Economics Test 5

Question 1

Products that will be worn out within a year

Answer 1

Consumer Nondurable goods

Question 2

A lack of government restrictions on foreign trade

Answer 2

Free trade

Question 3

Total dollar value of all final goods and services produced by a nation in one year

Answer 3

Gross domestic product

Question 4

When the government does put restrictions on foreign trade

Answer 4

Protectionism

Question 5

A negative balance of trade

Answer 5

Trade deficit

Question 6

A positive balance of trade

Answer 6

Trade surplus

Question 7

people who are unemployed because they are temporarily between jobs (such as those seeking a better job)

Answer 7

Frictional unemployment

Question 8

those who are out of work because of seasonal factors (this is very common in agricultural countries)

Answer 8

Seasonal unemployment

Question 9

Caused by recession

Answer 9

Cyclical unemployment

Question 10

when a worker’s skills do not match available jobs; this may occur for two reasons

Answer 10

Structural unemployment

Question 11

people who have been out of work for six months or longer and the government assumes they have stopped looking for work

Answer 11

Discouraged workers

Question 12

gross private domestic investment

Answer 12

GPDI

Question 13

measures the changes in the prices that affect a selected group of goods and services

Answer 13

Consumer price index

Question 14

the gross domestic product adjusted for inflation

Answer 14

Real GNP/GDP

Question 15

a true measure of a nation’s wealth

Answer 15

Per capita real GNP/GDP

Question 16

when a nation’s businesses raise prices, workers demand higher wages which further pushes up prices so that the businesses may compensate in profits

Answer 16

Cost-push inflation

Question 17

consumers begin demanding more of everything which causes prices to rise, higher wages must be paid, and prices rise again

Answer 17

Demand-Pull inflation

Question 18

a sustained rise in the average price level

Answer 18

Inflation

Question 19

the ability of the government to affect output and employment through taxes borrowing and spending

Answer 19

Fiscal policy

Question 20

a tax the government levies on the sale of certain targeted consumer goods

Answer 20

Excise tax

Question 21

takes a greater percentage of a person’s income as the income increases

Answer 21

Progressive tax

Question 22

takes a small percentage of a person’s income as the income rises

Answer 22

Regressive tax

Question 23

all people pay the same percentage (Flat Tax)

Answer 23

Proportional tax

Question 24

During a recession the government borrows and spends to “prime” the economy

Answer 24

“Pump priming”

Question 25

the means by which any given change in expenditures causes a greater change in national income

Answer 25

Expenditure multiplier

Question 26

Which group is hurt most from free trade

Answer 26

The noncompetitive industries

Question 27

What decreases during an expansion phase in a business cycle

Answer 27

The unemployment rate

Question 28

What factor triggers a recessionary phase in the business cycle

Answer 28

The unwillingness of the consumer to pay higher prices

Question 29

Who is hurt the most from protectionist legislation

Answer 29

Domestic consumers

Question 30

How long must a person remain unemplyed before he is no longer considered part of the labor force

Answer 30

6 months

Question 31

what are the minimum and maximum ages of people included in unemployment statistics

Answer 31

16 & 64

Question 32

Which phase of the business cycle does not occur every cycle

Answer 32

Depression

Question 33

Supporters of free trade believe the protection of which group is more important

Answer 33

Consumers

Question 34

Progressive personal income taxes tend to decrease or increase people's incentive to work harder

Answer 34

Decrease

Question 35

The U.S. has experienced inflation every year since this year

Answer 35

1961

Question 36

Is 0% unemployment an ideal goal for a country

Answer 36

no

Question 37

When an employer has to raise the minimum wage for its UNSKILLED workers, what does the employer also do to balance their overhead costs

Answer 37

layoff workers

Question 38

which group benefits the most from inflation

Answer 38

Borrowers

Question 39

which group is harmed the most from inflation

Answer 39

Creditors (lenders)

Question 40

What becomes a major problem when government uses spending as a tool of fiscal policy

Answer 40

Uncertainty of the expenditure multiplier

Question 41

What is the largest expenditure in the federal budget

Answer 41

Income security programs

Question 42

How does fiscal policy destroy a nation's future productivity

Answer 42

Borrows money that businesses need

Question 43

What is the greatest source of federal tax revenue

Answer 43

Personal income tax

Question 44

What aspect of fiscal policy has the most devastating effect on the national work ethic

Answer 44

Progressive taxation

Question 45

List in order the phases of the business cycle

Answer 45

``` ○ Expansion ○ Peak ○ Recession ○ Trough Depression ```

Question 46

List the three theories that explain the business cycle

Answer 46

○ Sunspot ○ Psychological ○ Monetary

Question 47

List the basic economic groups that are used to estimate GDP:

Answer 47

Households ○ Businesses ○ Government Foreign Buyers

Question 48

Why is frictional unemployment not necessarily bad for an economy

Answer 48

They are looking for a better job which is good. Define frictional unemployment Why isn't it bad. Employers have freedom to replace employees with more productive employes. Demonstrates that the labor market is competitive

Question 49

Products with a life expectancy of at least one year

Answer 49

Consumer durable goods