Macroeconomics Midterm Review

low income countries earn ____ of total world income, but represent ___ of global population

1%, 18.5%

high income countries earn 68% of world income but represent just ___ of the global population

12%

if the percentage of the population who holds jobs in an economy increases,

GDP per capita will increase but the productivity of individual workers may not be affected

productivity growth is also closely linked to

GDP per capita, the average level of wages

which of the following is not an examples of scarcity?

Home Depot offered a wage higher than the minimum wage resulting in an influx of job applications

What is true of the product combination that satisfies allocative efficiency?

It is the combination of products that society most desires. It is one of many combinations of products that use all available resources.

Why does producer surplus exist?

Some producers are willing to produce at a price that is below the equilibrium price.

Which of the following counries is not a low-income country?

Taiwan

Assuming all other variables that affect supply are held constant, which of the following outcomes happen in the market for DVD players if the price of DVD players increases?

There will be an increase in the quantity supplied of DVD players. When price increases, we see a movement along the supply curve, not a shift in the curve. According to the law of supply, a rise in price almost always leads to an increase in the quantity supplied of the good or service in question. Remember, quantity supplied is not the same as supply. Supply refers to the curve and quantity supplied refers to the (specific) point on the curve. Changes in price cause movement along the supply curve, but do not cause the curve to shift.

which scenario is an example of scarcity?

a factory has a large need for highly skill workers, however the majority of applicants do not have any work experience

Across all countries other than the high-income countries, on average, agriculture accounts for ________ of GDP.

about 12%

specialization in a particular small job allows workers to focus on the parts of the production process where they have a (n)

advantage

comparative advantage is a measure of:

advantage due to specialization

the law of demand illustrates

an inverse relationship between quantity demanded and price of a good

a model in economics is always

based on assumed condition that are simpler than those in the real world

national income approach

can be used interchangeably with GDP; total value of a nation's output is equal to the total value of a nation's income

micro and macro are____ on the overall subject of the economy

complementary perspectives

double counting

counting output more than once as it travels through the production stages, would overstate the size of the economy considerably

What term best describes the relationship between units of a good demanded across a range of prices?

demand schedule

economic growth

determines the prevailing standard of living in a country; growth rate more than 3% is good

when goods are produced, the process can be broken down into number of specific task. what is this called?

division of labor

industrial revolution refers to the widespread use of power-driven machinery and the

economic and social changes that resulted in the first half of the 1800s

goals of macroeconomic policies

economic growth, unemployment, inflation

law of diminishing goods

establishes a negative relationship between input resources and productivity

Which of the following would lead to a surplus?

excess supply

What are the primary sources of income in low-income countries?

external investment, foreign aid

If China has a higher GDP growth rate than US, then GDP will double

faster on China than in the US

which scenarios would be best represented by a budget constraint?

finn has an allowance to spend on his dog. he must decide whether to spend the allowance on new doogy treats for $10 per bad or new balls for $3 per ball; Sam has received a $500 scholarship that he can use for books and tuition. reflecting a consumption decision for an individual based on a budget and fixed prices of two goods

in a circular flow diagram, who pays wages?

firms

Jenna changes the amount of butter she purchases depending on whether it costs $3, $4, or $6 a pound. In order to derive her demand curve for butter, what other information do we need?

how much butter she buys at each price point The demand curve shows how much a person chooses to buy at different prices. In order to graph the curve, we need to know how much butter Jenna buys when it costs $3, $4, and $6.

economic theories and models can give us ideas about what characteristics?

human behavior, incentives, and the effects of government policies

aggregate production function with GDP per capita as its output

human capital person, physical capital per person, technology per person

the bowed out shape of the PPF illustrates the concept of

increasing marginal opportunity cost diminishing marginal returns

inflation

is a sustained increase in the overall level of prices and is measured by the consumer price index; 1-2% is a major goal

opportunity cost

is lower in the country that has comparative advantage

human capital

is the accumulated knowledge (from education and the experience), skills, and expertise

As additional increments of marginal resources are added to either healthcare or education, the marginal benefit from those additional increments will decline. What do economists call this pattern?

laws of diminishing returns

Which two explanations represent models in the study of economics?

models simplify real world interactions for the purposes of illustration; economic models are used to test theories

double is a problem because it would__

overstate the size of the economy

Generally, the ________ value is more important than the __________ value of a given statistic since it is more contextual.

real;nominal inflation-adjusted; unadjusted

Price below equilibrium leads to a _____. if a price cap that was lower than the equilibrium was lifted, the price would eventually _____.

shortage. rise to the equilibrium price.

the purpose of a theory in general, is to

take a complex, real world issue and simplify it down to its essentials

the purpose of a theory, in general is to

take a complex, real-world issue and simplify it down to its essentials

The law of demand states

that as the price of a product increases, quantity demanded will fall. As the price of a product decreases, quantity demanded will increase.

On the subject of the "New Economy" controversy, optimistic proponents argue that _______________.

the extraordinary advances in communications and information technology of the 1990s will generate higher average productivity growth for decades to come

Which of the following macroeconomic indicators would we expect to see fall during an economic recession?

the number of employed individuals the level of production

A nation's comparative advantage in the production of an item is determined by __________________.

the opportunity cost of producing the item relative to a trading partner's opportunity cost

allocative efficiency

the particular mix of goods a society produces represents the combination that society most desires

full specialization in the production of a good or a service is represented on the PPF curve by

the points in which PPF intersects the axes

economics of scale occurs when

the production of goods increase and the average cost of production decreases

According to the law of demand, if all else remains equal, as the price of a good becomes lower, then

the quantity demanded of the good will increase

Quantity supplied is a term that refers to _______.

the total number of units of a good or service producers are willing to sell at a given price

A major challenge for many high-income countries in the next few years in terms of creating policies that support economic growth in the long-run is __________.

to exit short-term policies that they used to correct 2008-2009 recession

which of the following illustrates productive efficiency

to increase production of healthcare, society must reduce production of military goods; current production choices use all available resources

the division and specialization of labor has been a force against the problem of scarcity

true

what cannot be determined by using a production possibilities curve?

what combination of outputs maximizes benefits for society

The law of supply states that

when there are many sellers of a good, an increase in price results in an increase in quantity supplied.

aggregate production function with GDP as its output

workforce, human capital, physical capital, technology