Macro Ch 26 & 27 JTCC

The business cycle depicts

• fluctuations in the general price level.

• the phases a business goes through from when it first opens to when it finally closes.

• the evolution of technology over time.

• short-run fluctuations in output and employment.

The term "recession" describes a situation where

• inflation rates exceed normal levels.

• output and living standards decline.

• an economy's ability to produce is destroyed.

• government takes a less active role in economic matters.

Real GDP measures the

• total dollar value of all goods and services produced within the borders of a country using current prices.

• value of final goods and services produced within the borders of a country, adjusted for price changes.

• total dollar value of all goods and services consumed within the borders of a country, corrected for price changes.

• value of all goods and services produced in the world, using current prices.

Why are high rates of unemployment of concern to economists?

• Higher rates of unemployment generally lead to higher inflation rates.

• Environmental destruction is more prevalent when unemployment rates are high.

• There is lost output that could have been produced if the unemployed had been working.

• All of these options are reasons why economists are concerned about high unemployment rates.

Inflation is defined as

• a general increase in the price level.

• the rate of growth in nominal GDP.

• a situation where all prices in the economy rise simultaneously.

• the growth phase of the business cycle.

Modern economic growth refers to countries that have experienced an increase in

• real GDP over time.

• nominal GDP over time.

• real output spread evenly across all sectors of the economy.

• output per person.

Savings are generated whenever

• prices are rising.

• current spending exceeds current income.

• current income exceeds current spending.

• real GDP exceeds nominal GDP.

Demand shocks

• refer to unexpected changes in the desires of households and businesses to buy goods and services.

• refer to unexpected changes in the ability of firms to produce and sell goods and services.

• always have a negative effect on the economy.

• cause fewer short-run fluctuations than supply shocks.

In situations of sticky prices and negative demand shocks, we would expect firms to

• deplete inventories before increasing production.

• reduce production before building up inventories.

• build up inventories before reducing production.

• lower prices before reducing production or building up inventories.

Macroeconomics is mostly focused on

• the individual markets within an economy.

• only the largest industries in the economy.

• the economy as a whole.

• why specific businesses fail.