Macro Final
Which of the following best describes an economy with full employment?
"The level of unemployment that corresponds to the normal friction in the labor market."
Suppose that for the economy of Springfield, we have the following information for 2013: consumption expenditures = $4,000; wages = $3,500; gross private domestic investment = $1,300; government expenditures = $2,000; exports = $900; imports = $1,100. Using the expenditure approach what would the Gross Domestic Product (GDP) be for Springfield in 2013?
$7,100
The formula for computing a basic price index is
(cost of market basket today/cost of market basket in base year) × 100.
If the rate of inflation is 4 percent and the real interest rate is 3 percent, the nominal interest rate should be
7 percent
Which of the following is most likely to generate a surplus?
A price floor
Which of the following will cause, other things being equal, a movement along the supply curve for LED televisions?
A reduction in the price of LED televisions.
The issues that an economic system attempts to solve include
All of the above ( how to produce items, what to produce, and for whom the items are produce)
What is the type of economic system that relies on one central authority to make economic decisions?
Command and control
Which of the following is true of incentives?
Different people are motivated by different incentives
Which of the following is true about product markets?
Goods and services flow from firms to households
Which of the following factors could cause the economy to experience supply-side inflation?
Government laws which say that the average work week must be reduced by one hour every year
Which of the following is true about the labor force?
It includes those over 16 ages old and are unemployed. It includes those over 16 ages old and are employed.
Suppose that consumer income decreases and that hamburger is an inferior good. Which of the following will occur in the market for hamburger?
Market clearing price will rise, and equilibrium quantity will rise.
Suppose that demand for tablets increases, and simultaneously, the supply of tablets increases. Which of the following would you conclude definitely will occur in the market for tablets?
The equilibrium quantity will rise
Which of the following would cause aggregate demand to decrease?
The government increases taxes on both business and personal income
Suppose there is a simultaneous increase in the demand for wheat and increase in the supply of wheat. Which of the following will occur as a result of these simultaneous events?
The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will rise
Europe and Asia both fall into deep economic recessions. What impact will this have on U.S. aggregate demand?
U.S. aggregate demand will decrease
Other things being equal, the economy's aggregate demand curve shows that
a change in the general price level causes a change in the quantity of final goods and services purchased
All of the following would cause the production possibilities curve to shift outward EXCEPT
a decline in the unemployment rate
Supply-side inflation is caused by
a decrease in aggregate supply and no change in aggregate demand
One reason why economists often use models in their analysis is that
a model helps us to understand, explain, and predict economic phenomena in the real world
All Americans should have access to health care" is an example of
a normative statement
"If the United States enters a war in the Middle East, the economy will go into a recession" is an example of
a positive statement
When, over a sustained period of time, the growth of aggregate business activity falls below what is considered the normal growth rate, the economy necessarily experiences
a recession
Assume equilibrium real GDP per year is equal to full-employment real GDP. Which of the following will cause a recessionary gap
a reduction in aggregate demand
A stronger U.S. dollar leads to ________ in SRAS and ________ in AD simultaneously
a rightward shift; a leftward shift
Normative economics involves
a statement of "what should be."
One major assumption of economics is that people
act as if they systematically pursue self-interest
The term "unemployment" is best described as the total number of
adults who are looking for work but have not found a job
If the price of Pepsi increases, then there will be ________ of Pepsi.
an increase in the quantity supplied
Self-interest relates to
both monetary and nonmonetary objectives.
The assumption that "other things are constant" is also known as the
ceteris paribus assumption
The dollar value of total output
equals the market value of all final goods and services produced in the United States
The two principle methods of measuring Gross Domestic Product are the
expenditures approach and the income approach.
Official unemployment rates may underestimate the true rate of unemployment because the official rate
fails to include discouraged workers
A mixed economic system is best described an economy with a mix of
free markets and government control.
The natural rate of unemployment when seasonally adjusted includes
frictional and structural unemployment but not cyclical
All of the following are factors that raise economic development EXCEPT
government control of the country's resources
Economic analysis is used
in all decision making
An improvement in technology in the production of computers would
increase the supply of computers
Demand-side inflation occurs when
increases in aggregate demand are not matched by increases in aggregate supply
Under a pure price system, the decision of resource allocation is made by
individuals who own the resources
Goods that are used up entirely in the production of final goods are known as
intermediate goods.
The Keynesian short-run aggregate supply (SRAS) curve
is horizontal
To encourage economic development a country should do all of the following EXCEPT
limit the amount of imports allowed into the country
The basic economic problem is a situation of
limited resources and unlimited wants
Unanticipated positive inflation will create
losses for creditors and gains for debtors.
The United States is best known as a
mixed economic system
A higher rate of saving should lead to
more investment, higher capital growth, and more future consumption
A negative (or natural) right refers to a right that
obligates inaction on the part of others to uphold your rights
The production possibilities curve bows out because
of the law of increasing relative cost
In sequential order, the four phases of the business cycle are
peak, contraction, trough, expansion.
A key component of the Keynesian model is that
prices are sticky
The value of your money income, in terms of buying goods and services, is referred to as your money's
purchasing power
If a price ceiling is set above the current market clearing price, then
quantity demanded will remain equal to quantity supplied at the current market clearing price
The law of demand states that
quantity demanded will vary inversely with the price of the good
When people donate money to a charity, they behave
rationally if the act gives them satisfaction.
Labor productivity can best be calculated as
real Gross Domestic Product (GDP) / number of workers
Higher interest rates
reduce total planned real expenditures because they increase the cost of borrowing funds
In economics, items that are used to produce goods and services are known as
resources
Scarcity arises because
resources are finite and are inadequate to meet all human wants and needs.
A persistently declining price level resulting from economic growth and unchanged aggregate demand is called
secular deflation
Economic growth can be pictured in a production possibilities curve diagram by
shifting the production possibilities curve out.
In 2006, hurricanes damaged many parts of Texas, destroying homes, businesses, schools, and infrastructure. In strictly economic terminology, these hurricanes are said to have caused
shortages, because supplies were cut off and goods were destroyed.
If an economy is operating at a point inside the production possibilities curve, then
society's resources are being inefficiently utilized
Bob's assembly line job has been replaced by robots, and Bob lacks abilities and skills required to attain other jobs. He is considered
structurally unemployed
The concept of absolute advantage relies on
the ability to produce more units of an item with a given amount of resources
The three stages of economic development include
the agriculture stage, the manufacturing stage, and the service sector stage
Inflation is best described as a situation in which
the average of all prices are on a sustained rise over a period of time.
Creative destruction refers to
the creation of new jobs and economic growth after destroying old jobs
Economic growth is usually defined as
the increase in output over time, as measured by real per capita Gross Domestic Product (GDP)
According to William Baumol, entrepreneurs will channel their entrepreneurial efforts into either productive or unproductive activities depending on
the institutional framework.
Long-run aggregate supply is
the level of output that occurs when the economy is operating on the production possibilities curve
The nominal value of a good is
the price of the good in today's dollars
The assumption that people do not intentionally make decisions that would leave them worse off is known as
the rationality assumption
U.S. Gross Domestic Product (GDP) does NOT include which of the following?
the value of goods produced in Canada by U.S. owned firms
If the price level kept increasing, the short-run aggregate supply (SRAS) curve would get steeper because
there are limits to how long workers can work long hours and capital can go without proper maintenance
Entrepreneurship functions better when
there is a well-defined property rights system
The short-run aggregate supply curve in modern Keynesian analysis is
upward sloping
The long-run aggregate supply curve is
vertical
Comparative advantage is
when a country can produce a good at a lower opportunity cost compared to other countries.