ECON 200 CERTIFICATION EXAM
QUESTIONS AND VERIFIED
ANSWERS 2026
▶ Nominal vs. Real GDP. Answer: Nominal- The value of final goods and
services evaluated at the current year prices
Real- The total value of goods and services produced in the economy over
the course of a year, evaluated at base-year prices.
Calculations are adjusted for price changes
Year to year comparisons
Nominal Rate-Inflation Rate= Real rate
▶ Why is GDP important?. Answer: When GDP increases, the economy
experiences economic growth and unemployment goes down
When GDP decreases for two consecutive quarters, the economy is in a
recession and unemployment goes up
▶ The business cycle. Answer: The Business Cycle
Is a positive-sum game.(everyone wins)
The business cycle shows periods of expansion and recession- Economic
Activity.
The periodic, but irregular up and down movements in economic activity,
measured by fluctuations in real GDP and other macroeconomic variables.
▶ The business cycle recession. Answer: Recessions cause the
unemployment rate to increase.
As firms see sales decline, they begin to reduce production and lay off
workers
▶ Efficiency. Answer: "More for your buck." Best use of resources with
least amount of costs.
Killing two birds with one stone.
▶ full employment. Answer: Does not mean 100%. An amount of laborers
employed differs for specific goals.
,The goal in the US is 4-6.4%.
▶ Unemployment. Answer: The unemployment rate measures the percent
of the labor force that is unemployed
• People who are not considered a part of the labor force: retirees,
housemakers, full time students, people on active military service, people in
prison and mental hospitals, and those who are available for work but not
actively looking for a job
▶ unemployment rate. Answer: # unemployed/ total labor
force=unemployment rate
▶ What is considered to be full employment?. Answer: •When the only
remaining unemployment is structural and frictional then the economy is
said to be at full employment
•This is considered the natural rate of unemployment
•
•Only 4-6.4% unemployed
•
•Current unemployment rate: 8.4 % ( 7.4 for CO) according to the US
Department of Labor Bureau of Labor Statistics
▶ frictional unemployment. Answer: Acceptable unemployment
•People in between jobs. They are in the process of looking for a new job.
•Those that quit, those that are seasonally unemployed, or those entering
the job force for the first time.
•This is usually short term.
▶ structural unemployment. Answer: Acceptable unemployment
•This occurs when there is a mismatch between job skills of workers and
the requirements necessary for jobs.
•This is often long term because workers need time to learn new skills.
▶ Clynical unemployment. Answer: Not acceptable
•When a person loses their job because the business cycle is in a lull and
the economy is weak.
•Recession
•When the only remaining unemployment is structural and frictional then
the economy is said to be at full employment
•This is considered the natural rate of unemployment
, Deals with the business cycle
▶ What is Consumer Price Index?. Answer: The CPI is used to measure
price-level changes on a range of consumer products.
It can be used to compare the price-level in one year with price levels in
earlier years.
It is calculated in urban areas and provides a fairly good look at how much
inflation has occurred in the country.
▶ price stability. Answer: Prices do not fluctuate too much.
▶ What is inflation?. Answer: When there is too much money in the
economy relative to the supply of goods and services=rising prices
Inflation is caused by too much money chasing too few goods
Current inflation rate is .76% and US long term average is 3.32%
An extended period of rising prices.
The value of the dollar decreases during
periods
of inflation.
▶ Types of inflation. Answer: Hyperinflation
Demand Pull Inflation
Cost Push Inflation
▶ Hyperinflation. Answer: Inflation that is "out of control"
Prices increase rapidly as a currency loses its value.
▶ Demand Pull Inflation. Answer: When demand increases faster than an
industry's ability to satisfy that demand, prices increase.
▶ Cost Push inflation. Answer: A period of rising prices due to an increase
in the cost of production.
Management may choose to raise prices to maintain profits.
Workers then ask for more money to keep up with rising costs.
This leads to an inflationary spiral.
▶ Who is Hurt or Helped by Inflation?. Answer: Hurt- people on fixed
incomes, savers, lenders, businesses.
Helped- Those who can increase their incomes, borrowers, and the
government (bracket creep).
QUESTIONS AND VERIFIED
ANSWERS 2026
▶ Nominal vs. Real GDP. Answer: Nominal- The value of final goods and
services evaluated at the current year prices
Real- The total value of goods and services produced in the economy over
the course of a year, evaluated at base-year prices.
Calculations are adjusted for price changes
Year to year comparisons
Nominal Rate-Inflation Rate= Real rate
▶ Why is GDP important?. Answer: When GDP increases, the economy
experiences economic growth and unemployment goes down
When GDP decreases for two consecutive quarters, the economy is in a
recession and unemployment goes up
▶ The business cycle. Answer: The Business Cycle
Is a positive-sum game.(everyone wins)
The business cycle shows periods of expansion and recession- Economic
Activity.
The periodic, but irregular up and down movements in economic activity,
measured by fluctuations in real GDP and other macroeconomic variables.
▶ The business cycle recession. Answer: Recessions cause the
unemployment rate to increase.
As firms see sales decline, they begin to reduce production and lay off
workers
▶ Efficiency. Answer: "More for your buck." Best use of resources with
least amount of costs.
Killing two birds with one stone.
▶ full employment. Answer: Does not mean 100%. An amount of laborers
employed differs for specific goals.
,The goal in the US is 4-6.4%.
▶ Unemployment. Answer: The unemployment rate measures the percent
of the labor force that is unemployed
• People who are not considered a part of the labor force: retirees,
housemakers, full time students, people on active military service, people in
prison and mental hospitals, and those who are available for work but not
actively looking for a job
▶ unemployment rate. Answer: # unemployed/ total labor
force=unemployment rate
▶ What is considered to be full employment?. Answer: •When the only
remaining unemployment is structural and frictional then the economy is
said to be at full employment
•This is considered the natural rate of unemployment
•
•Only 4-6.4% unemployed
•
•Current unemployment rate: 8.4 % ( 7.4 for CO) according to the US
Department of Labor Bureau of Labor Statistics
▶ frictional unemployment. Answer: Acceptable unemployment
•People in between jobs. They are in the process of looking for a new job.
•Those that quit, those that are seasonally unemployed, or those entering
the job force for the first time.
•This is usually short term.
▶ structural unemployment. Answer: Acceptable unemployment
•This occurs when there is a mismatch between job skills of workers and
the requirements necessary for jobs.
•This is often long term because workers need time to learn new skills.
▶ Clynical unemployment. Answer: Not acceptable
•When a person loses their job because the business cycle is in a lull and
the economy is weak.
•Recession
•When the only remaining unemployment is structural and frictional then
the economy is said to be at full employment
•This is considered the natural rate of unemployment
, Deals with the business cycle
▶ What is Consumer Price Index?. Answer: The CPI is used to measure
price-level changes on a range of consumer products.
It can be used to compare the price-level in one year with price levels in
earlier years.
It is calculated in urban areas and provides a fairly good look at how much
inflation has occurred in the country.
▶ price stability. Answer: Prices do not fluctuate too much.
▶ What is inflation?. Answer: When there is too much money in the
economy relative to the supply of goods and services=rising prices
Inflation is caused by too much money chasing too few goods
Current inflation rate is .76% and US long term average is 3.32%
An extended period of rising prices.
The value of the dollar decreases during
periods
of inflation.
▶ Types of inflation. Answer: Hyperinflation
Demand Pull Inflation
Cost Push Inflation
▶ Hyperinflation. Answer: Inflation that is "out of control"
Prices increase rapidly as a currency loses its value.
▶ Demand Pull Inflation. Answer: When demand increases faster than an
industry's ability to satisfy that demand, prices increase.
▶ Cost Push inflation. Answer: A period of rising prices due to an increase
in the cost of production.
Management may choose to raise prices to maintain profits.
Workers then ask for more money to keep up with rising costs.
This leads to an inflationary spiral.
▶ Who is Hurt or Helped by Inflation?. Answer: Hurt- people on fixed
incomes, savers, lenders, businesses.
Helped- Those who can increase their incomes, borrowers, and the
government (bracket creep).
