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20 terms

Test 2

STUDY
PLAY
The clearest sign of economic growth is a(n)
increase in the level of real GDP
General Motors Corporation (a U.S.-based firm) produces a Saab vehicle in Sweden, and sells it in the United States. In which country's GDP is it included?
Sweden because it was produced there.
The major difference between nominal GDP and real GDP is that
nominal GDP is the current market value and real GDP has been adjusted for inflation.
Potential GDP is an estimate of the economy's ability to produce goods and services if the
labor force is fully employed, or if there is no cyclical unemployment
An increase in the capital stock has the same effect on the production function as an increase in
technology
The unemployment rate is equal to
the number unemployed divided by the labor force
Technological change or the effects of automation cause
structural unemployment
When you subtract the expected rate of inflation from the nominal rate of interest, you calculate the
real rate of interest
The real wage rate is defined as the wage rate divided by
the price level
If ten years ago the price of a movie ticket was $5 and the average hourly wage was $10, and today the price of a movie ticket is $8 and the average hourly wage is $20, then
movies are now relatively cheaper in terms of work hours
The level of investment will increase if
interest rates decrease
The profit earned from selling an asset for more than you paid for it is called
capital gains
More education and training usually lead to higher levels of
productivity
One reason given for the U.S. productivity slowdown in the period from 1973-1995 was
increasing energy prices
The largest component of aggregate demand is
consumer spending
Disposable income can be defined as national income
minus taxes plus transfers
The federal government's principal tool in altering consumer spending is changing
personal income tax rates
If the MPC is .80, then a change in disposable income of $60 billion will lead to a change in consumption of
$48 billion
Consumption functions would shift downward (decrease) if
wealth levels fall
If consumers' expectations about future income is very optimistic, then we should expect
the consumption function to shift upward