If the economy's real GDP doubles in 9 years, we can
A. conclude that its average annual rate of growth is 8%.
B. not say anything about the average annual rate of growth.
C. conclude that its average annual rate of growth is 4%.
D. conclude that its average annual rate of growth is 12%.
Answer: A
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Suppose an economy's trend growth rate is 3 percent and current output is $10 trillion. If the economy enters a recession where output declines by 5 percent in one year, by how much does output have to rise to return to its trend? Assume it takes two years for the economy to return to its trend.
A. $1.7 trillion B. $1.4 trillion C. $0.5 trillion D. $0.6 trillion
Suppose that airline workers are laid off during a recession because of an unspoken agreement between airline workers and airline executives that wages will not be reduced. This example is consistent with the
A. implicit contract explanation of unemployment. B. explicit contract explanation of unemployment. C. efficiency wage explanation of unemployment. D. relative-wage explanation of unemployment.
If aggregate spending in an economy can be written as Y = 15,000 + 0.6Y - 20,000r, and potential output equals 34,000, what real interest rate must the Federal Reserve set to bring the economy to full employment?
A. 5 percent B. 7 percent C. 3 percent D. 6 percent
Unemployment statistics are often criticized for
A. overstating the number of people out of work, because retirees are included in the statistics. B. understating the number people out of work, because full-time college students are excluded. C. understating the number of people out of work, because discouraged workers are excluded in the statistics. D. overstating the number of people out of work, because the unemployment statistics include all low-income workers.