Unit 2 GPD, Unemployment and Inflation

In the 1980’s and 1990’s, the gap between high income and low income families widened for all of the following reasons EXCEPT 

• the sharp increase in the cost of living
• economy changing from a goods producing economy to service economy
• the decline of unions
• a widening gap between well educated and poorly educated workers

If a company lays off workers when the business cycle is going up (the economy is booming), what kinds of goods to this company most likely produce? 

• normal goods
• inferior goods
• technological goods
• capital goods

A rise in general price levels or too many dollars chasing too few goods are definitions of 

• unemployment
• recession
• inflation
• welfare

Why is disposable personal income an important factor in measuring the economy’s health? 

• when it is high, government debts are low
• it represents the actual money people have to spend, invest, and save in the economy
• when it is low, it shows that businesses are investing money back into the economy
• when it is high, it allows for higher government revenues and greater transfer payments

A business buys new computers for it’s office workers from a U.S. computer manufacturer. The value of the transaction would be included in which GDP category?

• consumer sector
• investment sector
• net exports
• government sector

• A = Recession
• A = Peak/Boom
• A = Expansion
• A = Trough

• D = Recovery/Expansion
• D = Recession
• D = Peak/Boom
• D = Trough 

Why is real GDP more accurate than nominal GDP? 

• It is adjusted for depreciation. 
• It includes unpaid and paid work.
• It is adjusted for price changes.
• It includes unrecorded business.

How can an economist compare the standard of living in two different countries?

• by comparing real GDP per capita
• by looking at the quality of life
• by seeing how the GDP is distributed
• by measuring physical capital

Products that would be used in calculating the United States GDP include

• toys manufactured in China at a factory owned by a U.S. company.
• cars manufactured in Tennessee at a factory owned by a Japanese automobile company.
• plastic manufactured in a factory in Kentucky and sold to toy manufacturers around the world to make plastic toys.
• cotton cloth manufactured in India and sold to clothes makers in the United States.