1. Final Review

2. Why is there always around 5% of the population unemployed? Frictional unemployment Seasonal unemployment

3. When do those on fixed incomes tend to struggle the most? When inflation pushes prices out of their reach

4. Why would Congress exercise contractionary fiscal policy? To reduce inflation

5. Most of the poor in the US don’t remain poor. What percent move into the upper 3/5 of the income distribution? 95%

6. What is the dollar value of all goods and services produced in the US? GDP $18.6 Trillion

7. What measurement reflects the overall size of an economy? GDP

8. What did the $54 billion worth of Apple products produced in 2013 add to? US GDP

9. What kind of unemployment did 5,000 workers who were laid off after Ford automated another part of its production facilities add to? Technological unemployment

10. How can the Fed directly pump more money into the banking system in hopes of reducing bank interest rates? Exercise open market operations

11. What kind of policy would the Fed use to deal with a recession? Expansionary monetary policy

12. How would the Fed use the discount rate to exercise tight money policy? Raise it

13. What should Congress do to the tax rate during a depression? Lower it

14. What kind of government spending is welfare and defense? Discretionary spending

15. What kind of spending accounts for most of the federal government’s budget? Mandatory spending

16. How could the government cripple a union’s ability to demand higher pay? Ban strikes

17. Rising prices can make GDP appear to have grown. How are price changes factored out of the dollar value of goods and services? Calculate real GDP

18. Unemployment rates jumped during the most recent recession due to: ________ _______? Cyclical unemployment

19. What rate of inflation do many economists believe is good for an economy? Creeping inflation

20. What category of labor would you call a manual laborer? Unskilled labor

21. What is the value of goods and services produced by Japanese firms in California? GDP

22. What is the value of goods and services produced by an American company in Guatamala? GNP

23. Who can be brought in to settle a labor dispute by requiring both labor and management to sign a contract to accept the decision the neutral third party provides? Arbitrator

24. What kind of union includes only skilled workers engaged in the same kind of work (electricians union)? Trade union

25. Due to this, investors tend to invest in riskier stocks: Inflation

26. What statistic makes clear that American workers are among the most productive in the world? Per capita GDP

27. What is the Consumer Price Index (CPI) used to calculate? The inflation rate

28. What intended effect does the Fed’s decision to sell government bonds have on GDP? Slow GDP to bring down inflation

29. Why wouldn’t the following be counted toward GDP? Secondhand sale

30. Underground economy (black market goods)

31. Intermediate good

32. How might the Fed use the Reserve Requirement to bring inflation under control? Raise it

33. Trick Question! How would the Fed use the tax rate to slow the rate of inflation? No! They can’t use the tax rate! The Fed uses Monetary policy Only Congress and the Pres. can change the tax rate!

34. What is the interest rate member banks must pay the Fed for overnight loans called? The discount rate

35. Unemployment within an industry that produces products consumers no longer want: Structural unemployment

36. Why does he Get paid more than him? Compensating differential

37. What happens to unemployment when minimum wages increase? Rates go up among those with the least skills (not worth the additional wages the government imposes) Usually most among innercity minorities

38. The dollar value of goods and services produced by American-owned capital: GNP (Gross National Product)

39. What theory of wages explains why He Earned that While he Earned only this Answer…

40. Traditional Theory of Wage Determination

41. Based on the traditional theory of wages, what determines how much you get paid? The market Supply and demand

42. What is the world’s standard for poverty? (live off of less than $___ a day) $1

43. Less than how much do the poor in the US live on? $10

44. What would happen to the unemployment rate if the Fed were to lower the discount rate? Decrease

45. What would happen to the unemployment rate of the Fed sold government bonds to member banks? Increase