Final - Macroeconomics

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 indicates that as the price of a good increases:

buyers desire to purchase less of it

The elasticity of supply is defined as the ________________ change in quantity supplied divided by the _______ change in price.

percentage; percentage

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

price

The downward slope of the demand curve again illustrates the pattern that as __________________ rises, ______________ decreases.

price; quantity demanded

The Producer Price Index is based on prices paid for supplies and inputs by:

producers of goods and services

The value of what is produced per worker, or per hour worked, is called ______________.

productivity

To achieve a high standard of living a nation should:

promote economic growth

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

quantity

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

quantity supplied

A straightforward example of a ______________, often used for simplicity, is the interest rate.

rate of return

Economists typically measure economic growth by tracking

real GDP per capita

The price elasticity of demand measures the:

responsiveness of quantity demanded to a change in price

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

services

Two factors that complicate the calculation of the inflation rate are:

substitution and quality/new production bias

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:

substitution bias

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

sunk costs

As the __________________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

technology

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

the Consumer Price Index (CPI)

Inflation can be calculated in terms of how the overall cost of ______________ changes over time.

the basket of goods

_____________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.

the industrial revolution

If a nation's labor force receives a significant influx of young workers:

the natural rate of unemployment is likely to increase.

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.

GDP is:

the value of all final goods and services produced domestically.

According to the law of supply:

there is a direct relationship between price and the quantity supplied

Insofar as government public policy is concerned, the best way to battle unemployment would be _______________ .

to minimize recessions

The term _______________ describes circumstances where a country's imports exceed its exports.

trade deficit

The term ______________ describes circumstances where a country's exports exceed its imports.

trade surplus

"If I didn't have class tonight, I would save $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized counties has averaged about ________________ per year.

2%

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

3.0

Consumption in the U.S. is about ______________ of GDP, and it moves relatively little over time.

68%

Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be

underemployed

Demand is said to be ________________ when the quantity demanded changes at the same proportion as the price.

unit elastic

The general pattern that consumption of the first few units of any good tends to bring a higher level of __________________ to a person than consumption of later units is a common pattern.

utility

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages _______________ .

will increase

Consumption is the purchase of goods and services by:

households

The term ________________ is used to describe what those in one country buy from those in other countries.

imports

10 / 10 pts Inflation implies that the level of all prices ___________________ .

increase

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

Improvements in the productivity of labor will tend to:

increase wages

If the demand for software engineers ________________ slower than does supply, then wages of software engineers will

increases; fall

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, and economist would advise:

increasing the price of game tickets because demand is elastic

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

____________ is a small category that refers t the goods produced by one business that have yet to be sold to consumers and are either still sitting in warehouses and on store shelves.

inventories

Investment in human capital: A. is of minor importance to economic growth. B. is characterized by both B) and C). C. can be acquired through on-the-job training. D. is an important source of economic growth.

is characterized by both B) and C).

Macroeconomics

is concerned wit the expansion and contraction of the overall economy.

Karen chooses to go to university full-time rather than to work. Karen:

is not part of the labor force

A nation can achieve higher economic growth if:

it devotes more resources to research and development.

Scarcity implies that:

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

The statement that GDP = C + I + G = X - M is an identity, because __________________ .

it is true according to the definition of GDP

Other things being equal, a ___________________ supply of workers tends to _____________ real wages.

larger; decrease

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _________________.

law of demand

Economists refer to this pattern, the ___________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.

law of diminishing marginal utility

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

Most choices involve ______________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

marginal analysis

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

market-oriented economy

Attending college is a case where the ________________________ exceeds the monetary cost.

opportunity cost

Which of the following best describes a monetary policy tool? A. interest rates B. household savings C. government spending D. taxes

A. interest rates

Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by ___________.

new technologies

Philosophers draw a distinction between positive statements, which describe the world as it is, and _______________s.

normative statement

Which of the following is correct? A. an increase in the quantity of labor always leads to economic growth. B. Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital. C. Third World countries are rich in human capital. D. A decrease in the productivity of labor leads to economic growth.

B. Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.

Which of the following is most likely a topic of discussion in macroeconomics? A. a decrease in the production of DVD players by a consumer electronics company B. a decrease in the unemployment rate C. an increase in the wage rate paid to automobile workers D. an increase in the price of a hamburger

B. a decrease in the unemployment rate

Which of the following are most likely classified by economists as consumer durable goods? A. stocks, bonds B. automobiles, furniture C. food, clothing D. drugs, toys, magazines, books

B. automobiles, furniture

Which of the following is unlikely to affect the rate of economic growth? A. the quantity of available resources B. technological change C. the level of government spending D. the quality of available resources

C. the level of government spending

In countries like _________________ the command economy predominates.

Cuba and North Korea

While one occasionally sees references to inflation over short time periods, the term typically implies a(n) ____________________ in prices.

ongoing rise

Which of the following would most likely be included in the positive side of the U.S. current account balance? A. money spent by U.S. tourists in Europe B. interest payments to foreign investors invested in the U.S. C. U.S. foreign aid sent to as disaster relief to Haiti D. money earned by U.S. firms in Europe

D. money earned by U.S. firms in Europe

Which of the following is not counted as a part of GDP? A. the purchase of a snow plow the city of Minneapolis. B. the unsold additions to inventory at an appliances store C. the purchase of a loaf of bead by a consumer D. the purchase of 100 shares of AT&T stock by your grandfather.

D. the purchase of 100 shares of AT&T stock by your grandfather.

_________________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.

Economies of scale

__________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.

Efficiency wage theory

__________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.

Price floors

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:

a sharp increase in the demand for and construction of wood-frame homes

The imposition of a price ceiling on a market often results in:

a shortage

The term "ceteris paribus" means that:

all variables except those specified are constant

In macroeconomics, the connect in from inputs to outputs for the entire economy is called ______________.

an aggregate production function

to compare the GDP of two different countries with different currencies, it is necessary to use _______________.

an exchange rate

If exports and imports:

are equal, then trade is balanced.

When demand is inelastic:

consumers are not very responsive to changes in price.

A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:

cross-price elasticity of demand for iced tea is -2

The type of unemployment that occurs because of a recession is called:

cyclical unemployment

From a macroeconomic perspective, if GDP economic indicators show a decline of 10 % or more in a single year, then which of the following outcomes is most likely to result?

deep economic recession

Demand is said to be ____________ when the quantity demanded is very responsive to changes in price.

elastic

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

elastic

If exports _______________, then the economy is said to have a trade surplus.

exceed imports

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

excess demand

Goods and services produced in one country that are then sold in other countries are called ____________ .

exports

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:

exports exceed imports by $50 billion

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

final goods and services

The circular flow diagram of economic activity is a model of the :

flow of goods, services, and payments between households and firms.

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

frictionally unemployed

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

goods, rather than services

The effects of inflation are seen in:

goods, services, wages and income levels

In a command economy, the ________________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

government