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WorksheetsCh. 14 Economic Instability
Total questions: 38
Worksheet time: 22mins
What is the difference between a recession and a depression?
A recession, although economically painful, usually last less than a year
A depression is a more long lasting recession with heavy unemployment
A recession is not than important in the business cycle
A depression is not as bad as it's made out to be
Why did the government declare a "bank holiday" in 1933?
To prevent "panic withdrawals" from banks
Many banks were failing and deposits (person's money) were not protected
World War II began
The stock market crash
How did easy and plentiful credit contribute to the Great Depression?
Made people vulnerable to high interest rates
Made people vulnerable to minor business fluctuations
Made people vulnerable to depression scrip
Made people vulnerable to foreign loans
When do businesses invest heavily in capital goods?
a recession
an expansion
a contraction
a peak
What is an inventory adjustment?
a company will cut back on inventory at the sign of a downturn
a company will add to inventory at the sign of an expansion
a change in interest rates
the closing of banks during a downturn
What does an innovation usually trigger in industry?
a company will gain on edge on competition
a company's sales might go up
a company's competition will have to copy to catch up
a company might catch up with the backlog of orders
What happens when the Fed follows an easy money policy?
interest rates are low
loans are easy to get
the private sector (business) is encouraged to borrow and invest
The economy is stimulated and grows for a short period
Give an example of a positive and negative external shock.
positive - an island off the coast of Japan was found to have 700 years worth of rare earth elements
positive - a war in the Middle East cuts oil production and raises the cost
negative - the corona virus causes America to shut all business activity for a period of months
negative - a new software is released that will speed up the internet 50X above current speeds
What is an econometric model?
a graph that shows how the economy behaves
an algebra equation that shows how the economy behaves
a device that shows how the economy behaves
an app that shows how the economy behaves
What is the Index of Leading Indicators?
a monthly statistical series that usually turns down
before real GDP turns down
statistical indicators, such as the length of
the average workweek
increased demand for loans causes interest rates to rise
when “easy money” policies are in effect
Who are the unemployed?
people available for work who made a specific effort to find a job during the past month
during the most recent survey week, worked less than one hour for pay or profit
worked in a family business without pay forless than 15 hours a week
those who have become too frustrated or discouraged to look for work
What formula is used to calculate the unemployment rate?
the number of unemployed individuals divided by the total number of persons in the civilian labor force
the number of unemployed individuals divided by the total number of persons in the country
the number of unemployed individuals divided by the total number of persons in 50,000 households
the number of unemployed individuals divided by the total number of persons in 2,000 counties
For what two reasons do the statistics actually understate employment conditions?
those who have become too frustrated or discouraged to look for work
people are considered employed even when they hold part-time jobs
people are also classified as unemployed if they worked in a family business without pay for less than 15 hours a week
nearly one-half of the population of the United States belongs to the civilian labor force
How does automation affect unemployment rates?
a drastic reduction in the number of workers needed for production
many people put off buying durable goods such as automobiles, refrigerators, washers, and dryers
carpenters and builders, for example, have less work in the winter
people reduced their demand for horses, buggies, and buggy whips
What is full employment?
unemployment under 5%
unemployment under 10%
unemployment under 3.9%
There is no set standard
What is the price level?
the relative magnitude of prices at one point in time
the causes of inflation and its consequences.
changes in the level of prices
changes in prices, employment, and output
How is price level used in determining the rate of inflation?
economists select a market basket of goods.
economists construct a price index, such as the consumer price index (CPI)
examine the causes of inflation and its consequences
the relative magnitude of prices at one point in time
What is the difference between creeping inflation and galloping inflation?
inflation in the range of 1 to 3 percent per year.
inflation that can go as high as 100 to 300 percent.
inflation in the range of 500 percent a year
negative inflation
What is hyperinflation?
inflation in the range of 1 to 3 percent per year.
inflation that can go as high as 100 to 300 percent.
inflation in the range of 500 percent a year
negative inflation
In what way does excessive demand cause inflation?
consumers, businesses, and governments converge on stores
shortages occur and prices go up
blames inflation only on the federal government’s deficit spending
rising input costs drive up the cost of products for manufacturers and cause inflation
How do labor costs affect inflation?
consumers, businesses, and governments converge on stores
shortages occur and prices go up
blames inflation only on the federal government’s deficit spending
rising input costs drive up the cost of products for manufacturers and cause inflation
What is the wage-price spiral?
higher prices force workers to ask for higher wages
producers try to recover that cost with higher prices
shortages occur and prices go up
an unexpected increase in the cost of non-labor inputs
What is excessive monetary growth?
an unexpected increase in the cost of non-labor inputs
the money supply grows faster than real GDP
prices are “pulled up” by excessive demand
it involves the federal government’s deficit
How does inflation affect the purchasing power of the dollar?
the most obvious effect of inflation is that the dollar buys less
higher prices force workers to ask for higher wages
decrease in the general price level
we must first examine how it is measured
What part of the population is inflation especially hard on?
the rich
fixed income people
soldiers
mothers
What happens if people change their spending habits?
disruption in the economy
the price of borrowed money can go up
tempts some people to speculate heavily
inflation alters the distribution of income
To evaluate the distribution of income, economists use the ___, which shows how much the actual distribution of income varies from an equal distribution.
Demand Curve
Lorenz Curve
Supply Curve
Production Possibilities Curve
This graph shows that the __________ had become more unequal in the last years of the twentieth century.
distribution of income
discrimination
poverty guidelines
income gap
A number of reasons explain why the incomes of various groups may be different. One is education, which puts
workers in a better position to get higher-paying jobs. Another factor is ___, which may favor some groups over others in hiring and advancement.
discrimination
welfare
monopoly power
earned income tax credits
Those with natural abilities that are in high demand may
earn very high salaries. There are also groups that hold ___ and are, therefore, in a better position to demand higher wages.
food stamps
monopoly power
welfare
income gap
Poverty is a relative measure that depends on prices, the standard of living, and the incomes that others earn. People
are living in poverty if their incomes fall below the ___, the annual dollar amounts used to evaluate the money income that families and unrelated individuals receive.
poverty guidelines
monopoly power
food stamps
workfare
One reason for the continued high poverty number is the growing __________ in the distribution of income.
food stamps
income gap
welfare
discrimination
Over the years the federal government has instituted a number of programs to help the needy. Most come under
the general heading of __________ economic and social programs that provide the needy with regular assistance.
food stamps
welfare
workfare
poverty gap
Some programs provide direct cash assistance. Supplemental Security Income (SSI) is an __________ program that makes cash payments to blind or disabled persons age 65 or older.
welfare
income assisstance
food stamps
workfare
Other programs, such as __________ , do not provide direct cash payments. Instead, eligible persons receive government-issued ·coupons that can be redeemed for food.
welfare
food stamps
Lorenz curve
income gap
Many working low-income Americans qualify for special tax credits such as the __________ which provides federal tax
credits and sometimes cash .
income assistance
earned income tax credit
distribution of income
poverty guidelines
To help businesses start up in run-down or depressed areas, laws have been setup to establish ___.
earned income tax credits
enterprise zones
food stamps
poverty guidelines
Because of rising welfare costs, many states now have __________ programs that require recipients to exchange some of their labor for benefits.
welfare
workfare
food stamps
earned income tax credits
