What Is The Term Full Employment GDP?

Pointthe Term Full Employment Gdp Is

Econ201 Homework 3 Question 1 (1 point) The term "full employment GDP" is synonymous with which of the following? Question 1 options: a) potential GDP b) Keynesian zone c) aggregate GDP d) macroeconomic equilibrium Question 2 (1 point) Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____________________ is to the potential GDP line. Question 2 options: a) AS and AD curve b) equilibrium c) AD curve d) AS curve Question 3 (1 point) 42. The __________________ in an AD/AS diagram is most relevant to Keynes’s Law. Question 3 options: a) AD curve b) AS curve c) steep portion of the AS curve d) flat portion of the AS curve Question 4 (1 point) Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________.

Question 4 options: a) shorter distance to equilibrium point b) longer distance to equilibrium point c) flatter top portion of AD curve d) downward sloping AD curve Question 5 (1 point) Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model? Question 5 options: a) it shifts the AD curve in the short-term b) it shifts the AS curve in the long-term c) it shifts the AS curve in the short-term d) it shifts the AD curve in the long-term Question 6 (1 point) _______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________. Question 6 options: a) Keynesian economists; long run b) Neoclassical economists; short run c) Keynesian economists; short run d) Neoclassical economists; long run Question 7 (1 point) Potential GDP in the U.S. will be unaffected by ____________________.

Question 7 options: a) the unemployment rate b) the amount of capital available c) government institutions d) technology Question 8 (1 point) As the aggregate price level in an economy decreases, Question 8 options: a) interest rates decrease. b) imports decrease. c) consumer demand decreases. d) investment decreases. Question 9 (1 point) The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment. Question 9 options: a) interest rate effect b) inflation rate effect c) price effect d) wealth effect Question 10 (1 point) The ____________________ in an AD/AS diagram is most relevant to Say’s Law. Question 10 options: a) steep portion of the AS curve b) AD curve c) AS curve d) flat portion of the AS curve Question 11 (1 point) Pointthe Term Full Employment Gdp Is Question 11 options: a) potential GDP b) Keynesian zone c) aggregate GDP d) macroeconomic equilibrium Question 12 (1 point) Refer to the graph above. A government creating economic policy in these circumstances should be most concerned about: Question 12 options: a) unemployment but not inflation. b) inflation but not unemployment. c) inflation and unemployment. d) neither inflation nor unemployment. Question 13 (1 point) The sum of all the income received for contributing resources to GDP is called ___________________. Question 13 options: a) marginal income (X) b) national revenue (Y) c) national income (Y) d) marginal revenue (X) Question 14 (1 point) According to the Keynesian framework, ________________ in __________________ may cause inflation, but not a recession. Question 14 options: a) decrease; interest rates b) an increase; domestic investment c) an increase; a major trading partner's economy d) a decrease; a major trading partner's export prices Question 15 (1 point) If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy: Question 15 options: a) is producing at its potential GDP. b) is producing at its equilibrium point. c) is producing at a point where output is less than potential GDP. d) is producing at a point where output is more than potential GDP. Question 16 (1 point) In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP? Question 16 options: a) national income (Y) b) expenditure-output c) inflationary gap d) recessionary gap Question 17 (1 point) Which of the following will cause the multiplier to be smaller and cause changes in investor confidence to have a smaller effect in an economy? Question 17 options: a) decreased trade b) bigger leakages c) increased trade d) smaller leakages Question 18 (1 point) Aggregate demand is more likely to _________________ than aggregate supply in the short run. Question 18 options: a) increase slightly b) decrease substantially c) shift substantially d) remain unchanged Question 19 (1 point) Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects. Question 19 options: a) policy prescription b) set of menu costs c) pricing strategy d) macro-economic model Question 20 (1 point) Which of the following is a distinguishing characteristic of a Keynesian cross diagram? Question 20 options: a) 45-degree line b) real GDP on the horizontal axis c) a flat line d) several different Phillips curves Question 21 (1 point) Which of the following data would be analyzed to determine whether any shift in the MPI has occurred over the course of the past 5 year period? Question 21 options: a) interest rates b) exchange rates c) MPS d) foreign income Question 22 (1 point) According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions. Question 22 options: a) sticky wage b) sticky wage and price c) coordination d) Keynesian Question 23 (1 point) Refer to the graph shown below. At point B: Question 23 options: a) economic growth it low or even negative. b) unemployment is very low. c) output is expanding. d) businesses may raise prices. Question 24 (1 point) When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by? Question 24 options: a) 500 b) 900 c) 100 d) 300 Question 25 (1 point) Suppose that out of the original 100 increase in government spending, 33 will be recycled back into purchases of domestically produced goods and services in the second round and 10.89 is spent in the third round. Following this multiplier effect, what value would be recycled in the fourth round of this cycle? Question 25 options: a) 9.89 b) 3.37 c) 5.23 d) 3.59

Pointthe Term Full Employment Gdp Is

Understanding the concept of full employment GDP is fundamental in macroeconomic analysis. Full employment GDP refers to the level of output at which all available resources are utilized efficiently, without causing inflationary pressures. This level is often associated with the economy operating at its potential output, meaning that unemployment is at its natural rate, and there are no cyclical unemployment effects. Recognizing this term is crucial for evaluating economic health and designing appropriate policies.

In the context of macroeconomic models such as the Aggregate Demand/Aggregate Supply (AD/AS) framework, full employment GDP is generally equated with potential GDP. Potential GDP indicates the maximum sustainable output the economy can produce without triggering inflation. Policymakers and economists monitor deviations from this level to address recessions or overheating economies.

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Full employment GDP is an essential concept in macroeconomics, serving as an indicator of the economy's optimal output level where resources are utilized efficiently. It differs from actual GDP, which may fluctuate above or below this benchmark due to various economic shocks or policy measures. Recognizing the significance of full employment GDP helps policymakers implement strategies to foster economic stability and growth.

This term aligns closely with potential GDP, which is determined by factors such as capital stock, labor force, technological progress, and productivity levels. When actual GDP surpasses potential GDP, it indicates an overheating economy, often leading to inflationary pressures. Conversely, when actual GDP falls short of potential GDP, it suggests underutilized resources, cyclical unemployment, and economic slack.

Understanding the relationship between full employment GDP and other macroeconomic aggregates is vital. For example, aggregate demand fluctuations influence real GDP relative to potential GDP, affecting unemployment rates and inflation. During recessionary periods, actual GDP dips below potential GDP, increasing unemployment. During economic booms, actual output may temporarily exceed potential, prompting inflationary concerns.

The significance of full employment GDP extends to fiscal and monetary policy formulation. Policymakers aim to keep actual GDP close to its potential level to maintain low unemployment and stable inflation. When deviations occur, corrective policies—such as adjusting interest rates or government spending—are employed to steer the economy back toward its full employment level.

In addition, understanding the concept helps in assessing long-term economic growth. As economies develop, potential GDP generally increases due to technological advancements and capital accumulation. Tracking this progression provides insights into sustainable growth paths and the effectiveness of economic policies over time.

In conclusion, full employment GDP, synonymous with potential GDP, reflects the maximum sustainable output level in a healthy economy. Its recognition and measurement are critically important for macroeconomic stability, policymaking, and understanding the economy's long-term growth prospects. Continuous monitoring of this indicator assists in designing policies that promote sustained prosperity, stable inflation, and low unemployment rates.

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