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Sustainable banking involves which of the following?
a. Expanding globally
b. Making more profits
c. Providing services to customers
d. Taking stakeholder interests into account
 
Which of the following groups benefited most from quantitative easing?
a. Low-paid workers
b. Investors in equities
c. Indebted companies in emerging markets
d. Savers
 
Increasing sovereign debt is a worry in all but which one of the following circumstances?
a. When public spending is falling
b. When tax revenues fall
c. When public spending is spiralling out of control
d. When economic growth slows
 
The interest rate is determined in the
A) money market and has no influence on the goods market.
B) money market and influences the level of planned investment and thus the goods market.
C) goods market and has no influence on the money market.
D) goods market and influences the level of planned investment and thus the money market.
Answer: B
 
Output is determined in
A) the goods market and also influences money demand.
B) the money market and also influences money demand.
C) the goods market with no influence from the money market.
D) the money market with no influence on the goods market.
Answer: A
 
When income increases, the money demand curve shifts to the ________, which ________ the interest rate with a fixed money supply.
A) right; increases
B) right; decreases
C) left; increases
D) left; decreases
 
4) When income ________, the money ________ curve shifts to the right.
A) increases; demand
B) increases; supply
C) decreases; demand
D) decreases; supply
 
All but which one of the following is a drawback of 'self-regulation' in financial services?
a. It assumes companies will behave in responsible ways.
b. The company is not inclined to engage in ethical behavior unless compelled to do so.
c. The company is likely to put owners ahead of other stakeholders.
d. It reduces regulatory bureaucracy.
 
When did the gold standard prevail in the international finance?
a. the 1900s to 1930
b. 1917 to 1939
c. 1948 to the 1970s
d. the 1870s to 1914
 
Which sector has seen the highest surges in stock prices in the decade following the 2008 financial crash?
a. Retailers
b. Car manufacturers
c. Oil companies
d. High-tech companies
 
The Argentina financial crisis was caused mainly by which of the following?
a. The activities of hedge funds
b. Too much accumulated sovereign debt
c. Poor governance
d. Too many indebted companies
 
Rising debt burdens of private-sector companies in emerging economies are a concern for which of the following reasons?
a. Governments will become politically unstable.
b. Companies might have difficulty repaying, due to volatility in global markets.
c. Governments will probably need to step in to prop up indebted companies.
d. Banks are reluctant to lend to companies.
 
Fiscal policy affects the goods market through
A) changes in money supply.
B) changes in taxes and money supply.
C) changes in government spending and money supply.
D) changes in taxes and government spending.
 
Fiscal policy affects the money market through its effect on
A) income and money supply.
B) income and money demand.
C) money supply and money demand.
D) money supply and income.
Answer: B
 
Hedge funds are criticized for which one of the following reasons?
a. They make lots of money.
b. Their speculative activities can distort markets.
c. They attract people who like to gamble.
d. Their activities can annoy corporate decision makers.
 
Why has globalization increased financial risks?
a. Global production now involves many countries.
b. Global supply chains need increased sources of capital.
c. Global capital flows can be highly volatile.
d. Global companies seek differing locations as part of their financial strategy.
 
Banking scandals have included all but which one of the following?
a. Rigging the interbank lending rate
b. Fines for mis-selling financial products
c. The separation of retail banking from investment banking
d. The Global Restructuring Group of RBS
 
Which of the following best describes the Washington consensus as originally conceived?
a. Comprehensive deregulation
b. Market reforms moderated by social needs
c. A priority on reducing public debt, despite economic hardships
d. An emphasis on market reforms as the only way out of financial crises
 
Monetary policy affects the goods market through its effect on
A) the interest rate and planned investment.
B) the interest rate and money demand.
C) income and planned investment.
D) income and money demand.
 
Which of the following is an example of an expansionary fiscal policy?
A) the Fed selling government securities in the open market
B) the federal government increasing the marginal tax rate on incomes above $200,000
C) the federal government increasing the amount of money spent on public health programs
D) the federal government reducing pollution standards to allow firms to produce more output
 
The objective of a contractionary fiscal policy is to
A) reduce unemployment.
B) increase growth in output.
C) reduce inflation.
D) increase stagflation.
 
The objective of an expansionary fiscal policy is to
A) reduce unemployment.
B) reduce inflation.
C) reduce growth in output.
D) reduce growth in international trade.
Answer: A
 
A decrease in the money supply aimed at decreasing aggregate output is referred to as
A) contractionary fiscal policy.
B) expansionary fiscal policy.
C) expansionary monetary policy.
D) contractionary monetary policy.
 
An example of a contractionary monetary policy is
A) an increase in the required reserve ratio.
B) a decrease in the discount rate.
C) a reduction in the taxes banks pay on their profits.
D) the Fed buying government securities in the open market.
 
An example of an expansionary monetary policy is
A) a decrease in the required reserve ratio.
B) the Fed selling bonds in the open market.
C) an increase in the required reserve ratio.
D) a law placing a ceiling on the maximum interest rate that banks can pay to depositors.
 
An intended goal of contractionary fiscal and monetary policy is
A) an increase in interest rates.
B) an increase in the price level.
C) a decrease in the unemployment rate.
D) a decrease in the level of aggregate output.
 
Which of the following sequence of events follows an expansionary monetary policy?
A) r↑ ⇒ I↓ ⇒ AE↓ ⇒ Y↓.
B) r↑ ⇒ I↑ ⇒ AE↓ ⇒ Y↑.
C) r↓ ⇒ I↑ ⇒ AE↑ ⇒ Y↑.
D) r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↓.
 
Why was the World Bank set up?
a. To maintain order in the international monetary system
b. To promote economic development
c. To preserve peace through international cooperation
d. To formulate a coordinated policy response to financial crises
 
A company's decision to acquire another company in a different country is a strategy that is often used for which of the following purposes?
a. To streamline corporate decision making
b. To gain rapid entry into a new market
c. To gain an immediate boost in profits
d. To streamline operations
 
Which of the following was an outcome of Russia's currency crisis of 1998?
a. A resurgence of market reforms
b. The fall of the government and election of Vladimir Putin
c. A reduction in state ownership in the economy
d. Austerity measures to reduce government debt
 
Which of the following was beneficial during the gold standard period?
a. Countries could not control their own interest rates.
b. Gold became scarce.
c. Governments lost some control over monetary policy.
d. There was exchange-rate stability among countries.
 
The Washington consensus includes all but which one of the following policies?
a. Market reforms
b. Liberalizing FDI
c. Deregulation
d. Nationalizing key industries
 
The severity of the crowding-out effect will be reduced if
A) the Fed increases the money supply at the same time the federal government increases  government spending.
B) the Fed decreases the money supply at the same time the federal government increases government spending.
C) the Fed does not change the money supply when the government increases government spending.
D) business firms become pessimistic about the future.
 
If the Fed decreases the money supply at the same time the federal government decreases government spending, the crowding-out effect
A) will not be affected.
B) will be increased.
C) will be reduced.
D) could either increase or decrease depending on the sensitivity of planned investment to the  interest rate.
 
The steeper the planned investment schedule (curve)
A) the larger is the crowding-out effect.
B) the smaller is the crowding-out effect.
C) the larger is the change in planned investment as a result of changes in the interest rate.
D) the smaller is the change in money demand as a result of changes in the interest rate.
 
The flatter the planned investment schedule (curve)
A) the smaller is the change in planned investment as a result of changes in the interest rate.
B) the smaller is the crowding-out effect.
C) the larger is the crowding-out effect.
D) the larger is the change in money demand as a result of changes in the interest rate.
 
If planned investment does not fall when the interest rate rises, there will be
A) a slight crowding-out effect.
B) a substantial crowding-out effect.
C) no crowding-out effect.
D) a complete crowding-out effect.
 
Which of the following reduces the severity of the crowding-out effect whenever  government spending increases?
A) An expansionary monetary policy
B) An expansionary fiscal policy
C) A contractionary monetary policy
D) A contractionary fiscal policy
 
There will be no crowding-out effect when the government increases spending and the planned investment schedule (curve) is
A) vertical.
B) downward sloping.
C) upward sloping.
D) horizontal.
 
Which of the following is true of a banking crisis?
a. It results in a sharp appreciation in the value of the currency.
b. It happens due to a decline in domestic borrowing.
c. It leads to individuals and companies withdrawing their deposits from banks.
d. It occurs due to asset price deflation.
 
A merger of pharmaceutical companies is likely to lead to all but which one of the following?
a. More investment in R&D
b. Lower prices for drugs in poor countries
c. More marketing expenditure in global markets
d. Ability to put greater pricing pressure on health providers
 
If firms sharply increase the number of investment projects undertaken when interest rates fall and sharply reduce the number of investment projects undertaken when interest rates increase, then, ignoring the crowding out effect,
A) expansionary fiscal policy will be very effective.
B) expansionary monetary policy will be very effective.
C) contractionary fiscal policy will be very effective.
D) contractionary monetary policy will not be very effective.
 
If planned investment is sensitive to the interest rate, an increase in the interest rate causes the
A) aggregate expenditure curve to shift down.
B) aggregate expenditure curve to shift up.
C) long-run aggregate supply curve to shift out.
D) investment demand schedule to shift to the right.
 
Monetary policy can be effective only if
A) the money supply reacts to changes in the interest rate.
B) planned investment reacts to changes in the interest rate.
C) money demand reacts to changes in the interest rate.
D) government spending reacts to changes in the interest rate.
 
Dan, a writer for a business magazine, interviewed managers at 100 large corporations.  All of the managers indicated that the primary determinant of planned investment is expected  sales and not the interest rate. From this information, Dan concluded that
A) fiscal policy would be very effective, but monetary policy would not be very effective.
B) neither expansionary nor contractionary fiscal policy would be very effective.
C) both expansionary and contractionary monetary policy would be very effective.
D) contractionary fiscal policy would not be very effective, but contractionary monetary policy would be very effective.
 
Assume that investment spending depends on the interest rate. As the supply of money is  increased, the interest rate ________ and planned investment spending ________.
A) falls; increases
B) falls; decreases
C) rises; decreases
D) rises; increases
Answer: A
 
If the interest rate is so high that it is hurting economic growth, the recommended policy action should be
A) an expansionary fiscal policy.
B) an expansionary monetary policy.
C) a contractionary monetary policy.
D) the demand for money should be increased.
 
Which of the following is a Bretton Woods institution?
a. The World Trade Organization (WTO)
b. The Securities and Exchange Commission (SEC)
c. The International Monetary Fund (IMF)
d. The International Labour Organization (ILO)
 
The market in which the equilibrium level of aggregate output is determined is the
A) labor market.
B) bond market.
C) money market.
D) goods market.
 
A country's exporters favor all but which one of the following?
a. A well regulated currency market
b. A strong domestic currency
c. A weak domestic currency
d. A stable currency market
 
The market in which the equilibrium level of the interest rate is determined is the
A) money market.
B) goods market.
C) labor market.
D) services market.
 
The two links between the goods market and the money market are
A) income and the inflation rate.
B) the interest rate and the unemployment rate.
C) income.
D) the inflation rate and the unemployment rate.
 
Which of the following refers to the gold standard?
a. Pegging currencies to gold and guaranteeing convertibility
b. The most valuable currency in the world at any given point in time
c. Conducting international trade by physically exchanging gold
d. The common global standard of gold quality to be maintained
 
All but which one of the following was a cause of the global financial crisis 2008?
a. Risky activities of global banks
b. The collapse in the US housing market
c. Regulatory failures
d. Too much government regulation of financial services
 
Monetary policy affects the money market by
A) changing the interest rate, which changes planned investment.
B) directly increasing consumption, which increases aggregate output.
C) changing the money supply, which changes the interest rate.
D) changing the level of aggregate output, which changes the level of planned expenditure.
 
If the investment demand curve is vertical,
A) both monetary and fiscal policy are ineffective.
B) both monetary and fiscal policy are effective.
C) monetary policy is effective, but fiscal policy is ineffective.
D) monetary policy is ineffective, but fiscal policy is effective.
 
If the federal government is reducing net taxes to stimulate the economy at the same time  the Fed is selling bonds in the open market, the effectiveness of the expansionary fiscal policy  will be
A) increased, because the Fed s actions will result in higher interest rates.ʹ
B) reduced, because the Fed s actions will result in higher interest rates.ʹ
C) increased, because the Fed s actions will result in lower interest rates.ʹ
D) reduced, because the Fed s actions will result in lower interest rates.ʹ
 
If the Fed accommodates a fiscal expansion by increasing the money supply so that the  interest rate increases only a little, the crowding-out effect will
A) be zero.
B) increase.
C) decrease, but still be positive.
D) become infinitely large.
 
Which of the following is determined in the goods market?
A) the equilibrium interest rate
B) money demand
C) income
D) money supply
 
Which of the following is determined in the money market?
A) the equilibrium interest rate
B) income
C) employment
D) the government budget
 
If planned investment is perfectly unresponsive to changes in the interest rate, the planned
investment schedule
A) has a negative slope.
B) is horizontal.
C) is vertical.
D) has a positive slope.
 
If planned investment is perfectly responsive to changes in the interest rate, the planned
investment schedule
A) has a negative slope.
B) is horizontal.
C) is vertical.
D) has a positive slope.
 
Which of the following is an advantage of the pegged exchange rate?
a. It leads to financial stability.
b. It attracts foreign investors.
c. It protects the country against economic downturn.
d. It deters speculators on the country's currency.
 
Which of the following refers to a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand?
a. Pegged exchange rate
b. Fixed exchange rate
c. Floating exchange rate
d. Forward exchange rate
 
The money market and the goods market are linked through the impact of the interest rate  on
A) government spending.
B) planned investment.
C) money supply.
D) unplanned spending.
 
Which of the following equations represents equilibrium in the goods market?
A) Y = Ms.
B) Md = C + I + G.
C) Md = Ms.
D) Y = C + I + G.
 
Risks arising in derivatives trading include all but which one of the following?
a. Speculative investors are active in trading.
b. There are potentially huge profits to be made in such trading.
c. The value of securities is hard to assess.
d. Much of the trading is unregulated.
 
Lessons from the Asian financial crisis of 1997-8 included all but which one of the following?
a. Financial crisis can spread to the entire economy.
b. IMF conditions requiring market reforms can cause more economic hardship.
c. Global capital flows are invariably beneficial in developing economies.
d. Financial contagion can spread from one country to another
 
In terms of the gold standard, the amount of currency needed to purchase one ounce of gold was referred to as the:
a. gold par value
b. gold to dollar ratio
c. gold reserve ratio
d. gold mix ratio
 
Which of the following equations is correct?
AE = C + I + G + (X - M)
 
The 45-degree line in the Keynesian model represents a set of points where _____ equals _____
disposable income; consumption
 
A depression economy has considerable slack, so:
unemployment is high
 
Aggregate expenditures are equal to:
the total of consumption plus investment plus government expenditures plus exports minus imports
 
Consumption spending is:
spending by individuals and households on both durable and nondurable goods
 
_____ is the change in consumption associated with a change in income
The marginal propensity to save
 
Saving is equal to:
disposable income minus consumption
 
As income increases, consumption ______
increases at a slower rate
 
MPC + MPS:
equals 1
 
If the stock market collapses, consumption will:
decrease because people feel less wealthy
 
Investment spending:
tends to be volatile
 
John Maynard Keynes focused on _____ to explain how the economy reaches short-term equilibrium employment, output, and income
aggregate spending
 
In the simple Keynesian model, equilibrium exists when:
investment spending equals saving
 
When the economy is in equilibrium in the simple Keynesian model:
saving is equal to investment
 
According to Keynes, as income grows:
both consumption spending and saving grow
 
When taxes are decreased, disposable income _______ and consumption spending ______________ multiplied by the change in disposable income
rises; rises by the marginal propensity to consume
 
The spending reduction necessary to bring an overheated economy back to full employment is called the:
inflationary gap
 
The GDP gap divided by the multiplier yields the:
inflationary or recessionary gap
 
Between 1929 and 1933, government spending _____ and net exports _____
stayed the same; declined
 
Economic growth is best defined as an increase in
Either real GDP or real GDP per capita
 
Real GDP per capita is found by
Dividing real GDP by population
 
Real GDP per capita
Can grow either more slowly or more rapidly than GDP
 
Which of the following best measures improvements in the standard of living of a nation
Growth of real GDP per capita
 
If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, it's real GDP per capital will
Remain constant
 
For a nations real GDP per capita to rise during a year
Real GDP must increase more rapidly than population
 
Growth is advantageous to a nation because it
Lessens the burden of scarcity
 
For comparing changes in potential military strength and political preeminence, the most meaningful measure of economic growth would be changes in
Total real output
 
Between years one and two, real GDP grew by______ percent and Alta
5
 
Between years one and two, real GDP per capita grew by approximately______ percent in Alta
4
 
Given the annual rate of economic growth, the rule of 70 allows one 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 adding 14 to annual growth rate
Dividing 70 by the annual growth rate
 
At an annual growth rate of 7%, real GDP will double in about
10 years
 
If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately
14 years
 
If the economy's real GDP doubles in 18 years, we can
Conclude that its average annual rate of growth is about 3.9%
 
Between 1950 and 2015, US real GDP grew at an average annual rate of about
3.1%
 
Between 1950 and 2015, US real GDP per capita grew at an average annual rate of about
2%
 
Real per capita GDP in the United States in 2015 was approximately
$50,820
 
Under what circumstances do rates of economic growth understate the growth of economic well-being
Product quality has improved
 
Which of the following statements is most accurate about modern economic growth
Modern economic growth is characterized by sustained and ongoing increases in living standards
 
Countries that have experienced modern economic growth have also tended to
Move toward more democratic forms of government
 
The Industrial Revolution and modern economic growth resulted in
The average human life span more than doubling
 
Economic historians date the start of the Industrial Revolution around the year 1776, when James Watt
Invented and built a more powerful and efficient steam engine
 
Real per capita GDP
Was much more equal across nations in 1820 than it is today
 
Which of the following economic regions has experienced the least growth in real GDP per capita since 1820
Africa
 
Which of the following economic regions has experienced the most growth in real GDP per capita since 1820
United States
 
Which of the following statements is most accurate about the prospects for poorer countries catching up with richer countries
Catching up as possible, as follower countries tend to grow faster than leader countries
 
In 1998, living standards in the United States were nearly_____ times higher than those in Africa
20
 
Economic growth rates and follower countries
Tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs
 
Real GDP per capita in the United States (as of 2010) exceeds that of France primarily because
The United States has a higher percentage of the working age population in the labor force and because US employees average about 14% more hours worked per year
 
Based on the annual number of hours worked per capita, labor supply in the United States exceeds that of France by about_____ percent
34
 
Strong property rights are important for modern economic growth because
People are more likely to invest if they don't fear that others can take their returns on investment without compensation
 
Which of the following institutional structures is most likely to promote growth
A well enforced system of patents and copyrights
 
Which of the following institutional arrangements is most likely to promote growth
Unrestricted trade between nations
 
A competitive market system
Encourages growth by allowing producers to make profitable investment decisions based on market signals
 
Free trade
Encourages growth by promoting the rapid spread of new inventions and innovations
 
What is the aggregate expenditure model?
The aggregate expenditure model is a simple model that helps us understand the relationships among some of the economic variables involved in the business cycle.
 
What is nominal GDP?
Nominal GDP is the current market value of all final goods and services produced in a country in a year.
 
What is real GDP?
Real GDP corrects nominal GDP for the effects of inflation.
 
What does the aggregate expenditure model focus on?
The aggregate expenditure model focuses on the short-run relationship between total spending and real GDP.
 
What is the central assumption of the aggregate expenditure model?
The central assumption of the aggregate expenditure model is that the price level doesn't change.
 
What does the assumption that the price level doesn't change mean for the model?
The assumption that the price level doesn't change means that we don't have to worry about a difference between real GDP and nominal GDP.
 
What is the key idea of the aggregate expenditure model?
The key idea of the aggregate expenditure model is that in any particular year, the level of real GDP is determined mainly by the level of aggregate expenditure.
 
What do we need to understand the relationship between aggregate expenditure and real GDP?
To understand the relationship between aggregate expenditure and real GDP, we need to look more closely at the components of aggregate expenditure.
 
What are the four components of aggregate expenditure identified by Keynes?
consumption, investment, government purchases, and net exports.
 
A decrease in the price level
causes a downward movement along the existing AD curve
 
If the nominal wage is $12 per hour and the price level (as measured by a price index) is 2, it follows that the real wage is _________ per hour.
$6.00
 
Suppose consumption decreases at each price level. As a result, aggregate demand __________, and the AD curve shifts __________.
decreases; leftward
 
A decrease in consumption caused by a factor other than a change in the price level
shifts the AD curve to the left.
 
If consumption increases,
the AD curve will shift rightward, which will push the price level up.
 
A decrease in the price of a nonlabor input such as machinery
shifts the SRAS curve to the right.
 
The product of ____________________ and _________________ is equal to the total amount of spending in an economy.
the money supply; velocity
 
A falling interest rate affects the demand for consumer __________ and shifts the AD curve to the __________.
durables; right
 
If wage rates rise at the same time that labor productivity increases, what is the effect on short-run aggregate supply (SRAS)?
SRAS may rise, fall, or remain constant.
 
What is consumption in the context of aggregate expenditure?
Consumption is the spending by households on goods and services, including everything from food to haircuts to snowmobiles.
 
How does the macroeconomic equilibrium model achieve equilibrium?
we assume that the price level is constant, so price adjustments can't cause the market to move to equilibrium.
 
What is the easiest way to show that the economy will move toward an output level that is equal to planned aggregate expenditure?
By considering what would happen if the two were not equal.
 
How would a manager respond to a decrease in inventories?
The manager would likely order more copies of the product to replenish inventory.
 
What happens when stores and producers in the economy experience similar unplanned drops in inventories?
They will increase their orders, and the output of the economy (GDP) will increase.
 
During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly __________
10%
 
The unemployment rate may underestimate the true extent of unemployment if:
many people become discouraged and cease looking for work.
 
A university student who is enrolled in school fulltime and not seeking employment is considered:
out of the labor force.
 
During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force
25%
 
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
out of the labor force.
 
The unemployment rate may underestimate the true extent of unemployment if:
many part-time employees would like to work fulltime, but are unable to get the additional work
 
The type of unemployment that occurs because of a recession is called
cyclical unemployment
 
A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:
cyclical unemployment
 
The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________.
business cycle
 
If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to:
94 million.
 
The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:
14.4%
 
A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:
frictionally unemployed
 
Frictional unemployment occurs when:
a worker decides to quit one job to seek a different job.
 
Which of the following statements is incorrect?
Employment insurance compensation increases the opportunity cost of being unemployed.
 
If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:
25%
 
Insofar as government public policy is concerned, the best way to battle unemployment would be __________________.
to minimize recessions
 
The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________.
4%-6%
 
If a nation's labor force receives a significant influx of young workers:
the natural rate of unemployment is likely to increase.
 
Freelife, New Hampshire has a labor force of 78,567 persons and employment of 74,382. The unemployment rate for the city is:
5.3%
 
The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce
frictional unemployment
 
If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:
25%.
 
Cyclical unemployment arises when
business activity in the macroeconomy declines.
 
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
out of the labor force.
 
Through good economic years and bad, many European economies had unemployment rates hovering near _________ since the 1970s.
10%
 
Women composed __________ of the paid workforce in 1900 and 50% of the paid workforce in 2010.
18%
 
How would a manager respond to an unplanned increase in inventories?
The manager would likely order fewer copies of The Fifth Risk, say 85 copies, in hopes of selling all of the copies ordered this time
 
What happens if many other stores and producers experience similar unplanned increases in inventories?
If many other stores and producers throughout the economy have experienced similar unplanned increases in inventories, they too will decrease their orders.
 
What happens when firms cut back production in response to a decrease in orders?
In response to the decrease in orders, firms will cut back production and GDP will decrease.
 
What can happen as a result of firms laying off workers due to a decrease in production?
As a result of firms laying off workers due to a decrease in production, total employment will decrease.
 
What actions might managers of small-town Tim Hortons have to take if major employers in the area close?
Managers of small-town Tim Hortons may have to lay off workers if major employers in the area close.
 
What happens if economists forecast that planned aggregate expenditure will decline in the future?
If economists forecast that planned aggregate expenditure will decline in the future, that is equivalent to forecasting that GDP will decline and that the economy will enter a recession.
 
Why do individuals and firms closely watch these forecasts?
Individuals and firms closely watch these forecasts because changes in GDP can have dramatic consequences.
 
What tends to increase when GDP increases?
When GDP increases, wages, profits, and job opportunities also tend to increase.
 
What can happen when GDP declines?
When GDP declines, it can be bad news for a lot of workers, firms, and
job seekers.
 
What might the federal and provincial governments do if economists forecast that the economy is headed for a recession?
If economists forecast that planned aggregate expenditure is likely to decline and the economy is headed for a recession, the federal and provincial governments may implement macroeconomic policies in an attempt to head off the decrease in expenditure and keep the economy from falling into recession.
 
During the past century, ______ in the United States has grown at an average annual rate of approximately 3%. Cyclical movements in real GDP have accompanied this growth of output.
Real GDP
 
two back to back quarters of declining real GDP. Characterized by declining real GDP and rising unemployment
A Recession
 
the level of employment that results form the efficient use of the labor force taking into account the normal (natural) rate of unemployment due to information costs, dynamic changes, and the structural conditions of the economy.
Full Employment
 
Both _____ and ______ are associated with the economy's maximum sustainable rate of output.
Full employment and the natural rate of unemployment
 
fluctuations in the general level of economic activity as measured by variables such as the rate of unemployment and changes in real GDP
Business Cycle
 
During economic expansions, construction and investment are ________.
increasing
 
the number of people 16 years of age and older who are either employed of unemployed
Civilian Labor Force
 
a person not currently employed who is either 1) actively seeking employment or 2) waiting to begin or return to a job.
Unemployed
 
________ in real GDP influence the demand for labor and employment.
Fluctuations
 
the number of people in the civilian labor force 16 years of age andolder who are either employed or actively seeking employment as a percentage of the total civilian population 16 years of age and over.
Labor Force Participation Rate