Macroeconomics midterm

The nature of demand indicates that as the price of a good increases:

Buyers desire to purchase less of it.

Name some factors that can cause a shift in the supply curve in labor markets.

Changes in how desirable the job is perceived to be, government policy to promote training in the field.

In the financial market, what causes a movement along the demand curve? What causes a shift in the demand curve?

Changes in interest rates would cause movement. Changes in anything else that affects demand for financial capital would shift the demand curve.

Name some factors that can cause a shift in the demand curve in labor markets.

Changes in output, changes in the production process that use more or less labor, government regulation.

In the financial market, what causes a movement along the supply curve? What causes a shift in the supply curve?

Changes in the interest rate cause a movement. Changes in anything else that affects the supply of financial capital such as income or future needs would shift the supply curve.

What does a downward-sloping demand curve mean about how buyers in a market will react to higher prices?

The demand would go down, while the supply would go up.

Many cooks view butter and margarine to be substitutes. If the price of butter rises, the. In the market for margarine:

The equilibrium price will rise and the equilibrium quantity will decrease.

How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves? Adam Smith offered 3 reasons. List them and briefly describe the rationale behind each.

The first reason is that specialization in a particular small job allows workers to focus on the parts of the production process where they have an advantage. People have different skills, talents, and interests, so they will be better at some jobs than others. The second reason is that workers who specialize in certain tasks often learn to produce more quickly and with higher quality. The third reason is that when the level of production increases, the average cost of producing each individual unit declines. It is also called taking advantage of the economies of scale.

Describe the general appearance of a demand or a supply curve with zero elasticity.

The highly inelastic case of demand or supply in which a percentage change in price, no matter how large, results in zero change in the quantity; vertical appearance.

What are the three main goals of macroeconomics?

Growth in the standard of living, low unemployment, and low inflation.

In the long run, the most important source of increase in a nation's standard of living is a:

High rate of economic growth

Consumption is the purchase of goods and services by:

Households

Are households demanded or suppliers in the goods market? Are firms demanders or suppliers in the goods market? What about the labor market and the financial market?

Households are demanders in a goods market. Firms are suppliers in a goods market. Households are the suppliers in the Labor market, but demanders in the financial market. Firms are demanders in the labor market, but suppliers in the financial market.

What is the formula for calculating elasticity?

To determine if something is elastic, the percentage change in quantity must be greater than the percentage change in price.

Name some factors that can cause a shift in the supply curve in markets for goods and services.

When costs of production fall, a firm tends tk supply a large quantity at any given price for its output. When costs of production rise, a firm produces less. A decrease in the price of a substitute in production. A decrease in input prices which make production toon less expensive. A change in technology. An expected decrease in producers. Deregulation. Reduction in taxes. Increase in subsidies.

Name some factors that can cause a shift in the demand curve in markets for goods and services.

Willingness to purchase, ability to purchase, changing tastes or preferences (substitutes and compliments), changes in expectations about future prices or other factors that affect demand.

What does ceteris paribus mean?

"Other things being equal." Any given demand or supply curve is based on this assumption that all else is held equal. A demand curve or supply curve is a relationship between two, and only two, variables when all other variables are kept constant.

Billy bob's barber shop knows that a 5% increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchases. What is a he elasticity of demand facing billy bob's barber shop?

3 because 15/5 equals 3

In the labor market, what causes a movement along the demand curve? What causes a shift in the demand curve?

A change in salary. A change in the quantity demanded if the product that the labor produces, a change in the production process, and a change in government policy that affect the quantity of labor.

In the labor market, what causes a shift in the supply curve? What causes a shift in the supply curve?

A change in salary. How desirable a job appears to workers, government policy and hat either restricts or encourages the quantity of workers trained for the job, the number of workers in an economy, and required education.

Which of the following is most likely a topic of discussion in macroeconomics?

A decrease in the unemployment rate.

What is a scarce good?

A good that is wanted but is not readily available. The demand exceeds the supply

Which Of the following is included in the calculated gross domestic product?

A local ice cream store sells $17,000 worth of cones and sundaes in July 1.

The industrial revolution

A term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800's.

In macroeconomics, the connection from inputs to outputs for the entire economy is called:

An aggregate production function.

Andy views beer and pizza as compliments to one another. If the price of pizza decreases, economists would expect:

Andy's demand for beer to increase.

What is the relationship between quantity demanded and quantity supplied at equilibrium? What is the relationship when there is a shortage? What is the relationship when there is a surplus?

At equilibrium, the two are equal. When there is a shortage, quantity demanded is greater than quantity supplied. When there is a surplus, quantity supplied is greater than quantity demanded.

Will demand curves have the exact shape in all markets?

Demand curves will appear somewhat different for each product. Nearly all demand curves share the fundamental similarity that they slips down from left to right.

I hat are 5 things that will shift a supply curve to the right?

Deregulation, a reduction in taxes, an increase in subsidies, a change in technology, an expected decrease in producers.

One danger for the statisticians who calculate GDP is to avoid the mistake of double counting. Define "double counting" and why it may be dangerous

Double counting is output counted two or more times as it travels through the stages of production. The danger is that this could overstate the size of the economy.

In order to avoid double counting, statisticians just count the ______

Final goods and services

How can you locate the equilibrium point on a demand and supply graph?

Find where quantity demanded and quantity supplied meet.

Final goods or services used to compute GDP refer to:

Goods and services purchased by the ultimate users.

Explain gross domestic product (GDP)

GDP is the value of all final goods and services produced domestically. It is the broadest quantitative measure of a nations total economic activity.

Several types of economic events can cause a shift in labor demand, so that a higher or lower quantity of labor is hired at every salary or wage. List 3 of these events

Government regulations, demand for output, and price and availability of other inputs.

In economic terms, what do economists mean by the word "investment"?

Investment, in economic terms, is the utilization of resources in order to increase income or products. Putting in something to get more in return.

Equilibrium price

Is the only price where quantity demanded is equal to quantity supplied.

The basic difference between macro and micro economics is that?

Micro is concerned with the trees (individual markets) while macro is concerned with the forest(aggregate markets).

What is the difference between microeconomics and macroeconomics?

Microeconomics focuses on individual agents within the economy like households, workers, and businesses. Macroeconomics views the economy as a whole and focuses on broad issues like growth production, unemployment, inflation, government deficits, and exports and imports. Both compliment each other and should blend together.

The 2 main tools of macroeconomic policy include monetary policy and fiscal policy. Briefly describe the main components of each.

Monetary policy involves policies that affect bank lending, interest rates, financial capital markets. For the United States, this is the federal reserve. Fiscal policy involves government spending and taxes. It is determined by a nation's legislative body. For the United States this is congress and the executive branch.

Will supply curves have the same shape in all markets? If not, how will they differ?

Nearly all supply curves share a basic similarity. They slope up from left to right and illustrate the law of supply.

The demand curve for a typical good has a(n):

Negative slips because some consumers switch to other goods as the price rises.

What are normal goods and inferior goods? Discuss within the context of income elasticity of demand.

Normal goods are goods whose consumption increases with an increase in income. Inferior goods are goods whose consumption decrease with an increase in income.

What is scarcity?

Scarcity is when human wants for goods, services, and resources exceed what is available

What is standard of living?

The degree of wealth and material comfort available to a person or community.

What is the price elasticity of demand?

Percentage change in the quantity demanded of a good or service divided the percentage change in price.

What is the price elasticity of supply?

Percentage change in the quantity supplied divided by the percentage change in price.

The value of what is produced per worker, or per hour worked, is called _____

Productivity

To achieve a higher standard of living, a nation should

Promote economic growth

Economists typically measure economic growth by tracking:

Real GDP per capita

Economies of scale

Refers to the fact that many goods, as the level of production increases, the average cost of producing each individual unit declines.

Quantity demanded

Refers to the total number of units that are purchased at that price.

The price elasticity of demand measures the:

Responsiveness of quantity demanded to a change in price.

A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:

Supply curve

What are three main sources for economic growth in any economy?

Technology, human capital, and physical capital.

What is the black market, and under what economic condition is it most likely to thrive?

The black market is like the underground economies. It is an illegal way to sell or trade goods that are not allowed in the country or scarce without the governments approval. It is most likely to thrive in a heavily regulated economy, a command economy.

What is the relationship between price elasticity and position in the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that?

The more vertical a curve, the more elastic it is. The more horizontal a curve, the more inelastic it is.

What is the "price" commonly called in the labor market?

The price is called a wage in the labor market.

What is the trade balance?

The trade balance is the calculation of a country's exports minus its imports.

GDP

The value of all final goods and services produced domestically.

When quantity demanded decreases in response to a change in price:

There is movement along the demand curve