Chapter 4 Macroeconomics Midterm

Trade deficit

exports < imports

Trade surplus:

exports > imports

The unemployment rate:

the percentage of the labor force that is unemployed -Rises during recessions -Always greater than zero

Inflation

the rate prices in general are increasing over time

Average labor productivity:

total output/ number of people employed= output per employed worker

Aggregation

-The adding up of the individual economic variables to obtain economywide totals -Used to take a "bird's-eye view" of the economy

Fiscal Policy

-Decisions that determine the government's budget, including the amount and composition of government expenditures and government revenues -How much should the government spend, and on what?

Monetary Policy

-Determination of the nation's money supply -Controlled by the central bank or, in the U.S., the Federal Reserve System (Fed) -The central bank has the power to inject more money into the economy, or remove it. How much money should there be?

Structural Policy

-Government policies aimed at changing the underlying structure, or institutions, of the nation's economy -What should the economy look like?

Economic Growth

A process of steady increases in the quantity and quality of the goods and services the economy can produce

A government is running a budget deficit if: A) government revenue is less than government spending. B) government revenue exceeds government spending. C) imports exceed exports. D) exports exceed imports.

A) government revenue is less than government spending.

Among economists today, the most widely accepted cause of the Great Depression is: A) poor economic policymaking. B) Adolf Hitler's election as Chancellor of Germany. C) globalization. D) wild stock market speculation on Wall Street.

A) poor economic policymaking

"U.S. exports will increase as a result of joined CAFTA," is an example of a ______ statement, while "The U.S. should join CAFTA," is an example of a _____ statement. A) positive; normative B) structural policy; fiscal policy C) monetary policy; fiscal policy D) normative; positive

A) positive; normative

A government decision to privatize a sector of the economy formerly operated by the government is an example of _____ policy. A) structural B) monetary C) aggregation D) fiscal

A) structural

The unemployment rate in the United States at the peak of the Great Depression was _____ percent. A) 20 B) 25 C) 10 D) 5

B) 25

A nation's central bank: A) is the bank that holds deposits for the most customers in the nation. B) controls the nation's monetary policy. C) is the bank that has the most neutral lending policy. D) determines the nation's fiscal policy

B) controls the nation's monetary policy

After increasing at more than 2 percent per year between 1950 and 1973, the growth rate of average labor productivity _____ between 1973 and 1995, and ____ between 1996 to 2007. A) slowed; decreased even more B) slowed; picked up C) speeded up; slowed D) speeded up; accelerated even more

B) slowed; picked up

In Econland exports equal 15 percent of total output, while imports equal 20 percent of total output. Econland has a: A) budget deficit. B) trade deficit. C) trade surplus. D) budget surplus.

B) trade deficit.

Major macroeconomic questions include all of the following EXCEPT: A) Are free trade agreements beneficial? B) What causes slowdowns in productivity growth? C) How do monopoly firms set prices and determine quantities to produce? D) Can inflation be reduced without generating additional unemployment?

C) How do monopoly firms set prices and determine quantities to produce?

Which of the following would be considered an example of monetary policy? A) A reduction in income tax rates. B) A decision by a developing country to reduce government control of the economy and to become more market-oriented. C) Provision of additional cash to the banking system. D) A broad government initiative to reduce the country's reliance on agriculture and promote high-technology industries.

C) Provision of additional cash to the banking system.

Fiscal policy refers to: A) the determination of the nation's money supply. B) government policies aimed at changing the underlying structure or institutions of the economy. C) decisions to determine the government's budget. D) policy directed toward increasing exports and reducing imports.

C) decisions to determine the government's budget.

The country of Northland produced $1,000 billion of output in one year. The population of Northland was 50 million, of whom 30 million were employed. What was average labor productivity in Northland? A) $33 B) $20,000 C) $20 D) $33,333

D) $33,333

Inflation was a major problem in the United States during the: A) 1950s. B) 2000s. C) 1960s. D) 1970s.

D) 1970s

A particularly strong expansion is called a(n): A) output excess. B) bonanza. C) growth recession. D) boom.

D) boom

The standard of living in an economy is best measured by: A) total output. B) the inflation rate. C) average labor productivity. D) output per person.

D) output per person

Aggregation allows economists to ______ at the cost of ________. A) see the details; obscuring the big picture B) make normative statements; ignoring positive analysis C) make positive statements; ignoring normative analysis D) the big picture; obscuring the details

D) see the big picture; obscuring the details

The fraction of people who would like to be employed, but can't find work is called the: A) average labor productivity rate. B) participation rate. C) inflation rate. D) unemployment rate.

D) unemployment rate.

Standard of Living

The degree to which people have access to goods and services that make their lives easier, healthier, safer, and more enjoyable