BUS 263 Chapter 29

If a country's economic data shows private savings of $300 million, government spending of $350 million, tax revenue of $400 million, and a trade surplus of $75 million, then what does investment equal?

$275 million

consumption in the U.S. is about _ of GDP, and it measures relatively little over time

68%

in _, firms and workers often build upon or copy technologies and industries developed by the tech. leaders

China and India's converging economies

investment in human capital:

Is characterized by both B) and C) B: is of minor importance to economic growth C: is an important source of economic growth

_economists place and emphasis on _run economic performance

Neoclassical; long

If the quantity of financial capital supplied is equal to the quantity of financial capital demanded then, the national savings and investment identity is written as:

S +(M-X)=I+(G-T)

__ are now the largest single component of the supply side of GDP, representing over half of GDP.

Services

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.

absolute advantage

in what way is each and every one of the economics of the more than 200 countries of the world similar

all have their own distinctive characteristics

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:

an absolute advantage in coffee production

If the U.S. economy is producing at a level that is substantially less than potential GDP and the government's budget deficits are increasing aggregate demand, then ____________________________ is not much of a danger.

an inflationary increase in the price level

which of the following is a valid criticism of the use of money as a store of value in modern economies

annual inflationary loss of buying power

the model that economists use for illustrating the process of individual choice in a situation of scarcity is the __, sometimes also called the opportunity set, a diagram which shows what choices are possible

budget constraint

cyclical unemployment arises when:

business activity in the macroeconomy declines.

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________.

business cycle

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

buyers and sellers

the nature of demand indicated that as the price of a good increases

buyers desire to purchase less of it

If a government's budget deficits are increasing aggregate demand when the economy is already producing near potential GDP, causing a threat of an inflationary increase in price levels, then the central bank may react with:

contractionary monetary policy

which of the following represents a Keynesian point of view of macroeconomics

creating increases in aggregate demand to reduce unemployment

in countries like:

cuba and north korea

in the national savings and investment identity framework, and inflow of savings from abroad is, by definition, equal to:

domestic household savings

_ a term referring to the fact that for many good, as the level of production increases, the average cost of producing each individual unit decline.

economies of scale

A price cut will increase the total revenue a firm receives if the demand for its product is:

elastic

the _ is an example of a large-scale common currency

euro

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________

excess demand

In order to avoid double counting, statisticians just count the __________________.

final goods and services

which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

which of the following government policies would be supported by neoclassical macroeconomic assumptions?

focus on long-term and on controlling inflation

a welder who quits his job and moves to Pittsburgh to Madison to try to get a better welding job is said to be:

frictionally unemplyed

At the outset of the 21st century, most global trade took the form of:

goods, rather than services

in a command economy, the _ either makes most economic decisions itself or at least strongly influences how the decisions are made

government

Consumption is the purchase of goods and services by:

households

Inflation implies that the level of all prices _____________________.

increase

If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase or decrease

If the demand curve is perfectly elastic, then an increase in supply will:

increase the quantity exchanged but result in no change in the price

the percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the_

inflation rate

_implies that pressure for price increases reaches across_ markets, not just one

inflation, most

As the aggregate price level in an economy rises, ____________________.

interest rates increase

_ is a small category that refers to the goods and services produced by on businesses that have yet to be sold to customers and are either still sitting in warehouses and or on store shelves

inventory

if a nation has a comparative disadvantage in the production of some commodity:

it can still gain from International trade in that commodity, by getting it at a lower Opportunity cost than if it produced domestically

a nation can achieve higher economic growth if:

it devotes more resources to research and development.

if the canadian dollar is strengthening, the _

it has appreciated in the terms of other currencies

Scarcity implies that:

it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

if a firm faces _, while the prices for the input the firm produces remain unchanged, a firm's profits will increase

lower costs of production

a prolonged period of budget deficits may lead to __

lower economic growth

trade allows each country to take advantage of __ in the other country

lower opportunity costs

what do growth in standard of living, low unemployment, low inflation, and a sustainable balance of trade all share in common?

main universal goals of macroeconomic policy

in a __, most economic decisions about what to produce, how to produce it, and for whom to product it are made by buyers and sellers.

market-oriented economy

The idea behind comparative advantage reflects the possibility that one party:

may be able to produce something at a lower opportunity cost than another party

in macroeconomics, what name is given to the mosts of changing prices that businesses must consider

menu costs

which of the following is omitted in a barter transaction

money

The reasons that nations trade includes the fact that:

no one country produces all of what citizens within the country want

philosophers draw a distinction between positive statements, which describe the world as it is, and __s, which describe how the world should be

normative statement

The "law of supply" functions in labor markets: that is, a higher __ for labor leads to a higher quantity of labor supplied

price

a _ policy will cause a greater share of income to be collected from those with higher incomes that from those with lower incomes

progressive tax

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and __, shown on the horizontal axis.

quantity

when economists talk about supply, they are referring to a relationship between the price received for each unit sold and the _

quantity supplied

A central bank that desires to reduce the quantity of money in the economy can:

raise the reserve requirement

Economists typically measure economic growth by tracking:

real GDP per capita

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.

regressive

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?

store of value

which of the following will have the greatest influence on the slope of the demand curve in a single market model?

substitute goods

The lesson of ___ is to forget about the money that's irretrievable gone and instead to focus on the marginal costs and benefits of future options.

sunk costs

when an economy is experiencing higher real interest rates, business firms will most likely be discouraged from investing in:

tangible and/ or intangible capital

The most commonly cited measure of inflation in the United States is:

the consumer price index (CPI)

which of the following is unlikely to affect the rate of economic growth

the level of government spending

The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result?

the money supply in the economy decreases

When the central bank lowers the reserve requirement on deposits:

the money supply increases and interest rates decrease

the most significant real economic cost of high unemployment is:

the potential goods and services that might have been produced but weren't

As depicted in __ it is necessary to give up some of one good to gain more of the other good.

the production possibilities frontier

Macroeconomic topics do not usually include:

the profit maximizing decisions of an individual manufacturer.

exchange rates are an effective way to analyze the price of one currency in terms of another currency with_

the tools of demand and supply

Potential GDP in the U.S. will be unaffected by ____________________.

the unemployment rate

according to the law of supply

there is a direct relationship between price and quantity supplied

A _ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy

trade surplus

If Keynes' law applies during economic contractions and Say's law applies during economic expansion, how will the three goals of macroeconomics be affected?

trade-offs and connections may differ in the short run and the long run

the general pattern that consumption of the first few units of any good tends to being a higher level of _ to a person that consumption of later units is a common pattern.

utility

if labor demanded is downward sloping and labor supply is upward sloping, when labor demand rises faster than labor supply, it is expected that real wages __.

will increase