Princ. of Macroecon. Exam 1
Equilibrium
a state in which opposing forces or influences are balanced.
demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
How to calculate GDP
GDP = C + I + G +NX
How to calculate GDP inflation rate
GDP deflator- 100/ 100
substitutes
Goods and services that can be used for the same purpose.
shortage
A situation in which quantity demanded is greater than quantity supplied
surplus
A situation in which quantity supplied is greater than quantity demanded
If orange juice and apple juice are substitutes, an increase in the price of orange juice will shift the demand curve for apple juice to the left. True or False?
False
natural resources
Materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain
How to calculate Nominal GDP
Multiply quantity of goods produced by prices (in a given year), then add other year
How to calculate real GDP
Multiply the base year by quantity of goods produced by prices, then add another year
How to calculate the value of Net Exports
NX= Exports- Imports
How to calculate GDP deflator
Nominal GDP/Real GDP x 100
The following transactions would be included in what a) Extreme Chocolate, a Swiss chocolate company, makes chocolate chips at a plant in Hersey, PA on May 16, 2020. They were purchased later that month. b) Cheesy, a U.S. restaurant, produces a steak at one of its many Sioux Falls locations on February 24, 2020. It sells the steak to a customer that same day
The U.S. GDP of 2020
Gross Deomestic Product (GDP)
The value of the total output of goods and services produced in a country in a given time period (normally one year).
Sellers respond to a surplus by cutting their prices. True or False?
True
The equilibrium price is the same as the market clearing price. True or False?
True
inferior good
a good that consumers demand less of when their incomes increase
normal good
a good that consumers demand more of when their incomes increase
demand curve
a graph of the relationship between the price of a good and the quantity demanded
supply curve
a graph of the relationship between the price of a good and the quantity supplied
production possibilities frontier
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
market
a group of buyers and sellers of a particular good or service
competitive market
a market in which there are many buyers and many sellers
circular flow diagram
a visual model of the economy that shows how dollars flow through markets among households and firms
Identify whether each of the following events in this scenario occurs in the market for Goods and Services or Factors of Production a) Suppose Peter earns $500 a week in the shipping department at a brewery b) Peter spends $60 to buy Patriots football tickets c) Lois buys a beer from the brewery for $5
a) Factors of Production b) Goods and Services c) Goods and Services
Which of the following flow from a firm to a household?
a) The $500 Peter receives from the brewery b) The beer Lois purchases
Which of the following expenditures would increase the consumption component of U.S. GDP? a) You buy a used book about finance b) You buy a pizza c) You buy 1,000 shares of stock d) You buy a new house
b) You buy a pizza
Which of the following is an example of human capitol? a) The comfortable chair in your dorm room where you read economic texts b) The amount you get paid each week to work at the library c) The things you learned this semester d) Any capitol goods that require a human to be present to operate
c) The things you learned this semester
Positive statements
claims that attempt to describe the world as it is
Normative statements
claims that attempt to prescribe how the world should be
catch-up effect
countries that start off poor tend to grow more rapidly than countries that start off rich
Which of the following would increase the net export component of U.S. GDP? a) A car produced in Michigan is purchased in Louisiana b) A car produced in Japan is purchased in California c) A bottle of French wine is purchased in New York d) A bottle of California wine is purchased in London
d) A bottle of California wine is purchased in London
Which of the following events must cause equilibrium prices to rise?
demand and supply both increase
Based on the circular flow model, households earn income when ___________ purchase ______________ in resource markets.
firms, labor
If an American- based firm opens and operates a new clothing factory in Honduras, then it is engaging in
foreign direct investment
For a market for a good or service to exist, there must be a
group of buyers and sellers
Greg learns how to bake from his grandmother. This is an example of
human capitol, but not technological knowledge
diminishing returns
policies that raise saving and investment
In order to promote growth in living standards, policymakers must
protect property rights and maintain political stability
Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably rise
real GDP/ person and productivity in Eurnesia
technological knowledge
society's understanding of the best ways to produce goods and services
An example of a perfectly competitive market would be the
soybean market
consumption
spending by households on goods and services, with the exception of purchases of new housing
investment
spending on capital equipment, inventories, and structures, including household purchases of new housing
government purchases
spending on goods and services by local, state, and federal governments
quantity demanded
the amount of a good that buyers are willing and able to purchase
quanitity supplied
the amount of a good that sellers are willing and able to sell
law of supply and demand
the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
Law of Supply
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
physical capitol
the human-made objects used to create other goods and services
human capitol
the knowledge and skills a worker gains through education and experience
equilibrium price
the price that balances quantity supplied and quantity demanded
Productivity
the quantity of goods and services produced from each unit of labor input
equilibrium quantity
the quantity supplied and the quantity demanded at the equilibrium price
Macroeconomics
the study of economy-wide phenomena, including inflation, unemployment, and economic growth
Microeconomics
the study of how households and firms make decisions and how they interact in markets
complements
two goods that are bought and used together
Law of Demand
when price rises, quantity falls, when price falls, quantity demanded rises