lesson6 quiz - 1 Attempts by the government to maintain...

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1.   Attempts   by   the   government   to   maintain   constant   or   increasing   business  activity do have uncertainty and risk 2. Inflation and unemployment (recessions and depressions) are the results of  fluctuations  in the business cycle and the growth trend line. 3. New technology  can improve economic activity provided that production costs  are reduced and the economy can absorb those workers who become unemployed as  a result of the new technology 4. Use the figure below to answer the following question: Keynesian analysis  assumes that an economy with high  un employment would have a relatively  flat   aggregate supply line. 5. If the economy is at the natural rate of unemployment, then production is  considered to be at its maximum capacity (on the PPF) 6.   In   this   example   the   overall   backshift   in   Aggregate   Demand   after   the  multiplier effects are completed cause Spending GDP to decrease by a total of $  500  billion dollars. 7. In this example the increase in Spending GDP created an additional two  million jobs, but it caused inflation to jump by 17  % . 8. By the Rule of 70 if a nation’s prices are inflating at 7 percent it will  take 10  years for the prices to double. 9. Assume you borrowed $100,000 at a fixed rate of 7 percent for 30 years to  purchase a house.  If the inflation rate is 7 percent, then your repayments to  the lender have the same  purchasing power as the dollars that s/he loaned to  you. 10. Because  durable   goods are purchased for use over a longer time period,  their purchases can be postponed in a recession and put off until a more  prosperous period arrives. 11. In this example the overall decline in Spending GDP caused  5   million to  lose their jobs. 12. The impact of inflation places uncertainty and risk (the possibility that   costs may be more than expected)  in the savings and borrowing relationships. 13. An example of cost push inflation is an increase in all the above  prices  which   in   combination   result   in   cost   increases   in  almost   all   production  processes which is passed on to buyers in the prices of almost all  goods and  services. 14.  Simon Kuznets
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This note was uploaded on 06/18/2011 for the course ECON 2302 taught by Professor Methenitis during the Fall '10 term at Richland Community College.

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lesson6 quiz - 1 Attempts by the government to maintain...

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