Measures to Improve the Standard of Living Essay

Economic growth is best defined as either real GDP or real GDP per capita Real GDP per capita is found by dividing real GDP by population Which of the following best measures improvements in the standard of living of a nation?Growth of real GDP per capita If a nation real GDP increases from 100bill to 106bill and its population jumpts from 200mill to 212mill, real GDP per capita will remain constant For comparing changes in potential military strength and political preminence, the most meaningful measure of economic growth would be: changes in total real output Given the annual rate of economic growth, the rule of 70 allows me to calculate the number of years required for real GDP to double the number of years required for real GDP to double can be found by dividing 70 by the annual growth rate at an annual growth rate of 4 percent, the real GDP will double in about 17. yrs at an annual rate of 7 percent, real GDP will double in about 10yrs recurring upswings and downswings in an economys real GDP over time is called business cycles in the US, business cycles have occurred against a backdrop of a long run trend of rising real GDP the immediate determinant of the volume of output and employment is the composition of consumer spending during a severe recession, we would expect output to fall most in the construction industry the phase of the business cycle in which real GDP declines is called a recession market economies have been characterized by occasional instability of employment and price levels the production of durable goods varies more than the production of nondurable goods because durable purchases are postponable in which phase of the business cycle will the economy most likely experience rising real output and failing unemployment rates?Expansion in the US, the rate of unemployment is highest for African American teenagers to be officially unemployed, aperson must be in the labor force the natural rate of unemployment is that rate of unemployment occurring when the economy is at its potential output the labor force includes employed workers and persons who are officially unemployed. The unemployment rate of teenagers is much higher than of adults Official unemployment statistics understate employment because discouraged workers are not counted as unemployed.

The presence of discouraged workers may cause the official unemployment rate to understate the amount of unemployment. Te natural rate of unemployment is the full employment unemployment rate Assume that Lucian is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job nxt week with company B.Lucian is considered as frictionally employed The full employment unemployment rate means an unemployment rate of about 4-5percent Cyclical unemployment results from a deficiency of aggregate spending Which of the following is correct? The unemployment rates of men and women workers are roughly the same Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs called structural unemployment Structural unemployment may involve a locational mismatch between unemployed workers and job openings When the US economy has achieved full employment, the unemployment rate is between 4 and 5percent Which of the following constitute the unemployment occurring at the natural rate of unemployment?Cyclical and structural unemployment The type of unemployment associated with recessions is called cyclical unemployment Search unemployment and wait unemployment are types of structural unemployment In the depth of the great depression, the unemployment rate of the USA was about 25percent The GDP gap measures the difference between actual GDP and potential GDP A large negative GDP gap implies a high rate of unemployment The aggregate cost of unemployment can be measured by the amount by which actual GDP exceeds potential GDP the relationship between size and negative GDP gap and the unemployment rate is inverse if actual GDP is less than potential GDP the actual unemployment rate will be higher than the natural unemployment rate okuns law: shows the relationship between unemployment rate and the size of the negative GDP gap.If the consumer price index rises from 300 to 333 in a particular yr, the rate of inflation is that year is 11percent If the rate of inflation is 12percent per year, the price level will double in about 6yrs Demand pull inflation occurs when total spending in the economy is excessive Too much money chasing too few goods best describes demand pull inflation Unlike demand pull inflation, cost push inflation increases real income Cost push inflation may be caused by a negative supply shock Suppose that a persons nominal income rises by 5 percent and the price level rises from 125 to 130.

The persons real income will remain constant Cost push inflation increases real output If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation premium is 3percent The most important determinant of consumer spending is level of income The most important determinant of consumption and saving is the level of income With an MPS of . 4, the MPC will be 1. 0 minus .4 The MPC can be defined as that fraction of a change in income that is spent The 45 degree line on a graph relating consumption and income shows all the points at which consumption and income are equal The consumption schedule relates consumption to the level of disposable income The APC is calculated as consumption/income The APC can be defined as the fraction of a specific level of a total income that is not consumed Which of the following is correct APC+APS=1 The consumption schedule is such that the MPC is constant and the APC declines as income rises As disposable income rises, consumption and savings both increase The average propensity to consume indicated that amount by which income exceeds consumption