macroeconomics test 1

Nominal GDP is:

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

nominal GDP

will include all of the changes in market prices that have occurred during the current year due to inflation or deflation.

income effect

change in consumption resulting from a change in real income

what causes the demand to change?

change in: income, taste, taxes, number of buyers, expectations, price of related goods.

The National Income and Product Accounts (NIPA) help economists and policymakers to:

follow the long-run course of the economy to determine whether it has grown or stagnated.

Final goods and services refer to

goods and services purchased by ultimate users, rather than for resale or further processing.

price ceiling

government-imposed price control or limit on how high a price is charged for a product.

In this market, economists would call a government-set minimum price of $50 a:

price floor.

An increase in the quantity demanded means that:

price has declined and consumers therefore want to purchase more of the product.

Before the period of modern economic growth

rates of population growth virtually matched rates of output growth.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

reduce the demand for soda and increase the demand for tacos.

The average number of months between price changes for gasoline is:

0.6

The U.S. government agency responsible for compiling the national income accounts is the:

Commerce Department's Bureau of Economic Analysis (BEA).

Which of the following would most likely increase the demand for gasoline?

The expectation by consumers that gasoline prices will be higher in the future.

sticky prices

The resistance of a price to change, despite changes in the broad economy that suggest a different price is optimal

The economy of 1995-2012 was characterized by greater productivity growth and greater economic growth than in the immediately preceding two decades. Correct Response

True

normal goods

are those for which consumers' demand increases when their income increases.

(1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. Refer to the given information. If X is an inferior good, a decrease in income will:

increase D, increase P, and increase Q.

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to

increase the demand for Z.

Assume product A is an input in the production of product B. In turn, product B is a complement to product C. We can expect a decrease in the price of A to:

increase the supply of B and increase the demand for C.

inferior goods

is a good whose quantity demanded decreases when consumer income rises

real GDP

is a macroeconomic measure of the value of economic output adjusted for price changes

price floor

is a minimum price fixed by the government.

shortage

is a situation in which the demand for a product or service exceeds its supply in a market.

demand shock

is a sudden event that increases or decreases demand for goods or services temporarily.

supply shock

is an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general.

substituion effect

is one component of the effect of a change in the price of a good upon the amount of that good demanded by a consumer, the other being the income effect.

demand

is the schedule or a curve that shows the various amounts of a product that consumers are willing and able to buy at each of series of possibles prices during a given period of time.

surplus

is used to describe many excess assets including income, profits, capital and goods.

If government set a maximum price of $45 in the market:

it would create neither a shortage nor a surplus.

The demand curve shows the relationship between

price and quantity demanded.

supply

the amount of producers are willing and able to sell at a given price.

GDP excludes:

the market value of unpaid work in the home.