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Macroeconomic Indicators Flashcards

7 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. Which component of GDP measures the value of goods produced but not yet sold?

    Answer: Inventory investment

    Inventory investment captures changes in unsold goods held by businesses and is part of the investment (I) component of GDP.

  2. If nominal GDP grows 6% and the GDP deflator rises 4%, what is the approximate real GDP growth rate?

    Answer: 2%

    Real GDP growth ≈ nominal GDP growth minus inflation, so 6% − 4% = 2%.

  3. Which unemployment measure is considered the broadest indicator of labor underutilization in the U.S.?

    Answer: U-6

    U-6 includes the officially unemployed, marginally attached workers, and those working part-time for economic reasons.

  4. A sustained decline in the general price level is best described as:

    Answer: Deflation

    Deflation is a persistent fall in the overall price level, distinct from disinflation which is a slowing of the inflation rate.

  5. The current account balance is LEAST likely to include which item?

    Answer: Foreign direct investment

    Foreign direct investment appears in the capital/financial account, not the current account.

  6. Which leading economic indicator typically turns down before a recession begins?

    Answer: Building permits for new private housing

    Building permits are a leading indicator because construction decisions are made well before economic activity slows.

  7. In calculating CPI, the Laspeyres index is used. What is the primary bias this introduces?

    Answer: Upward substitution bias

    The Laspeyres (fixed-basket) approach overstates inflation because it ignores consumer substitution toward cheaper goods when prices change.