all of the above
b) the base year is 100
Inflation means that all prices are going up ...
a) true
b) false
a) true
Which of the following would NOT be included in the GDP?
a) a bill from a doctor for treating a patient
b) the increase in value of a share of stock when the stock market rises
c) a real estate agent's commission on the sale of a house
d) the purchase price of a new house
b) the increase in value o fa share of stock when the stock market rises
Suppose that during a year the economy produced final goods and services worth $400 billion. Of that $400 B, by teh end of the year $300 B were sold and #100 B had not been sold and were still being held in inventory. GDP for that year is ...
a) $400 B
b) $100 B
c) $300 B
d) $700 B
e) $800 B
a) $400 B
Nation income equals...
a) wages + salaries + corporate profits + net income
b) the market value of all final good sand services in a year
c) compensation of employees + indirect business taxes + transfer payments
d) wages + rents + interest + profits
d) wages + rents + interest + profits
Personal income is ...
a) equal to GDP minus the capital consumption allowance
b) the portion of income that is available for consumption and saving
c) the amount of income that individuals actually receive
d) income that is earned but not received
c) the amount if income that individuals actually receive
The largest component of GDP is ...
a) gross private domestic investment
b) personal consumption expenditures
c) net exports
d) government purchases
b) personal consumption expenditures
According to Keynesian economic theory, the most important determinant of economic activity is ...
a) interest rates
b) net exports
c) total spending (AD)
d) total production (AS)
c) total spending (AD)
When the economy is at its full employment Real GDP, the unemployment rate is equal to ...
a) zero
b) the frictional rate
c) the natural rate
d) the structural rate
c) the natural rate
Year1: Nominal GDP = $3400 and the GDP deflator = 104.0.
Year 2: Nominal GDP = $3500 and the GDP deflator = 109.5.

Based on this information, during the period from year 1 to year 2 ...
a) the price level decreased
b) it was the base year
c) there was a recession
d) output increased
c) there was a recession