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Study Guide 2

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Department
Economics
Course
ECON 2001.01
Professor
All Professors
Semester
Winter

Description
H201 Study Guide 2 Chapter 7 – GDP (20 Questions) 1. What is the definition of GDP? 2. What is a transfer payment and what is a final good? 3. What is the difference between GNP and GDP? 4. With regard to GDP accounting, why must it be true that total spending equals total income? 5. What is the formula for total spending? 6. What percent is consumption spending of total spending? 1 7. What is the formula for net exports? 8. What is the difference between GNP and NNP? 9. What is the difference between Personal Income and Disposable Income? 10. Out of all types of income received, wages and salaries are what percent? 11. What is the definition of real versus nominal GDP? 12. If nominal GDP increases, what does that tell us about real GDP? 13. Can you restate dollars in terms of purchasing power in a different year? 14. Can you calculate percentage change in prices by using price index values? 15. The GDP deflator is chain weighted – how is it constructed? 16. What price index is the best overall estimate of inflation for the economy? 2 17. What has happened to the labor force participation rate of women since 1960? 18. What are four GDP measurement problems mentioned in class? 19. What are the two reasons that the underground economy exists? 20. What are three difficulties that an underground economy creates? Chapter 8 – Unemployment and Inflation 1. How do the fluctuations around trend of GDP since WWII compare to the time before that war? 2. Has the unemployment rate in the U.S. ever exceeded 9% since the 1940s? 3. What is the definition of a recession? 3 4. How many recessions has the U.S. experienced since 1953? 5. In defining potential GDP, the key requirement is that all resources are fully utilized and the rate of output is .......? 6. What was the income loss per person as a result of the 1992 recession? 7. What is Okun’s Law? 8. When is a person unemployed? 9. How is the labor force defined? 10. In order to be counted as employed, how man hours per week must your work? 11. What is the definition of “Underemployment”? 4 12. Who are “discouraged” workers? 13, Who are the “Phantom” unemployed? 14. What is the definition of a part-time worker? 15. Why do we pay special attention to the ratio of involuntary part-time employees to voluntary part-time employees? 16. What are the two ways of calculating the unemployment rate? 17. Since the 1960s, what decade has had the highest level of unemployment? 18. What are three reasons the quantity of labor supplied might exceed the quantity of labor demanded at existing wage rates? 5 19. Explain the concept of “Efficiency” wages 20. What are three categories of the unemployed and which category is largest? 21. What are the four types of unemployment? 22. What is the definition of frictional, structural, and cyclical unemployment? 6 23. Should policy try to eliminate frictional unemployment? 24. Define the Full Employment Rate of Unemployment and the Natural Rate of Unemployment – when does the unemployment rate equal those rates? 25. Define the NAIRU – what does that acronym s
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