Economics: The Basics 1st Edition by Mike Mandel

Exercise 1

Say whether each of the following statements it is true or false.
a) Potential GDP assumes that all resources are being fully used.
b) A higher productivity growth rate means a slower potential growth rate, all other things being equal.
c) The output gap is negative if economic output is below potential GDP.
d) If the economy is above potential GDP, then inflation tends to fall.
e) A person cannot be counted as unemployed if he or she has stopped looking for a job.
f) If the unemployment rate is above NAIRU, then inflation tends to rise.
g) All recessions last at least a year.
h) In a business cycle, the peak marks the end of recession.
i) In a business cycle, the trough marks the end of recession.
j) One typical impact of recession is to reduce business spending on physical capital.
k) Oil price increases can lead to recession by causing a leftward shift in the supply curve in many markets.
l) The Federal Reserve can sometimes help cause a recession.