Macro Chapter 5 Conceptual

Which of the following accurately describe the financial flows into and out of households? (Check all that apply) A. Taxes flow out of households and to the government B. Wages flow into households as payments for their labor services C. Transfer payments flow out of households and into firms D. Interest flows into households as payment on corporate and government bonds and dividends from firms.

A. Taxes flow out of households and to the government B. Wages flow into households as payments for their labor services D. Interest flows into households as payment on corporate and government bonds and dividends from firms.

A circular flow diagram shows A. The income received and payments made by each sector of the​ economy: firms,​ households, government, and the rest of the world. B. A business cycle. C. The workings of fiscal and monetary policies. D. The intersection of aggregate demand and aggregate supply.

A. The income received and payments made by each sector of the​ economy: firms,​ households, government, and the rest of the world.

The length and severity of the Great Depression necessitated a fundamental rethinking of the operations of the macroeconomy because very high levels of A. Unemployment persisted for about 10​ years, which is contrary to classical models. B. Interest rates persisted for about 10​ years, which is contrary to classical models. C. Inflation persisted for about 10​ years, which is contrary to classical models. D. Unemployment persisted for about 30​ years, which is contrary to Keynesian models.

A. Unemployment persisted for about 10​ years, which is contrary to classical models.

Wages, interests, and dividends flow out of _______ and into _______. A. Firms; households B. Firms; government C. Households; government D. Households; firms

A. firms; households

Transfer payments are not included in GDP calculation because these are A. Income​ received, but not as payments for providing current goods and services. B. No different from income tax payments. C. Payments received from an employer as a reimbursement for moving expenses. D. Income from foreign countries that is transferred to the U.S.

A. income received, but not as payment for providing current goods and services (ex: social security benefits, veterans' benefits, welfare payments)

Assume that you live in a simple economy in which only three goods are produced and​ traded: cashews,​ pecans, and almonds. Suppose that on January​ 1, 2015, cashews sold for $13.00 per​ pound, pecans were $4.50 per​ pound, and almonds were $5.00 per pound. At the end of the​ year, you discover that the cashew crop was lower than expected and that cashew prices had increased to ​$13.15 per​ pound, but pecan prices stayed a $4.50 and almond prices had actually fallen to $4.25. Based on this​ information, you can say that the overall​ "price level"​ ___________. A. Increased since cashews are now more expensive than almonds and pecans. B. Decreased during the year since the average price for the three goods fell from $7.50 to $7.30. C. Stayed the same since the price of cashews increased but the price of almonds fell. D. There is not enough information to determine the change in the overall price level.

B. Decreased during the year since the average price for the three goods fell from $7.50 to $7.30.

According to the National Bureau of Economic Research​ (NBER), what has been dubbed the Great Recession officially began in December 2007 and ended in June 2009. During this​ recession, national output of goods and services fell from the second quarter of 2008 until the end of the recession in the second quarter of​ 2009, and then slowly began to increase. When the recession was officially declared as being​ over, the unemployment rate continued to​ rise, reaching 10 percent in October 2009 and remained close to that level until April 2010 when it slowly started to decline. During that​ 10-month period, the net loss in jobs in the U.S. economy was close to 1.4 million. Which of the following explains how it is possible that output can rise while at the same time employment​ falls? A. Increase in population. B. Increase in labor productivity. C. Rise in the capital stock. D. Decrease in labor productivity.

B. Increase in labor productivity.

The athletic skills of the Green Bay Packers' quarterback Aaron Rodgers are traded in the A. Goods-and-services market B. Labor Market C. Money (Financial) Market

B. Labor Market

In September​ 2009, the unemployment rate of the U.S. was​ 9.6% and in the state of​ Michigan, the unemployment rate was​ 13.1%. Which of the following is NOT a possible explanation for the difference in the unemployment​ rates? A. The structure of the type of employment in Michigan has changed and the labor force has been slow to adjust. B. The federal government gave Michigan more stimulus money than the other states. C. Michigan has higher taxes than the average of the states in the U.S. D. The labor laws in Michigan are relatively more strict and make it difficult for firms to hire additional workers.

B. The federal government gave Michigan more stimulus money than the other states.

Which of the following is NOT one of the main policies that the government uses to stimulate demand? A. The government could lower the tax rate, which will raise consumer spending and increase demand. B. The government could raise the tax rate, which will reduce consumer spending but raise demand because the government is collecting more revenue. C. The government could spend more, which will directly increase demand. D. All the above policies used to stimulate demand.

B. The government could raise the tax rate, which will reduce consumer spending but raise demand because the government is collecting more revenue.

In order to construct your​ measure, you might need all of the following information EXCEPT a​ ____________. A. Fixed-weight measure of prices using a market basket of quantities purchased by a typical consumer. B. Variable-weight price measurement tool that emphasizes percentage changes in the price level. C. Measure of prices that producers receive for products at all stages in the production process. D. Weighted average of prices of all goods and​ services, with the quantities produced acting as weights.

B. Variable-weight price measurement tool that emphasizes percentage changes in the price level.

Since​ 1970, the longest recession in the United States began in ____ Since​ 1970, the highest unemployment rate in the United States occurred during the recession that began in _____ A. 2001. B. 1980. C. 1990. D. 2008.

Both answers: D. 1980

Inflation is defined as​ ____________. A. A measurement of consumer behavior. B. A decrease in the overall price level. C. An increase in the overall price level. D. A measure of economic growth.

C. An increase in the overall price level.

Macroeconomists use microeconomic theory to guide them in their work since A. Both microeconomists and macroeconomists believe that wages are often​ "sticky" and do not quickly adjust to maintain equilibrium. B. Macroeconomists was developed by John Maynard Keynes in the late​ 1700's shortly after around the time that microeconomic theory was at its height. C. Macroeconomics studies the aggregate versions of microeconomic topics therefore the conclusion from microeconomic theory serves as an important reference for macroeconomists. D. Similar to microeconomists macroeconomists believe that markets work well therefore there will not be periods when the quantity of labor supplied will exceed the quantity of labor demanded.

C. Macroeconomics studies the aggregate versions of microeconomic topics therefore the conclusion from microeconomic theory serves as an important reference for macroeconomists.

In​ 1974, the price of a​ first-class postage stamp was 10 ​cents, a loaf of bread averaged 28 ​cents, gasoline was 53 cents per​ gallon, and the average price of a new car was ​$3,500. In​ 2014, the postage stamp cost 49​ cents, a loaf of bread was​ $2.46, gasoline averaged​ $3.36 per​ gallon, and the average new car cost​ $32,531. Based on this​ information, can we conclude that consumers today are worse off than consumers in​ 1974? A. No, other factors such as the unemployment rate or national output levels are required to answer this question. B. Yes, based on the​ data, goods were much cheaper in 1974 so we can conclude that consumers today are worse off. C. No, we need to compare the purchasing power of consumers in 1974 with the purchasing power of people in 2014. D. Yes, this is further proof that people have been losing the battle against inflation over the past 60 years.

C. No, we need to compare the purchasing power of consumers in 1974 with the purchasing power of people in 2014.

The labor demand curve shows the A. Number of workers that want to work at each wage rate. B. Quantity of goods and services that the workers want to buy at each price. C. Number of workers that the firms want to hire at each wage rate. D. Quantity of goods and services that the firms want to sell at each price.

C. Number of workers that the firms want to hire at each wage rate.

The labor supply curve shows​ the: A. Quantity of goods and services that the workers want to buy at each price. B. Quantity of goods and services that the firms want to sell at each price. C. Number of workers that want to work at each wage rate. D. Number of workers that the firms want to hire at each wage rate.

C. Number of workers that want to work at each wage rate.

To fund its budget​ deficit, the government can borrow by A. Issuing stocks to the public. B. Increasing taxes. C. Selling treasury bills to the public. D. Applying for a loan from banks.

C. Selling treasury bills to the public. (treasury bonds, notes, bills)

People who are unemployed are those who A. Have given up their search for employment. B. Are unwilling to work. C. Are unable to work. D. Are searching for work but cannot find a job.

D. Are searching for work but cannot find a job

Short-run fluctuations of an economy are called ______. A. A trough B. A cyclical deficit C. An expansion D. Business cycles

D. Business cycles

In​ 1974, the price of a​ first-class postage stamp was 10 ​cents, a loaf of bread averaged 28 ​cents, gasoline was 53 cents per​ gallon, and the average price of a new car was ​$4,000. In​ 2014, the postage stamp cost 49​ cents, a loaf of bread was​ $2.46, gasoline averaged​ $3.36 per​ gallon, and the average new car cost​ $32,531. Based on this​ information, can we conclude that consumers today are worse off than consumers in​ 1974? A. Yes, this is further proof that people have been losing the battle against inflation over the past 60 years. B. Yes, based on the​ data, goods were much cheaper in 1974 so we can conclude that consumers today are worse off. C. No, other factors such as the unemployment rate or national output levels are required to answer this question. D. No, we need to compare the purchasing power of consumers in 1974 with the purchasing power of people in 2014.

D. No, we need to compare the purchasing power of consumers in 1974 with the purchasing power of people in 2014.

If the economy has just left a​ trough, it will be​ ________ and its level of output will be​ ________. A. contracting; low B. growing; high C. contracting; high D. growing; low

D. growing; low

The classical model is based on the critical assumption that A. Prices and wages are rigid. B. Markets are always perfectly competitive. C. The​ self-correcting mechanism does not work. D. Markets always clear.

D. markets always clear The critical assumption in the classical model is that markets always clear. This means supply will = demand. In other​ words, classical economists believed that recessions​ (downturns in the​ economy), were​ self-correcting.

True/False: In order to pursue the macroeconomic goal of​ stability, policy makers want to avoid prolonged periods of inflation and instead push for prolonged periods of deflation.

False

What are the 2 main instruments policy instruments of the government.

Fiscal policy (Government policies concerning taxes and spending) Monetary policy (Tools used by Federal Reserve to control short-term interest rates)

Much of modern macroeconomics has roots in the works of ________.

John Maynard Keynes

True/False: Business cycles were more extreme before World War II than they have been since then.

True

True/False: Everyone's expenditure is someone else's receipt

True

True/False: Households supply funds and demand funds in the money market.

True

True/False: One reason why unemployment exists is because labor market adjustments generally take time.

True

True/False: The unemployment rate is usually closely related to the​ economy's aggregate output.

True

Macroeconomists tend to combine many markets into one. For​ example, the behavior of all households and firms together is called _______.

aggregate behavior

Assume that the demand for flight attendants increases significantly as a result of an increase in demand for air travel. Using Keynesian reasoning, this should result in ________. A. Higher wages and more incentive for firms to decrease the number of workers demanded B. Less employment of other types of workers. C. A decrease in the wage rate for other types of workers. D. A decrease in unemployment since wages will not adjust right away.

d. a decrease in unemployment since wages will not adjust right away (classical belief would argue that increase in demand for flight attendants should result in higher ages b/c of flexible market)

During the​ 1960's, many economists believed that the government could regulate both unemployment and inflation at the same time. This is known as _______ the macroeconomy

fine-tuning

Government policies that deal with taxes and spending are known as ______, while other policies dealing with the control of the​ nation's short-term interest rates are called _______. .

fiscal policy monetary policy

Classical economists believed that unemployment would not persist because prices and wages are _______, while Keynesians believed that they are _______, therefore unemployment will persist without government intervention to spur aggregate demand.

flexible sticky

In the labor​ market, ________ supply labor and​ ________ demand labor.

households firms and the government

The opportunity cost of holding a job is _______.

the leisure time that is given up

In a diagram of labor supply and labor demand​ curves, we measure _______ along the horizontal axis and ______ along the vertical axis.

units for labor the wage rate