(7.) Economics Hl. Macroeconomics, Definitions.
IB Economics HL. Definitions QUIZ. Section 3. Macroeconomics. Inflation, unemployment, income distribution.
Questions and Answers
- 1.
"A sustained rise in price level" (over at least two consecutive quarters) What is being defined?
Explanation
The given definition is describing inflation, which refers to a sustained increase in the general price level of goods and services in an economy over a period of time. This increase in prices is measured by calculating the average price change of a basket of goods and services. Inflation is often expressed as an annual percentage rate and is influenced by various factors such as supply and demand dynamics, government policies, and economic conditions.Rate this question:
- 2.
Using the exact same words (except the keyword, and neglecting those within brackets), define deflation!
Explanation
Deflation refers to a consistent and prolonged decline in the overall price level of goods and services within an economy. This means that prices of various goods and services are continuously decreasing over a significant period of time. Deflation can have various causes, such as reduced consumer demand, increased productivity, or a decrease in the money supply. It is often seen as a negative economic indicator as it can lead to economic stagnation and increased debt burdens.Rate this question:
- 3.
"Inflation that occurs as a result of an increase in costs of production" What kind of inflation is this?
- A.
Demand-pull inflation
- B.
Cost-push inflation
- C.
Stagflation
Correct Answer
B. Cost-push inflationExplanation
This type of inflation is known as cost-push inflation because it occurs when there is an increase in the costs of production. This can be due to factors such as an increase in wages, raw material prices, or taxes. As a result, producers are forced to increase the prices of goods and services, leading to a general rise in the overall price level in the economy.Rate this question:
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- 4.
A very low rate of inflation (2-3 % a year) is known as [...] inflation
Correct Answer
creepingExplanation
A very low rate of inflation (2-3% a year) is known as creeping inflation. This term is used to describe a gradual and slow increase in the general price level of goods and services over time. Creeping inflation is often considered to be a desirable level of inflation as it signifies a stable economy and allows for gradual adjustments in prices without causing significant disruptions. It is different from hyperinflation or rapid inflation, where prices increase at an extremely high rate, leading to economic instability.Rate this question:
- 5.
A very high rate of inflation (100 % a year or more) is known as [...] inflation
Correct Answer
hyperExplanation
A very high rate of inflation, specifically 100% a year or more, is referred to as hyperinflation. Hyperinflation is characterized by extremely rapid and out-of-control increases in prices, leading to a significant decrease in the purchasing power of money. This type of inflation is often caused by factors such as excessive money supply, government mismanagement of the economy, or political instability. During hyperinflation, prices can double or even triple within a short period, causing severe economic instability and hardship for the population.Rate this question:
- 6.
When short run aggregate supply contracts and price level increases simultaneously (that is, when inflation rate is high and real output decreases / economic growth is low), this is known as
- A.
Demand-pull inflation
- B.
Crowding out
- C.
Stagflation
- D.
Disinflation
Correct Answer
C. StagflationExplanation
Stagflation refers to a situation where there is a combination of high inflation (indicated by an increase in the price level) and low economic growth (indicated by a decrease in real output). This is usually caused by a decrease in aggregate supply, which leads to a decrease in production and employment, while demand remains high. Stagflation is a challenging economic condition as it presents policymakers with the dilemma of addressing both inflation and low growth simultaneously.Rate this question:
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- 7.
Demand-pull inflation is inflation that occurs as a result of an increased ...
Correct Answer
AD
aggregate demandExplanation
Demand-pull inflation is inflation that occurs as a result of an increased aggregate demand. This means that when the overall demand for goods and services in an economy exceeds the available supply, prices tend to rise. This can happen due to factors such as increased consumer spending, government spending, or investment. When there is a higher demand for goods and services, businesses may increase their prices to take advantage of the increased demand, leading to inflation. Thus, the correct answer is AD, which stands for aggregate demand.Rate this question:
- 8.
"People of working age who are without work, but willing to, able to, and actively seeking work" Is such a definition acceptable for the concept of unemployment?
- A.
Yes
- B.
No
Correct Answer
A. YesExplanation
The given definition of unemployment is acceptable because it includes all the necessary criteria for someone to be considered unemployed. It states that individuals of working age who are without work, but are willing to work, able to work, and actively seeking work are considered unemployed. This definition covers the key aspects of unemployment, such as the desire and ability to work, as well as the active search for employment. Therefore, it is an appropriate definition for the concept of unemployment.Rate this question:
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- 9.
A tax imposed on income (or wealth) is a ...
Correct Answer
direct taxExplanation
A tax imposed on income (or wealth) is classified as a direct tax. This means that the tax is directly levied on the individual or entity that earns the income or possesses the wealth. Direct taxes are typically progressive in nature, meaning that the tax rate increases as the income or wealth increases. Examples of direct taxes include income tax, property tax, and inheritance tax. This is in contrast to indirect taxes, which are imposed on goods and services and are ultimately passed on to the consumer.Rate this question:
- 10.
Write down the two most commonly used letters for the diagrammatic representation of "the economically active population"
Correct Answer
LFExplanation
(LF = Labor force)Rate this question:
- 11.
Equilibrium unemployment is the lowest rate of unemployment that an economy can sustain over the long run. Therefore, the concept is better known by another name. Which?
- A.
Real-wage unemployment
- B.
Demand-deficient unemployment
- C.
Natural unemployment
Correct Answer
C. Natural unemploymentExplanation
The correct answer is "Natural unemployment". Equilibrium unemployment refers to the lowest rate of unemployment that can be sustained in the long run. It is also known as natural unemployment, as it represents the level of unemployment that occurs when the labor market is in balance and there is no cyclical or demand-deficient unemployment. Real-wage unemployment refers to unemployment caused by high wages relative to productivity, while demand-deficient unemployment is a type of unemployment caused by insufficient demand in the economy.Rate this question:
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- 12.
Write down the three types of natural unemployment using only the keywords (that is, leave out "unemployment") Any order will do, but don't start with the type of unemployment that starts with an "f"! Separate the words using the space bar (mellanslag)
Correct Answer
frictional structural seasonal
structural seasonal frictional
seasonal frictional structural
seasonal structural frictional
structural frictional seasonalExplanation
The three types of natural unemployment are frictional, structural, and seasonal.Rate this question:
- 13.
A tax which increases more than proportionally with income is a ...
- A.
Proportional tax
- B.
Regressive tax
- C.
Progressive tax
- D.
Laffer curve
Correct Answer
C. Progressive taxExplanation
A progressive tax is a tax system in which the tax rate increases as income increases. This means that individuals with higher incomes pay a larger percentage of their income in taxes compared to those with lower incomes. In this case, the tax increases more than proportionally with income, indicating that it is a progressive tax.Rate this question:
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- 14.
"The number of people who are unemployed expressed as a percentage of the total labor force" Write down what is being defined
Correct Answer
unemployment rateExplanation
The definition provided accurately describes the concept of the unemployment rate. It refers to the proportion of individuals who are jobless and actively seeking employment, expressed as a percentage of the total labor force. This measure is commonly used to assess the health of an economy and the level of job opportunities available.Rate this question:
- 15.
How can "demand-deficient (cyclical) unemployment" be defined?
- A.
Unemployment caused by trade unions/minimum wage policies negotiating wages higher than the labor market equilibrium
- B.
Unemployment resulting from the fall of demand for a certain type of labor during certain times of the year
- C.
Unemployment resulting from cyclical downturns in the economy
- D.
Unemployment that occurs when there are conditions preventing the labor market from reaching labor market equilibrium
Correct Answer
C. Unemployment resulting from cyclical downturns in the economyExplanation
A: Real-wage unemployment. B: Frictional unemployment. C: Disequilibrium unemploymentRate this question:
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- 16.
A long-term unemployed worker who has given up the search for work and thus no longer counts as unemployed is said to be a [...] worker.
Correct Answer
discouragedExplanation
A long-term unemployed worker who has given up the search for work and thus no longer counts as unemployed is said to be a discouraged worker.Rate this question:
- 17.
"Unemployment that occurs when people are in between jobs or have left education and are waiting for their first job" What is being defined?
- A.
Frictional unemployment
- B.
Structural unemployment
- C.
Seasonal unemployment
- D.
Fisval
Correct Answer
A. Frictional unemploymentExplanation
There is nothing in economics that is called "fisval"Rate this question:
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- 18.
"A curve demonstrating the invrese relationship between the rate of inflation/rate of change of money wages) and the rate of unemployment in an economy" What is being defined?
Correct Answer
Phillips curveExplanation
The given answer correctly defines the Phillips curve. The Phillips curve is a graphical representation that shows the inverse relationship between the rate of inflation (or the rate of change of money wages) and the rate of unemployment in an economy. It suggests that as unemployment decreases, inflation tends to increase, and vice versa. This concept was introduced by economist A.W. Phillips in the 1950s and has since been used to analyze the trade-off between inflation and unemployment in an economy.Rate this question:
- 19.
The Laffer curve demonstrates the "parabolic" relationship between tax rate and the rate of change of money wages
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
It demonstrates the relationship between tax rate and government tax revenueRate this question:
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- 20.
One-way payments of money for which no money, good, or service is received in exchange are known as ...
Correct Answer
transfer paymentsExplanation
Transfer payments refer to one-way payments of money where no goods, services, or money are received in return. These payments are typically made by the government to individuals or other entities for various purposes such as welfare, unemployment benefits, or subsidies. Transfer payments are aimed at redistributing income and providing financial assistance to those in need.Rate this question:
- 21.
A tax is a [...] tax if the proportion of income paid in tax falls as income rises (true for all indirect taxes)
- A.
Direct tax
- B.
Proportional tax
- C.
Regressive tax
- D.
Progressive tax
Correct Answer
C. Regressive taxExplanation
A regressive tax is a tax where the proportion of income paid in tax decreases as income increases. This means that individuals with lower incomes pay a higher percentage of their income in taxes compared to those with higher incomes. In the given statement, it is mentioned that the proportion of income paid in tax falls as income rises, which aligns with the definition of a regressive tax.Rate this question:
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- 22.
A tax which increases proportionally with income is a ...
Correct Answer
proportional taxExplanation
A tax that increases proportionally with income is known as a proportional tax. This means that individuals with higher incomes will pay a higher amount of tax compared to those with lower incomes, but the tax rate remains the same for everyone. This type of tax system is often considered fair as it does not disproportionately burden individuals based on their income levels.Rate this question:
- 23.
When the borrowing of a government in order to stimulate the economy leads to businesses and individuals saving (demanding loanable funds) rather than spending/investing, this is called
- A.
Multiplier effect
- B.
Accelerator effect
- C.
Real balance effect
- D.
Crowding out
Correct Answer
D. Crowding outExplanation
Crowding out refers to a situation where increased government borrowing to stimulate the economy leads to a decrease in private sector spending and investment. When the government borrows more, it increases the demand for loanable funds, which can result in higher interest rates. This can discourage businesses and individuals from borrowing and investing, as the cost of borrowing becomes more expensive. Instead, they may choose to save their money, leading to a decrease in spending and investment in the economy. Therefore, the correct answer is crowding out.Rate this question:
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Mar 22, 2023Quiz Edited by
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