1. What is the gross domestic product?
Gross Domestic Product, or GDP, is the total market value of final goods and services produced within an economy in a given year. It is the most common measure of an economy’s total output. 2. When prices change, how do we measure real income?
When prices change we measure real income with
3. What is unemployment? Why can’t it be driven down to zero? Unemployment is when you don’t have a job. Unemployed people are those who don’t have a job but are actively looking for work. Unemployment cannot be driven down to zero because the lower the unemployment rate is, the harder it will be for businesses to hire new employees. The harder it is to find qualified employees, the more competitive businesses will be, causing wages to increase. When wages increase, prices will increase for the whole economy. 4. What is the Consumer Price Index and how is it related to the cost of living? The Consumer Price Index measures the cost of a fixed basket of goods chosen to represent the consumption pattern of a typical consumer. Economists use the Consumer Price Index when prices change to measure the cost of living. They will compare the price certain goods from one year to another, measuring the change in price to determine how much money you would need to uphold your previous standard of living. 5. How does increased immigration affect wages and the level of output in the economy? Increased immigration actually increases wages for American workers with a high school education or higher because the labor supply increases, so business owners can afford to add on their business and employ the immigrant workers. Wages for high-school dropouts decrease because they compete with the immigrant workers for jobs at their level. The economy’s output increases because of the increase in supply and demand. 6. What are the benefits of increased investment?
When governments decrease spending, there are increased investments, which...