Economics Unit 3 Quiz

Historically, price levels have risen over time. When is inflation most likely to be problematic?

• In the short run

• In the long run

• Always

Which of the following forms of GDP is most useful when economists are determining which of two economies is better off?

• Nominal GDP

• Real GDP

• GDP per capita

In which situation is inflation most problematic?

• Making payments on a fixed-rate home loan

• Paying rent for an apartment

• Earning wages that are annually adjusted to reflect changes in the CPI

True or False, an unemployment rate of 2.9% means 2.9% of the total U.S. population is unemployed.

• True

• False

If the economy is experiencing an accelerating GDP growth rate, the inflation rate will most likely

• Increase

• Decrease

• Become negative

What does the Consumer Price Index (CPI) primarily measure?

• The average total spending by households in a year for goods and services

• The price level for a representative market “basket” of consumer goods and services

• The price level for all goods and services produced in an economy

Which type of underutilized labor is of least concern for economists?

• People who lost their job during a contractionary period

• People who are frustrated by the job search and have given up looking for work

• People who recently graduated and are looking for work for the first time

How does inflation affect the cost of living?

• It decreases the cost of living by increasing the value of money.

• It has no impact on the cost of living.

• It increases the cost of living by reducing the purchasing power of money.

Which of these points best represents an economy with an unusually high unemployment rate?

• Points K and I

• Points K and J

• Points I and L

Which of the following is most likely to cause an increase in the inflation rate?

• An increase in the overall savings rate in the economy.

• An increase in consumer demand for many goods and services.

• A decrease in production costs for many goods and services.