Final - Macroeconomics

In the context of decision making, the word "marginal" is most closely associated with the word

"edge"

There are non-tariff barriers in the form of _____________ regulations, in which certain textiles are made in the United States, shipped to other countries, combined in making apparel with textiles made in those other countries - and then re-exported back to the United States at a lower tariff rate.

"rules of origin"

"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

Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?

$510 million

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

$108,000

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

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

A. interest rates

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

In countries like _________________ the command economy predominates.

Cuba and North Korea

The _________________ is the institution designed to control the quantity of money in the economy and also to oversee the ______________ .

Central Bank; safety and stability of the banking system

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

Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in:

an increase in price level

A tax increase has

both a crowding out and multiplier effect

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same as $74.8 billion, the result will be a _____________________________

budget surplus

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

contractionary monetary policy

Developing the means to increase human capital, and using existing technology to connect to the global economy are general associated with the growth policies of:

converging nations

If markets throughout the global economy all have flexible and continually adjust in prices, then:

each economy will always head for its natural rate of unemployment

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

elastic

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

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

The effects of inflation are seen in:

goods, services, wages and income levels

Fiscal policy affects the economy

in both the short and long run

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

increase

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

increases; fall

____________ 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

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

it is true according to the definition of GDP

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

law of demand

Economists would say tariffs:

limit voluntary exchanges.

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

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.

______________ are always that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products.

non-tariff barriers

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

ongoing rise

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

opportunity cost

In uncertain economic times, ________________ serves as a way of preserving economic value that can be spent or consumed in the future.

owning gold

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

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

the Consumer Price Index (CPI)

_____________ 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

People are willing to pay more for a diamond than for a bottle of water because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.

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.

According to the law of supply:

there is a direct relationship between price and the quantity supplied

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

International trade is fundamentally a ________________ .

win-win situation

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

If the reserve ratio is 25 percent, the money multiplier is

4

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

68%

The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increases spending by 250, how much will output increase by?

750

Which of the following is correct concerning opportunity cost? A. rational people should compare various options without considering opportunity costs. B. Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. C. To compute opportunity costs, you should subtract benefits from costs. D. Opportunity costs and the idea of trade-offs are not closely related.

B. Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway.

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.

When calculating the cost of college, which of the following should you probably not include? A. The cost of books required for college classes. B. The cost of rent for your off-campus apartment. C. The income you would have earned had you not gone to college. D. The cost of tuition.

B. The cost of rent for your off-campus apartment.

Which of the following is an example of an increase in government purchases? A. The government increases unemployment insurance benefit payments. B. The government builds new roads. C. The Federal Reserve purchases government bonds. D. The government decreases personal income taxes.

B. The government builds new roads.

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 statements about stabilization policy is true? A. Welfare benefits are automatic stabilizers in our economy. B. All are correct. C. When unemployment insurance was first enacted, some economists supported it because of its automatic stabilization power. D. The automatic tax cut created when the economy is in recession stimulates aggregate demand and reduces the effects of economic fluctuations.

B. all are correct

Which of the following shifts aggregate demand to the right? A. a decrease in the money supply B. an increase in the money supply C. a decrease in the price level D. an increase in the price level

B. an increase in the money supply

Which of the following is a valid criticism of the use of money as a store of value in modern economies? A. imperfect as a unit of account B. annual inflationary loss of buying power C. storing money is wasteful D. money supply is too narrowly defined

B. annual inflationary loss of buying power

Which of the following is a distinguishing characteristic of the neoclassical view? A. wages and real GDP are sticky over time B. flexibility of wages and prices over time C. wages are maintained at original equilibrium D. increasing price levels will increase the unemployment rate

B. flexibility of wages and prices over time

Which of the following is a traditional tool used by the Fed during recessions? A. coins and paper currency B. open market operations C. higher interest rates D. quantitative easing

B. open market operations

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? A. deposit requirements B. reserve requirements C. monetary requirements D. discount requirements

B. reserve requirements

Which of the following is the best example of a quota? A. a limit imposed on the number of men's suits that can be imported from a foreign country B. a subsidy form the American government to domestic manufacturers of men's suits so they can compete more effectively with foreign producers of men's suits C. a tax placed on all small cars sold in the domestic market D. a $100-per-car fee imposed on all small cars imported

A. a limit imposed on the number of men's suits that can be imported from a foreign country

Which of the following is an automatic stabilizer? A. private school tuition. B. unemployment benefits. C. military paychecks. D. spending on highway maintenance.

B. unemployment benefits.

Discussion: What is absolute advantage? What is comparative advantage?

Absolute advantage is to be able to make something using fewer resources than other producers require. Comparative advantage is to be able to produce a good at a lower opportunity cost than another producer. One person can have an absolute advantage in both goods but it is impossible for one person to have comparative advantage in both goods. This is due to the opportunity cost of a product being the inverse of the opportunity cost of the other.

In _______________ , firms and workers often build upon or copy technologies and industries developed by the technology leaders.

China and India's converging economies

Which of the following is omitted in a barter transaction? A. medium of exchange B. trade C. money D. store of value

C. money

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

Which of the following represents a Keynesian point of view of macroeconomics? A. vertical aggregate supply B. focus on long-term growth in the economy C. aggregate supply is the primary determinate of economic output D. creating increases in aggregate demand to reduce unemployment

D. creating increases in aggregate demand to reduce unemployment

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? A. financial policies B. monetary policies C. economic policies D. fiscal policies

D. fiscal policies

Which of the following government policies would be supported by neoclassical macroeconomic assumptions? A. focus on real GDP and cyclical unemployment B. focus on combating depression and cyclical unemployment C. focus on short-term recession and controlling inflation D. focus on long-term and on controlling inflation

D. focus on long-term and on controlling inflation

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 will have the greatest influence on the slope of the demand curve in a single market model? A. full employment B. higher wages C. wealth effects D. substitute goods

D. substitute goods

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.

Discussion: Why is investing in girls' education beneficial for growth?

Investing in girls' education is beneficial for growth for a few reasons. It helps increase the economic growth and an educated girl will have a huge impact on their children. There is some evidence that educating women has better outcomes for family health and education. A more educated country is more productive. It allows more people, men and women, into important fields such as doctors, nurses, teachers, etc. The areas that educate strictly just men, are missing out on extra people being educated and having less people in the workforce. Intelligence is found in both men and women.

Discussion: List reasons why economists should not consider GDP an effective measure of the standard of living in a country.

GDP should not be considered an effective measure of the standard of living in a country for a few reasons. The social programs, levels of crime, and education are a few. Regional variations in income and spending inequalities in comes and wealth. The changes in life expectancy innovation. Then the development of new products is also another reason.

Discussion: Should banks have to hold 100 % of their deposits? Why or why not?

I do not believe banks should have to hold 100% of their deposits. The Federal Reserve sets the percentage of deposits that banks are required to hold. It is called fractional banking and its purpose is to free up money for loans. It becomes more profitable to use these reserves for the loans because they earn interest. Without fractional banking, more money would need to be printed for these loans. They would end up paying a lot more for everything and not make profit.

Discussion: Why do you think that most modern countries' economies are a mix of command and market types?

Modern countries are a mix of command and market types for a couple of reasons. Market economies have proven to be very good at raising the standards of living. A command element is that political higher ups are always reluctant to give up the authority that they have. There is not a true market or command system within the modern countries. In the market systems, the people have all control. When they mix, the government can be involved to assist them in the right direction. In the command systems, the government decides what goods and services will be produced and what prices will be charged for them.

Discussion: What is the price elasticity of demand? Can you explain it in your own words?

Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Elasticity of demand is how consumers react to the change in an items price and what the measure is. Price elasticity of demand can be measured by how delicate the quantity demanded of it is to its price. When prices rise, quantity demand falls for that specific good.

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

Price floors

Discussion: What is the Keynesian prescription for recession? For inflation?

Recession is an economic scenario where levels of household demand for good and services, are less than what is created when at max employment. Keynesian terms this demand for goods and services as Aggregate Demand. Therefore, recessions is a situation when Aggregate Demand is less than the Aggregate Demand at full employment levels. For recession, policies would have to shift to the right for Aggregate Demand. Like tax cuts for consumers and business to stimulate consumption and investment. Inflation refers to the increase in price of goods and services over period of time. For inflation, Aggregate Demand must be shifted to the left by using tax increases or government spending cuts.

Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:

The USA has an absolute advantage in the production of cars.

From a neoclassical view, which of the following is a true statement?

The economy cannot sustain production above its potential GDP in the long run.

Discussion: Which kind of monetary policy would you expect in response to recession: expansionary or contractionary? Why?

The kind of monetary policy I'd expect in response to recession would be expansionary. I state this because expansionary policy can help the economy return to potential Gross Domestic Product, or potential GDP. It will help reduce interest rates and stimulate investment and consumption spending. This causes the original aggregate demand curve to shift so that the new equilibrium occurs at the potential GDP level. Contractionary fiscal policy decreases the level of aggregate demand, either through cuts in government spending or increases in taxes.

Discussion: What are the two types of unemployment problems? Explain.

There are multiple types of unemployment. One is Seasonal Unemployment. This is when an individual is unemployed due to a change in season. An example would be like Santa Clause after Christmas. Since he only works during Christmas, he would be without work for 364 days. Another type would be Cyclical Unemployment. This is when an individual loses their job due to a fall in aggregate demand. This is often during an economic recession.

Discussion: Explain why the neoclassical economists believe that the government does not need to do much about unemployment. Do yo agree or disagree? Explain.

The neoclassical economists believe that the economy is self-regulating, and they tend to focus on controlling the inflation rather than worrying about cyclical unemployment. Due to the dynamic nature of the labor markets, workers keep on entering and leaving the market. There are workers who also cannot find work within their skill sets. Because of this, unemployment rate may never be zero. I neither agree nor disagree with this thinking for unemployment. There are so many hard working people out there who get laid off due to budget cuts. They want to work and want to provide for their families but can't now because they've lost their jobs. This happens all the time. With the government helping these families by providing even the slightest bit of income for these families, helps them more than some realize. However, unemployment is always going to be there regardless of the economy.

What do the economies of Greece, Ireland and Germany all share?

a common currency

Politicians often argue for tariff increases in order to reduce the nation's dependence on imports. If tariffs are increased, the long-run effect is most likely to be:

a decrease in both American imports and exports

According to the Keynesian framework, which of the following will not help a country to get out of a recession, but may help that country reduce inflation?

a decrease in military spending

if government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to _______________________ .

a floating exchange rate

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

A tariff differs from a quota in that a tariff is:

a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

In the neoclassical view, changes in __________________ can only have a short-run impact on output and on unemployment.

aggregate demand (AD)

Consumption, investment, government spending, exports, and imports are:

all components of aggregate demand

In what way is each and every one of the economies of the more than 200 countries of the world similar?

all have their own distinctive characteristics

The term "ceteris paribus" means that:

all variables except those specified are constant

The multiplier effect:

amplifies the effects of an increase in government expenditures, while the crowding-out effect diminishes the effects.

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

an absolute advantage in coffee production

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

an aggregate production function

The federal government levies ____________________ on people who pass assets _________________ , either after death or during life.

an estate and gift tax; to the next generation

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

an exchange rate

A reduction in personal income taxes increases Aggregate Demand through

an increase in personal consumption

According to the Keynesian framework, ________________ in _________________ may cause inflation, but not a recession.

an increase; domestic investment

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, the _______________ is not much of a danger.

an inflationary increase in the price level

If exports and imports:

are equal, then trade is balanced.

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

A central bank that wants to increase the quantity of money in the economy will __________________ .

buy bonds in open market operations

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

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

From a neoclassical viewpoint, government should focus less on:

cyclical unemployment

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

cyclical unemployment

When the economy of a country is operating close to its full capacity:

cyclical unemployment is close to zero

When governments are borrowers in financial capital markets, which of the following is least likely to be possible source of the funds from a macroeconomic point of view?

central bank prints more money

_________________ will not cause a shift of the AS curve in a Keynesian framework.

changes in output prices

During the second half of the twentieth century, trade barriers have in general:

declined quite substantially both in the U.S. economy and in the global economy.

If taxes

decrease, then consumption increases, and aggregate demand shifts rightward.

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

What term is used to describe the interest rate charge by the central bank when it makes loans to commercial bank?

discount rate

When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:

discretionary fiscal policy

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:

domestic producers can attain the economies of scale to allow then to compete in world markets.

In macroeconomics, ________________ describes a situation in which two people each want to exchange some good or service that the other can provide.

double coincidence of wants

Transfer payments A. are not made in exchange for currently produced goods or services. B. are payments that flow from government to households C. alter household income, but they do not reflect the economy's production. D. are all correct.

economy's production. D. are all correct.

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

elastic

By about 2050, the ______________ populations in ________________ are expected to boom.

elderly; low-income countries

In a closed economy, national saving is

equal to investment

The ________________ is an example of a large-scale common currency.

euro

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

Social Security payments are

excluded from GDP because they do not reflect the economy's production.

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

In modern economies, _________________________ receive money from savers and provide funds to borrowers.

financial intermediaries

People or firms use one currency to purchase another currency at the _____________ .

foreign exchange market

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

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

government

Fiscal policy refers to the idea that aggregate demand is affected by changes in

government spending and taxes

If households view a tax cut as being temporary, the tax cut

has less of an effect on aggregate demand than if households view it as permanent.

Consumption is the purchase of goods and services by:

households

A government will likely ______________ to encourage investment in technology R&D by private firms?

implement fiscal policy establishing tax incentives

_______________ are numerical limitations on the quantity of products that can be imported.

import quotas

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

imports

The aggregate supply curve is vertical in

in the long run, but not in the short run

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

Improvements in the productivity of labor will tend to:

increase wages

An increase in government spending:

increases the interest rate and so investment spending decreases.

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

The ________________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.

interest rate effect

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

interest rates increase

When the central bank decides to increase the discount rate, the ________________ .

interest rates increase

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

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 it 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.

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

larger; decrease

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

Intra-industry trade between similar trading partners allows the gains from _______________ that arise when firms and workers specialize in the production of a certain product.

learning and innovation

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

Profit-maximizing firms in a competitive market produce an output level where

marginal cost equals marginal revenue

Countries have strong differences in economic institutions: the U.S. is extremely ____________, Cuba has a _______________ and Canada is a mixture of both.

market-oriented; command economy

In modern economies, credit cards are a _____________________ because of their wide acceptance as a method of payment for both goods and services.

medium of exchange

In macroeconomics, what name is given to the costs of changing prices that businesses must consider?

menu costs

____________ serves society in three functions: medium of exchange, unit of account, and store of value.

money

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

new technologies

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.

normative statement

The slope of the production possibility frontier is determined by the _______________ of expanding production of one good. measured by how much of the other good would be lost.

opportunity cost

What you give up to obtain an item is called your

opportunity cost

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

percentage; percentage

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

price is above or below marginal cost

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

price; quantity demanded

The Keynesian economic framework is based on an assumption that:

prices and wages are sticky and do not adjust rapidly

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

A _______________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

To achieve a high standard of living a nation should:

promote economic growth

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

proportional

In a closed economy, what does (T-G) represent?

public saving

________________ equalizes the prices of internationally traded goods across countries.

purchasing power parity

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 central bank that desires to reduce the quantity of money in the economy can _____________________ .

raise the reserve requirement

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

If South Dakota's governor reports a budget surplus in 2011, that state government likely:

received more in taxes than it spent in that year

Suppose the cost of operating a 100-room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

rent the room because the marginal benefit exceeds the marginal cost.

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

Most economists use the aggregate demand and aggregate supply model primarily to analyze

short-run fluctuations in the economy.

A marginal change is a

small, incremental adjustment

When a government uses a _____________ exchange rate policy, it usually allows the exchange rate to be set by the market.

soft peg

Some nations that seek to produce all of their own needs face the problem that:

some industries are too small to be efficient if restricted to their domestic markets alone.

_____________________ results when an economy experiences high unemployment and high inflation at the same time.

stagflation

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

The onset of a trade deficit is most likely supported by a country's

strong economic growth

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

A rational decision maker:

takes an action only if the marginal benefit of that actin exceeds the marginal cost of that action.

Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________ .

taking a management responsibility

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

tangible and/or intangible capital

What do Africa, southern Mexico, and tropical areas of Central America and Brazil all share in common?

technological exclusion

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

technology

When per capita GDP is used as a rough measure to compare the economic regions of the World, the richest region is _____________ and the poorest region is _____________ .

the United States, Western Europe, and Japan; Sub-Saharan Africa

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

the basket of goods

When a business firm makes an investment in physical capital, what is that investment subject to?

the discipline of the market

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the park.

Mallory decides to spend 3 hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is

the enjoyment she would have received had she watched the video.

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

The government busy a bridge. The owner of the company that builds the bridge pays her workers. The workers increase their spending. Firms that the workers buy goods from increase their output. This type of effect on spending illustrates

the multiplier effect

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

the natural rate of unemployment is likely to increase.

When computing the opportunity cost of attending a basketball game you should include

the price you pay for the ticket and the value of your time.

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

The marginal benefit Kyra gets from eating a second sandwich is

the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich.

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

the trade deficit

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

the unemployment rate

GDP is:

the value of all final goods and services produced domestically.

Charlie decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

the value of the knowledge she would have received had she attended class.

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

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

trade surplus

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

trade surplus

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

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

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

High-school athlete who skip college to become professional athletes

understand that the opportunity cost of attending college is very high.

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

unit elastic

In macroeconomics, a ______________ describes the common way in which market value are measured in an economy.

unit of account

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

The opportunity cost of an item is

what you give up to get that item

When demand is inelastic:

consumers are not very responsive to changes in price.

In 2010, Microsoft will pay corporate income tax to the federal government based on the company's ________________.

corporate profits

Which of the following institutions determines the quantity of money in the economy as its most important task? A. U.S. Department of the Treasury B. Federal Open Market Committee C. Federal Reserve Board of Governors D. Central Bank

D. Central Bank

What name was given to South Korea, Thailand, Malaysia, Indonesia, Hong Kong and Taiwan because of their economic success?

East Asian tigers

_________________ - 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

__________________ economists place an 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)

People make decisions at the margin by

comparing costs and benefits

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:

potential GDP

The term "full employment GDP" is synonymous with which of the following?

potential GDP

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

price

Say's Law argues that a given _______________ must create an equivalent ___________________ somewhere else in the economy.

value of supply; value of demand

When other factors such as health and illiteracy rates are added to global comparisons of GDP and population, which of the following is likely to be revealed?

very wide differences in the standard of living

Keynesian view of economics assumes that:

wages are sticky

A depreciating U.S. dollar is _____________ because it is worth ______________ in terms of other currencies.

weakening; less