MacroEconomics

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In the absence of​ well-defined property​ rights, we would likely find

people with fewer incentives to take risks.

Economic​ decision-making often focuses on how a one unit change will impact the system. This type of analysis is known​ as:

marginal analysis.

The behaviors that these firms are attempting to model are the subject​ of:

microeconomics.

The ceteris paribus assumption means

other things equal

According to new growth​ theorists, increased population growth rates can lead to faster economic growth because

the larger the market the more incentive there is to innovate.

The inverse relationship between price and quantity demanded is often referred to​ as:

the law of demand.

The rate of growth in the productivity of capital is 1​ percent, the rate of growth of capital is 2​ percent, the rate of growth of labor is 1​ percent, and the rate of growth in the productivity of labor is 3 percent. From this we know that

the rate of economic growth is 7 percent.

Full employment means

there is a level of unemployment consistent with​ "normal" frictions in the labor market.

What is the economic effect of price​ ceilings?

An effective price ceiling will lead to a shortage.

Which of the following will generate an increase in aggregate​ demand?

Government spending for the onset of a war.

Inflation is more harmful to​ people:

living on fixed incomes.

If the average annual rate of economic growth is 4​ percent, approximately how long will it take for the​ nation's per capita real GDP to​ double?

17.5 years

India will sell​ ___________ of rice from the government stockpiles.

5 million tons

Using the expenditures approach to national income​ accounting, which of the following would be counted as investment spending?

A person in California buys a new house.

Which of the following statements is ​false?

A society that wants more in the future should consume more of its capital today.

Which of the following will cause an outward​ (rightward) shift in​ supply?

A technological improvement.

Economic growth as it is currently measured

A. does not consider​ spiritual, cultural or social difficulties that may arise from growth. B. understates actual economic growth since it does not adjust for changes in leisure. C. does not account for how increased per capita income is distributed across income groups.

Specialization and comparative advantage

A. lead to international trade and overall gains for the nations involved. B. lead to greater output even if you can do everything better than someone else. C.lead to greater productivity.

Which of the following is a true statement about comparing world​ incomes?

Adjusting world incomes for purchasing power gives a more accurate view than using market foreign exchange rates.

Consider the following statement based on a positive economic analysis that assumes that all other things remain​ constant. Falling gasoline prices will result in additional vacation travel. Which of the following​ (initially assumed​ constant) could occur and thus offset the stated outcome?

An increase in hotel taxes at popular resorts

Which of the following is a true statement about​ self-interest as used in the study of​ economics?

Any action can be based on​ self-interest if the person has some reason for the action.

According to the​ article, ___________ is hiring an economist to help its team of economists use existing data to​ "reveal ways to improve the​ company's service for buyers and​ sellers."

EBay Inc.

What is economic​ growth?

Economic growth is increases in per capita real GDP measured by its rate of change per year.

Which of the following is not a true statement about the impact of immigration on economic​ growth?

Economists agree that population growth through immigration is a drain on the economy because it lowers per capita GDP.

Which of the following statements is​ true?

Everyone can benefit when people specialize where they have a comparative advantage and then trade with each other.

An innovation is the same thing as an invention.

False

In the United​ States, a patent gives the inventor of a product the exclusive right to​ make, use, or sell the product for 50 years.

False

Nations with high tariff barriers have tended to have higher average annual rates of real GDP per capita growth since 1965.

False

Real standards of living can only go up with positive economic growth.

False

Suppose a government official is trying to decide whether or not to allow more immigration. Which of the following is not an aspect of the economic way of thinking that would apply in this​ decision-making process?

Flipping a coin.

According to the circular flow of income and​ output, which of the following is not​ true?

Goods, services and money all flow in one direction since money pays for the goods and services.

Which of the following factors could cause the economy to experience​ supply-side inflation?

Government laws which say that the average work week must be reduced by one hour every year.

Assume the cost of aluminum used by​ soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft​ drinks?

II and III. I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

b. What types of policies might Brazil implement to improve its growth​ prospects?

It should implement programs narrowly focused on promoting a higher literacy rate and broadly focused on a greater average educational attainment by its residents.

Which of the following will increase labor​ productivity?

Labor has more physical capital to work with.

The comparative advantage in meal preparation is held by

Mike

Which of the following measures will lower the natural rate of​ unemployment?

More high school graduates enter college without looking for employment right away.

Which of the following statements is not​ true?

Property rights encourage people to take fewer​ risks, making the economy more secure.

Using the expenditures approach to national income​ accounting, which of the following would be counted as consumption?

Residents of New York City buy food every week.

Brazil has a population of about 200​ million, with about 145 million over the age of 15. Of​ these, an estimated 25​ percent, or 35 million​ people, are functionally illiterate. The typical literate individual reads only about two nonacademic books per​ year, which is less than half the number read by the typical literate U.S. or European resident. Answer the following questions solely from the perspective of new growth​ theory: a. Which of the following best explains the implications of​ Brazil's literacy and reading rates for its growth prospects in light of the key tenets of new growth theory.

Since the development of human capital is an important determinant of economic​ growth, Brazil's literacy and reading rates suggests its potential economic growth rate is lower.

Why are politicians and economists concerned about the economic growth rate in the​ U.S.?

Small differences in the rate of economic growth can make large differences in the standard of living over time.

Steve can​ wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. His roommate Mike can​ wash, fold, and iron a basket of laundry in three hours and prepare a meal in one hour. The absolute advantage in laundry is held by

Steve

According to economist Paul​ Romer, ideas are what drive economic growth.

True

According to new growth​ theory, more technological advances will occur when the rewards are greater.

True

In​ general, the more securely private property rights are​ assigned, the more capital accumulation there will be.

True

On a national​ basis, higher saving rates eventually mean higher living standards in the long​ run, all other things held constant.

True

Population growth can have both a positive and a negative impact on economic growth.

True

There are predictions that computers may become as powerful as the human brain by 2030.

True

The three fundamental economic questions that a nation addresses in order to allocate​ society's scarce resources include all of the following ​except:

Why will the items be​ produced?

An increase in the LRAS curve that is larger proportionately than an increase in the AD curve will lead to

a decrease in the price level and an increase in output.

Entrepreneurship functions better when

a system of private property rights permits entrepreneurs to capture the rewards from their entrepreneurial activities.

The expenditure approach to tabulating GDP

adds up the total amount spent on newly produced domestic goods and services during the year.

The development of modern rich nations can be characterized by three​ stages:

agricultural​ stage, followed by manufacturing​ stage, and lastly the tertiary stage.

Typically, modern developed countries have gone through three stages Initially countries have most of the population involved in Secondly, much of the population moves to Finally, there is a shift toward

agriculture Industry services

The economic way of thinking is best described as

an analytical framework enabling one to reach informed conclusions.

A simplified representation of a complex system dealing with economics is known​ as:

an economic model.

If prices fall for a particular good then consumers​ will:

buy more units. demand arrow goes down

Economics is the study​ of:

choices made when scarcity exists.

One of the most important factors for economic growth to take place is that a society must

consume less than they produce.

According to the​ text, firms encounter rising costs when they attempt to produce more in the same time period. As a​ consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is

direct​ (or positive) and is called the law of supply.

Labor productivity is normally measured by

dividing total real domestic output by the number of workers or by the number of labor hours.

Population growth generally

encourages technological progress that increases economic growth.

Mexico has a more open economy​ (lower tariff​ barriers) than Nigeria Thus it would be expected that the average annual per capita growth rate of real GDP would be higher in Mexico. Free trade encourages economic growth by

encouraging the more rapid spread of technology.

A country that saves a larger percentage of GDP than another country​ will, ceteris paribus

experience higher rates of economic growth since there will be more investment.

Economic goods are

goods that are scarce.

The knowledge and skills that people in the workforce acquire through​ education, on-the-job​ training, and​ self-teaching is referred to as

human capital.

Inflation that is higher than​ 50% per month is known​ as:

hyperinflation

Economic growth is positively related to all of the following except

import tariffs

For every 1 percent increase in the stock of research and development in the United​ States, productivity in the rest of the world

increases by about 0.25 percent.

In the long​ run, persistent deflation in a growing economy can occur if

increases in the LRAS are proportionately larger than the increases in AD.

Limiting the immigration of highly educated professionals hurts U.S. economic growth because

it restricts the supply of high human capital workers and the new ideas they could potentially generate. it restricts the knowledge base of the workforce.

According to the new growth theory

knowledge about how to produce goods and services is an important source of economic growth.

Improvements in ______ productivity, all other things being​ equal, lead to _________ economic growth and higher living standards. One fundamental determinant of the rate of growth is the rate of _________ . To have more consumption in the​ future, we have to __________ rather than consume. In​ general, countries that have had higher rates of _______ have had higher rates of growth in per capita real GDP.

labor; greater; saving; save; saving

According to Julian​ Simon,

legal and illegal immigrants have a positive effect on the welfare of American citizens.

To encourage economic development a country should do all of the following except

limit the amount of imports allowed in to the country.

Economic growth can be defined as the increase in _____ real​ GDP, measured by its rate of change per year. The _____ of economic growth are reductions in​ illiteracy, poverty, and illness and increases in life spans and political stability. The costs of economic growth may include environmental​ pollution, alienation, and urban congestion. Small​ percentage-point differences in growth rates lead to ______ differences in per capita real GDP over time.

per capita; benefits; costs; large

Total capital is the sum of

physical capital and human capital.

High levels of inflation can lead​ to:

political unrest.

Farmer McDonald has 100 acres of land on which he can grow soybeans or corn. An acre of land yields 200 bushels of soybeans or 100 bushels of corn or some combination of both. The accompanying figure refers to farmer McDonald's

production possibilities curve.

The economic development of a country is dependent on all of the following except

promoting protectionist barriers.

Government enforced property rights are crucial to economic growth because they

provide incentives for capital accumulation and entrepreneurial activity. B. encourage people to save knowing their wealth will not be arbitrarily confiscated. C. make the returns to​ risk-taking relatively more certain.

An​ economy's rate of economic growth equals

rate of growth of capital plus rate of growth of labor plus rate of growth in the productivity of capital and labor.

According to the​ real-balance effect, an increase in the price level

reduces an​ individual's expenditures due to a decrease in the real value of cash balances.

For economic growth to take​ place, a country must save.​ But, for saving to actually generate economic​ growth,

saving must be channeled into investment.

Other things remaining​ equal, the law of demand says that higher prices will lead to a

smaller quantity demanded and lower prices to a larger quantity demanded.

The division of productive activities among persons and regions so that no one individual or region is totally​ self-sufficient is known as

specialization.

The new growth theory argues that

technology must be considered a separate factor of production that is sensitive to economic incentives.

One reason that economists use microeconomics as the basis of macroeconomic analysis is

that all choices are made by individuals and firms.

An economic model is developed from a set of assumptions about consumer behavior and predicts that people will buy less of a good the higher the price of the good. Empirical testing of this model would involve

the collection of data to evaluate the usefulness of the model.

People may appear to use rules of​ thumb, as suggested by the assumption of bounded​ rationality, even though they may really be behaving in a manner suggested by the rationality assumption if

they face persistently predictable range of choices for a period of time.

New growth theory differs from traditional growth theory in that

traditional theory did not explain what causes improvements in​ technology, but new growth theory does.

Ph.D. economists have traditionally been hired​ by:

universities. government agencies. Wall Street firms.

All of the following are benefits of economic growth except

urban congestion

All of the following pairs of goods are substitutes except

we observe the price of bacon increases and the demand for eggs decreases.

All of the following pairs of goods are complements except

we observe the price of coffee decreases and the demand for tea decreases.

To which of the following​ household-type(s) does the phrase​ "unlimited wants and limited resources"

​I, II, and III. A​ low-income household II. A​ middle-income household III. A​ high-income household


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