AP Macreconomics

A production possibilities curve is best said to model the concepts of?

scarcity and trade-offs.

What are capital goods?

the manufactured goods used to make other goods and services and are a result of production; examples are machines, buildings, tools used to assemble other things such as cars

If MPC is .5, the MPS is

.5

Suppose japan can produce either 50 TVs in a day or five cars in a day or any point in between. What is the opportunity cost of Japan producing a car?

10 TVs.

Nation Y has a comparative advantage in the production of a good compared to nation X. Therefore, nation y is experiencing?

A lower marginal domestic opportunity cost when producing a good.

What is an example of frictional unemployment?

A worker quits her job to search for a better job in another city.

Trade between nations will lead to?

An increase in specialization.

What is a factor of production?

Any recourse used for the production of consumer products. Example: capital (machines and factories)

What action should occur if the federal reserve wants to increase the money supply?

Decrease the discount rate.

Works for you would be used to calculate real GDP?

Base year prices x current year quantities.

Assume two countries, United States and Canada, produce only two goods. If the production possibilities curves for both countries is curved outward away from the axis, then this means?

Both countries experience different mixes of resources and technological advances.

Fluctuations in employment and output in the short run are known as?

Business cycles.

The United States is operating at a point below its production possibilities curve. All else being equal, what tool of monetary policy should be used to return to a point on the curve?

Buy bonds on the open market.

In order to increase the money supply the federal reserve will take what action?

Buy bonds.

In booming economic times we were expect demand for inferior goods to?

Decrease.

What would cause a shift in the production possibilities curve?

Change in resources and change in technology

What are the determinants of aggregate demand shifts?

Consumer expenditures, government expenditures , business investment expenditures and foreign expenditures on exports.

What countries do not enact the fiscal policy?

Countries that do not have a central bank.

If the economy of the country x is currently experiencing increasing unemployment and falling output at what point are they in the business cycle?

Country x is in a recessionary phase.

Formula to calculate nominal GDP?

Current year prices X current year quantities.

Supposed teacher took a year off from teaching school to manage a clothing boutique. During this year, the teacher would be considered

Cyclically unemployed.

What is an example of a normal good?

Designer jeans.

What represents a fundamental economic problem?

Determining what to produce in a society with unlimited wants and scarce resources

Assuming opportunity costs are constant. Visually moving left to right the production possibilities curve would be a?

Downward sloping line.

The law of demand is illustrated by a demand curve that is?

Downward sloping.

What effect with it and increase in government spending have an equilibrium output in price level in the short run?

Equilibrium output would increase and the price level would increase.

Monetary policy is created and executed by the?

Federal reserve.

What does GDP measure?

Final value of output in a given time period.

Monetary policy designed to stimulate aggravate demand could include?

Find government securities

What are two major components of balance of payments?

Fiscal and monetary

If consumers are feeling popper dye to price level increases but unemployment has not increased then this means the AD curve?

Has likely shifted right of the vertical part of the aggregate supply curve.

Assume shoes are a normal good. According to the law of demand, when all else is equal?

If income decreases, then the quantity of shoes demanded will decrease.

What is a tight money policy maneuver of the federal reserve

Increase discount rate

What would cause an economic growth?

Increase in worker productivity, improvement in technology, and an increase in the number of workers. Shown by shifting the curve to the right.

What is your country a do to combat a severe recession?

Increase taxes

How would a temporary cut in the tax rate of the employee portion of the US Social Security payroll tax affect a recessionary economy

It would likely cause an aggregate demand curve shifts to the right

The basic economic problem is the existence of?

Limitless wants with limited resources

Ceteris Paribus, An increase in the quantity demand it would be caused by?

Lower prices.

What are examples of automatic stabilizers?

Marginal progressive income tax, unemployment compensation and Social Security

What's an example of something that wouldn't satisfy an economists defintion of the concept of scarce resources

Measles

How can a good be scarce?

Must be limited and desired. The bubonic plague is not scarce because it is limited but not desired.

In order to graphically demonstrate the opportunity cost associated with the production of two different items in the economy when would you use a?

Production possibilities curve.

Another common name for the production possibilities curve is?

Production possibilities frontier.

Price of a movie chicken pieces from $12-$15 we can expect?

Quantity demanded of movie tickets to decrease.

According to the law of supply, if the price of a product decreases, one would expect?

Quantity supplied to decrease.

Assume Congress lower taxes. If the FED wanted to counter act that move, then which of the following best describes what the FED would do?

Raise the reserve requirement

An interest rate that is adjusted for inflation is known as the?

Real interest rate.

Aggravate demand is best described as?

Representing the demand of all consumers for all ten good and services produced in a nation in a given time period at different price levels.

What are natural resources?

Resources that occur in nature. Examples: air, water, trees, coal, natural gas, fuels

Economists consider the choices people must make as originating from?

Scarcity

Which fundamental economic concept forces producers and consumers to make trade-offs?

Scarcity

Suppose fiscal policy was enacted to prevent a recession, but due to the lagging nature of implementing a policy, the economy was already back to normal. Which of the following is the most likely action taken by the federal reserve?

Sell bonds on the open market

What is an example that represents an exercise of tight money policy by the FED

Selling bonds on open market.

A country decides to focus on producing a limited variety of goods. What is this an example of?

Specialization.

What does market basket refer to?

Specified goods and services used to measure price change.

Fiscal policy refers to?

Taxing and spending policy

When the production possibilities curve shifts towards the right, what is most likely true?

The country is experiencing some economic growth.

Assume hamburgers and buns are complementary goods if the price of hamburgers increase?

The demand for buns decrease.

If the economy for a country x has been growing but recently has seen the rate of growth slow down, what is likely to happen next?

The economy of a country x will begin a recession

The price of the United States dollar expressed in terms of other countries currency's is known as?

The exchange rate

The production possibilities function corresponds to?

The maximum number of goods attainable with fixed resources.

A trough in the business cycle occurs when?

The natural rate of unemployment is at a minimum.

The unemployment rate is a measure of?

The percentage of people in the labor force without jobs.

What is an example of resource scarcity?

There is a limited amount of trees in the world

The labor force is determined by considering?

Those who are employed or unemployed.

What is county's A experiencing if the value of their exports are more than their imports?

Trade surplus

When we must make a choice between different options due to a shortage of any given resources, economists refer to this as a?

Trade-offs.

Cyclical unemployment could be described as?

Unemployment caused by decreases in consumption

What is an example of a trade-off?

With a fixed budget, a local community will spend less on the building parks when it spends more on roads.