Chapters 5and6 - Sarah Williams 7/14/2008 Test 2 Chapters...

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Sarah Williams 7/14/2008 Test 2 Chapters 5-6 Extra Credit Questions Chapter 5 Macroeconomic Measurements Part 1-Prices and Unemployment 1. Name a few macroeconomic problems Some macroeconomic problems include high inflation rate, high unemployment rate, high interest rates, and low economic growth. 2. What is the difference between a macroeconomic theory and policy Macroeconomic theories are built to try to understand questions which do not have obvious answers, while macroeconomic policies are proposed to solve the problems. 3. What are the three macroeconomic organizational categories The three macroeconomic organizational categories are P-Q category, Self- Regulating-Economic Instability category, and effective-Ineffective category. 4. Define and distinguish between monetary policy and fiscal policy Monetary policy refers to changes in the money supply, or rate of growth of the money supply, and fiscal policy refers to changes in government expenditures and/or changes in taxes to achieve particular macroeconomic goals. 5. Define the Consumer Price Index (CPI), price index, and base year CPI is a widely cited index number for the price level. It is the weighted average of prices of a specific set of goods and services purchased by a typical household. Price index is a measure of the price level. Base year is the year chosen as a point of reference or basis of comparison for prices in other years—a benchmark year. 6. Define the inflation, real income, and nominal income
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Inflation rate is an increase in the price level measured annually. Real income is a person’s nominal income, and nominal income the current-dollar amount of a person’s income. 7. Explain how the CPI is used? CPI is used to measure inflation and to keep up with its rising, falling and constant movement. 8. Define the GDP implicit price deflator The GDP implicit price deflator is based on all goods and services produced in an economy. 9. Who are the unemployed? The unemployed are all persons who did not have jobs, made specific active efforts to find a job during the prior four weeks and were available for work. They are all persons who were not working and were waiting to be called back to a job from which they were temporarily laid off. 10. Define the unemployment rate, employment rate, and labor force
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Chapters 5and6 - Sarah Williams 7/14/2008 Test 2 Chapters...

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