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1. Steady growth is generally the goal which will yield the best results in the long run.
2. Real GDP has its problems, but is the best measure we have (a).
3. We calculate this as the difference in price levels divided by the first year's price level 140.2 -132.5 = 7.7/132.5 = 5.8%
4. When imports are greater than exports, we must borrow in order to buy the goods.
5. Personal consumption is the largest component of expenditure GDP calculations.
When more people are working, real GDP increases and this increase is counted. More laborers mean more income for workers, and more for them to spend on consumption.
7. The unemployment rate is the number of employed divided by the total labor force, multiplied by 100 to get a percentage (a).
8. Structural unemployment is the type described by c. Cyclical unemployment fluctuates over the business cycle (thus its name).
9. We have 5/ 132.5 = 3.8%
10. CPI measures the cost of the same basket of goods each year. Thus the answer is b.
11. The supply of real GDP is the quantities of labor, capital and the state of technology. These are what the economy uses to produce goods and services.
12. c. At equilibrium, real GDP and the price level are determined by the SAS and demand curves. In short-run equilibrium, real GDP can be greater than or less than potential GDP while the unemployment rate can be above or below the natural unemployment rate. The SAS is the relationship between the quantity of real GDP supplied and the price level in the short-run when the money wage rate, the prices of other resources, and potential GDP remain constant.
13. Classical economists believe the economy is self-regulating.
14. The classical dichotomy is the division between the real side of the economy and the monetary side. Thus when the economy is operating at full employment, the forces that determine the real variables are independent of those that determine the nominal ones.
15. The bowed out real GDP-leisure PPF indicates that each additional unit of labor produces less output (d). Because the most productive employees will be hired first, people ...