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ECO 11 Final Review

Terms in this set (24)

GDP serves as a measure of both:
total income of everyone in the economy + total expenditure on nation's output of final goods & services
Unemployment rate formula
unemployed/labor force x 100
Labor force participation rate formula
labor force/adult population x 100
What does labor force participation rate measure?
Total adult population in the labor force
Natural rate of unemployment definition
Rate of unemployment that the economy normally experiences
Cyclical unemployment definition
Short term fluctuations of unemployment around natural rate
Economists predict that the more generous a country's system of unemployment compensation...
the longer the duration of unemployment, and the higher the unemployment rate
Most economists agree that eliminating unemployment insurance would...
Reduce unemployment rate and improve economic well-being
Structural unemployment will happen if...
Some wages are kept above their equilibrium level
When employers pay efficiency wages, they pay wages...
above equilibrium to increase productivity
Efficiency wages do what to structural unemployment?
Increase structural unemployment by keeping wages above equilibrium
As price level increases, the value of money...
Decreases
The principle of monetary neutrality refers to the idea that the supply of money...
Determines nominal variables, but not real variables
Most economists believe monetary neutrality provides a good description of...
the long run but not the short run
When money supply doubles which also double in the long run: price level, nominal wages, nominal GDP
All of the above
Velocity of money definition
The average number of times per year a dollar is spent
Quantity equation
M x V = P x Y
If money supply increase by 5%, what would happen to nominal GDP and real GDP?
Nominal GDP would increase by 5%, real GDP wouldn't change
Evidence from hyperinflation suggest that money growth and inflation...
Moved together
Printing money to pay for government expenditures...
Imposes a tax on anyone who holds that money
People can reduce inflation tax by...
Reducing cash holdings
Fisher effect; Real interest rate =
Nominal interest rate - inflation
As inflation increases, after tax interest...
Decreases
Wealth is distributed from creditors to debtors when inflation is...
Unexpectedly high
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