Compared to the natural rate of unemployment, the actual unemployment rate is:
A. always higher.
B. always lower.
C. always the same.
D. higher in periods when GDP fails to grow at its normal rate.
Answer: D
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The demonstration effect suggests that people will save less when they
A. recognize that the real interest rate has increased. B. base their saving decisions on their projections of income and spending needs over their lifetime. C. base their spending decisions (and consequently their saving decisions) on spending decisions of others who spend more than they do. D. control their spending in order to save more when the real interest rate increases.
Which of the following typically purchases the most goods and services in the U.S. economy?
A. Businesses. B. Foreigners. C. Federal, state and local governments combined. D. Households.
Suppose the demand curve for bus travel is downward sloping, and the income elasticity of demand for bus travel is negative.
(i) Design an indifference curve-budget line diagram showing the substitution and income effects created when the price of bus travel falls. In your diagram, place bus travel on the horizontal axis and all other goods on the vertical axis. (ii) How you can tell from your diagram that the income elasticity of demand for bus travel is negative? Explain.
Are stocks and bonds considered part of the investment component of GDP?
What will be an ideal response?