What is potential GDP? What happens to unemployment when GDP is at its potential?
What will be an ideal response?
Potential GDP is the level of real GDP attained when all firms are producing at capacity. The capacity of a firm is not the maximum output the firm is capable of producing. It is the firm's production when operating on normal hours, using a workforce of normal size. At potential GDP, the economy achieves full employment, and cyclical unemployment is reduced to zero.
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Which of the following statements about the ripple effects of monetary policy is FALSE? Monetary policy can
A) raise the federal funds rate, thereby decreasing the quantity of money, raising the real interest rate, and decreasing investment. B) lower the federal funds rate, thereby increasing the supply of loanable funds, and lowering the exchange rate. C) lower the federal funds rate, thereby lowering the real interest rate and increasing aggregate demand. D) raise the federal funds rate and shift the aggregate demand curve leftward. E) raise the federal funds rate, thereby raising the real interest rate and increasing potential GDP.
If the nominal GDP is $500 billion and the money supply is $100 billion, the velocity of money is:
a. 500. b. 5.00 c. 2.50. d. 0.40.
In which of the following examples is excess burden not present?
A. Harriet decides to give up her Saturday hours at her law office after income tax rates rise. B. Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack. C. Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed. D. Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased.
According to estimates, what percentage of agricultural workers in the United States are illegal immigrants?
A. 12. B. 19. C. 25. D. 50.