Macroeconomics Final Study guide
At the beginning 2010, the government of Norway had no debt and held $180 billion dollars in its sovereign fund. To stimulate its economy during 2011, Norway's government plans to spend $35 billion more than it will collect in tax revenue and in 2012, its spending will exceed tax revenues by $25 billion. What will the total government debt equal at the end of 2012?
$0
Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?
$2,449 billion
International trade currently involves about ______________ worth of goods and services thundering around the globe.
$20 trillion
A country finds itself in the following situation: a government budget deficit of $900; total domestic savings of $200, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment decreases by $300 while the government budget deficit and savings remain the same, what will happen to the current account balance?
$200 deficit changes to $100 surplus
Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 million. The current value of its loans, if sold at market value, is $130 million. What is the value of the Stealth bank's liabilities?
$200 million
India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars.
$418
"If I didn't have class tonight, I would save the $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
The Czech Republic has a GDP of 2,000 billion koruny. The exchange rate is 20 koruny per U.S. dollar. The Czech population is 20 million. Calculate the per capita GDP of the Czech Republic in U.S. dollars.
$5000
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
At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010?
$540 billion
Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities?
$600 million
Refer to the table above. If D2 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively.
$8; 15
Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets?
$970 million
The change in inventories, a component of aggregate supply, comprises roughly __________ of GDP.
0.5%
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange?
1 apple for 3 oranges
Which of the following is the percentage of annual US government spending allocated to foreign aid?
1%
1. Calculate: i. The nominal GDP in 2018 ii. The nominal GDP in 2019 iii. The real GDP in 2018 iv. The real GDP in 2019 2. Where did the economy grow because of production? (Choose 1 industry and explain) 3. Where did the economy experience inflation? (Choose 1 industry and explain)
1. The nominal GDP can be found by adding together the products of the prices and quantities of each industry, which results in a nominal GDP of 325 for 2018, and 585 for 2019. The same process is used to find the real GDP for the base year, however, in other years the real GDP can be found by adding together the products of the base years prices and the other years quantities. Following this equation, the real GDP of 2018 is 325, and the real GDP of 2019 is 500. 2. The production of wheat rose by 5 to a total of 15 in 2019, whereas in 2018 it was only at a production rate of 10. 3. The economy experienced inflation within the industry of beef, whereas in 2018 it was only 10 dollars, before rising by 2 to 12 dollars in 2019.
During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly __________.
10%
In the United States, a typical credit card interest rate ranges from ______________ per year.
12% to 18%
The high-income economies of the world contain approximately __________ of the world's population and produce and consume ___________ of the World's GDP.
12%; over 60%
In 1980 Denmark had a GDP of $70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of $160 billion (measured in U.S. dollars) s and a population of 5.3 million. By what percentage did Denmark's GDP per capita rise between 1980 and 2000?
120%
The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:
14.4%.
When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership?
16.66%
During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year.
2%
If the price index moves from 107 to 110, the rate of inflation is:
2.8%
The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy?
20
During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force.
25%
If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:
25%
If nominal GDP is 2700 and the money supply is 900, what is velocity?
3
A country will roughly double its GDP in twenty years if its annual growth rate is:
3.5%
Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __________.
30
In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $___________.
300
If GDP is 2400 and the money supply is 600, then what is the velocity?
4
Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:
4 yards of textiles.
The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________.
4%-6%
Durable goods and non-durable goods comprise approximately ________ of the supply side of the GDP.
45%
Which of the following is a distinguishing characteristic of a Keynesian cross diagram?
45-degree line
Of the world's population of 6.7 billion people, _________ are scraping by on incomes that average less than $2 per day.
5 billion
When the economy is in a recession, the government will want to increase output. If the multiplier equals 2.5 and the government increases spending by 200, how much will output increase by?
500
Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month.
60,000
Consumption in the United States is about ____________ of GDP, and it moves relatively little over time.
68%
Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is:
7 points on the economics exam
On the supply side of the GDP, Structures account for around __________ of U.S. GDP.
7%
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
Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be:
8 wine; 16 cloths
Craigburg has a working age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________.
8.3%; 60%.
The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.
80,000; 200
If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to:
94 million.
Which of the following best denotes the reason for the existence of substantial black markets?
A command economy
What is the relationship between government deficits and government debt?
A government deficit occurs when the government spends more than it has gained from things such as taxes, which relates to government debt as the borrowing that the government does to make up for these deficits adds to the overall government debt.
Which of the following is true?
A nation cannot have a comparative advantage in the production of every good.
When an economy's output increases and the price level decreases, the _________ curve has shifted to the ____________.
AS; right
_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.
Automatic stabilizers
Shifting Supply and Demand: For this scenario, explain how you think the following situations would affect the indicated market. Draw a properly labeled graph as part of your answer, showing what happens to equilibrium price and quantity in the market. Be sure to upload your graphs to the assignment so they can be graded! A decrease of the price of flour in the market for bread.
Below is the graph I have created for this project. As lowering the price for flour would most likely lower the price for bread, I decreased the price by one and raised both the quantity demanded and supplied by one as shown with the green line. In doing so, the graphs market equilibrium changed as well, whereas it started at 4:4 and now is 5:3.
On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?
Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.
Which of the following best characterizes the circular flow of income?
Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
C to F Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:
C to F
Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?
COLA plus 2.4%
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.
_______________________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called ________________.
Certificates of deposit; time deposits
___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time.
Consumption
The GDP deflator is a price index that includes the following components of GDP:
Consumption, Investment, Government plus Exports minus Imports
In which of the following countries will the national government have the greatest influence with respect to the nation's economy?
Cuba
In countries like _____________ the command economy predominates.
Cuba and North Korea
Cyclical unemployment is a short-term problem. What is its root cause? What is the preferred solution and how can this be accomplished?
Cyclical unemployment is essentially the pattern of unemployment in an economy through economic expansions and recessions, whereas a major factor in its occurrence is from a lack of demand for labor. I'm not exactly sure of a preferred solution, but if those within the economy focus on raising demand, it could possibly be a solution. An increase in demand for labor could be achieved through raising wages.
Which of the following statements most likely lies within the realm of macroeconomics?
Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.
_____________ - 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
The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:
Either the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve or the production possibilities frontier shifts outward due to an improvement in technology.
_______________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
Full employment GDP
_______ includes spending on recreation and travel, but it does not cover leisure time.
GDP
An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?
GDP Deflator
Which of the following statements is true? Selected:
GDP includes spending on recreation and travel, but it does not cover leisure time.
How do statisticians and economists measure GDP? Specifically, what is the formula used? Describe the component parts of the equation.
GDP is measured through adding four key components together, these key components are: consumption, investment, government, and trade balance. Consumption is essentially what the consumer purchases for themselves, whether that be objects like game systems, or services like the dentist. The government component is what the government chooses to purchase or invest in such as infrastructure like transportation. Investment is gathered through the investment and spending of businesses, such as where a game company could invest in a new studio or better technology. The trade balance is determined through subtracting the value of exports from imports of a country.
A nation's prosperity is sometimes measured in terms of ___________.
GDP per capita
When discussing economic growth, it is often useful to focus on ____________, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis.
GDP per capita
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?
Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.
Clem Oatley could grow wheat and barley. He could grow 75 bushels of wheat or 125 bushels of barley using the same resources on an acre of his land. The price of wheat is $2.00 per bushel and the price of barley $ 0.80. Show the benefits to Clem from specialization. What should he specialize in? Explain.
I guess that Clem could benefit from specialization in the idea that he has the capability to grow this large number of crops on his land, which could be much harder or not possible for others to accomplish. Clem should specialize in growing wheat, as he would make around 50 dollars more than growing barley.
Would you rather have $100 in the future or $100 today? Why might the value change?
I would prefer to have 100 dollars today. This is because the process of inflation could decrease the value of the dollar overall, making it worth less than it would be in the present. This means that the 100 dollars in the future wouldn't be as useful as the 100 dollars in the present, therefore I would prefer to have 100 dollars today.
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following statements is true?
If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.
Which of the following is correct?
Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.
Which of the following best describes the relationship between economic growth and literacy?
Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.
The ____________________ is based on the prices of merchandise that are exported or imported.
International Price Index
___________ is a small category that refers to 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
Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?
It would fall.
Which of the following did not result in economic growth?
Many citizens emigrating from Zimbabwe when a politically repressive regime took office.
Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
Marginal Analysis
________________ serves society in three functions: medium of exchange, unit of account, and store of value.
Money
__________________ pool the deposits of many investors together and invest them in a safe way like short-term government bonds.
Money market funds
Despite many negative feelings, a number of governments have decided that reducing barriers to trade is at least potentially beneficial to their economy. Which of the following is an example of countries reducing barriers through free trade?
NAFTA
_________ is calculated by taking _________ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year.
NNP; GNP
It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________.
National Interest Argument
_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.
Neoclassical economists; long run
________________ economists place an emphasis on __________ run economic performance
Neoclassical; long
__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products.
Non-tariff barriers
Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result?
Northern's loan assets increase by $30 million
The extent to which a national economy is involved in global trade:
Not very strongly related to related to the issue of whether the economy has a substantial trade imbalance or underlying economic meaning of trade imbalances
In macroeconomics, a _________________ is used to show the relationship between output and the input price level.
Phillips curve
The shape of the ______________ involves a tradeoff between unemployment and inflation.
Phillips curve
Refer to Figure 4-1. The movement from __________ to __________ is consistent with a successful advertising campaign that claims wool keeps you warm.
Point A; Point F
Refer to Figure 4-1. The movement from __________ to __________ is consistent with a decrease in the price of cotton (a substitute).
Point A; Point H
Refer to Figure 2-1. The most inefficient point depicted is:
Point G
______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
Price floors
Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?
Producer Price Index
_________ is output per hour in the business sector.
Productivity
________________________ are the result of improvements in human capital, physical capital, and technology interacting in a _____________________.
Productivity improvements; market-driven economy
The race to the bottom scenario of global environmental degradation is explained roughly like this:
Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.
________________________ equalizes the prices of internationally traded goods across countries.
Purchasing power parity
___________are funds that the bank keeps on hand that are not loaned out or invested in bonds.
Reserves
_________ are now the largest single component of the supply side of GDP, representing over half of GDP.
Services
_________________ results when an economy experiences high unemployment and high inflation at the same time.
Stagflation
When GDP per capita is used as a rough measure to compare the economic regions of the World, Latin America and the Caribbean are better off than _________________, but worse off than ___________________.
Sub-Saharan Africa; South Asia, Eastern Europe and Central Asia
Which of the following institutions oversees the safety and stability of the U.S. banking system?
The Federal Reserve
What are The Fed's three policy choices for how to get the US back to full employment?
The Feds have three options in getting the US back into full employment, they can either lower the reserve requirement, lower the discount rate, or buy bonds.
_____________________ 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
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.
If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:
The USA specializes in potatoes because of its comparative advantage in producing potatoes.
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.
Referring to the diagram above, which of the following is a true statement?
The increase in output (Q1 to Q2) may come about because of lower levels of taxation.
________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.
The infant industry argument
Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."
The statement is correct.
Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?
There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.
What do goods like gasoline, tobacco, and alcohol typically share in common?
They are all subject to government excise taxes.
How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known?
They increase the quantity of apples supplied.
Why would foreign firms export a product at less than its cost of production—which presumably means making a loss?
This may be part of a long-term strategy in which foreign firms would sell at below the cost of production in the short-term for a time, and when they have driven out the domestic U.S. competition, they would then raise prices.
Which of the following involves a financial outflow from the U.S. economy?
U.S. firms buying logging rights to China's forests
Shifting Supply and Demand: For this scenario, explain how you think the following situations would affect the indicated market. Draw a properly labeled graph as part of your answer, showing what happens to equilibrium price and quantity in the market. Be sure to upload your graphs to the assignment so they can be graded! A study linking eating fish to lower risk of getting cancer.
Within the graph below regarding the study, I increased the price and quantity demanded by one and left the quantity supplied as it was.
Which of the following is the best example of a tariff?
a $1000-per-car fee imposed on all small cars imported
Refer to the table above. Suppose that D1 and S2 are the demand and supply schedules for Product A. If the government imposes a price ceiling of $4, then:
a 10 unit shortage will result.
If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:
a budget deficit.
A change in price of a good or service typically causes ___________________________ for that specific good or service.
a change along the supply curve
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:
a contractionary monetary policy.
When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following:
a contractionary monetary policy.
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
According to the Keynesian framework, which of the following may help a country reduce inflation, but will not help that country to get out of a recession?
a decrease in the tax rate on consumer income
Which of the following is most likely a topic of discussion in macroeconomics?
a decrease in the unemployment rate
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.
Which of the following events would cause interest rates to increase?
a higher discount rate
Which of the following is the best example of a quota?
a limit imposed on the number of men's suits that can be imported from a foreign country
The graph above refers to a significant increase in oil prices. Which of the following is likely to result?
a rise in inflation from 2.0% to 3.0%
If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, which of the following is likely to occur?
a rise in unemployment
In an AD/ASAD/AS diagram, __________________________ could explain a rise in cyclical unemployment?
a shift to the left in either AS or AD
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.
Frictional unemployment occurs when:
a worker decides to quit one job to seek a different job.
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
Policies that provide governments with economic controls should be evaluated on their _________________________________, not on the basis of the promises of their supporters or the theories of economists.
actual effects, which can be positive or negative
What distinguishes the real value of a statistic from the nominal value of a statistic?
adjusting for inflation
In the neoclassical view, changes in ____________________ can only have a short-run impact on output and on unemployment.
aggregate demand
In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output.
aggregate demand (AD)
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:
aggregate demand curve will shift to the right.
At a macroeconomic level, the theory of rational expectations points out that if the ______________________ is vertical over time, then people should rationally expect this pattern.
aggregate supply curve
The labor force consists of:
all adults who are working or actively seeking work.
Consumption, investment, government spending, exports, and imports are:
all components of aggregate demand.
The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.
allocative efficiency
Which of the following is considered to be a relatively weak tool of monetary policy?
altering the discount rate
One of the following groups is not participating in the foreign exchange markets. Which one?
an Iowa travel firm that arranges vacation tours for local seniors to Hawaii
In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________.
an aggregate production function
The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.
an expansionary fiscal policy; an increase in government spending
Which of the following results in a rightward shift of the market demand curve for labor?
an increase in demand for the firm's product
The graph above reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to?
an increase in input prices
The graph reflects a significant increase in world oil prices. What will the impact on aggregate supply most likely lead to?
an increase in input prices
Which of the following will not result in a rightward shift of the market supply curve for labor?
an increase in labor productivity
Referring to the diagram above, complete the following sentence: Any increase in aggregate demand in the short-run will lead to:
an increase in output (Q1 to Q2), but it will also lead to prices increasing.
Over the long run, a surge in aggregate demand from a neoclassical perspective will most likely result in:
an increase in price level.
Which of the following factors contribute to economic growth?
an increase in the proportion of the population that is college educated
Which of the following will not result in a leftward shift of the market demand curve for labor?
an increase in the wage rate
Referring to a Keynesian Phillips curve, a reduction in inflation is likely to cause:
at least a slight increase in unemployment.
If an economy moves into a recession, causing that country to produce less than potential GDP, then:
automatic stabilizers will cause tax revenue to decrease and government spending to increase.
If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then:
automatic stabilizers will decrease government spending and increase tax revenue.
Which of the following are most likely classified by economists as consumer durable goods?
automobiles, furniture
The ________________ refers to the gap that can exist between what a nation's _____________, and a nation's ____________________.
balance of trade; producers sell abroad; imports
A ______________________ means that government spending and taxes are equal.
balanced budget
What is the name given to the macroeconomic equation MV = PQ?
basic quantity equation of money
The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely:
borrow for the short term from the central bank.
If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then:
both the money multiplier and the supply of money in the economy will increase.
Macroeconomics primarily examines:
broad issues such as national output, employment and inflation.
The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.
budget constraint
Cyclical unemployment arises when:
business activity in the macroeconomy declines
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.
Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond?
by increasing its reserves
Specialization
can lead to an increase in overall production.
When society has a higher level of capital per person, it is called ______________.
capital deepening
Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.
circular flow diagram
Along with the general growth-oriented agenda, some central Asian nations need an improved infrastructure of _________________, along with research into ___________ focused on their particular economic realities.
communication and transportation; technology
What is the most common method of measuring flows of trade?
comparing exports of goods, services, and financial capital between countries
A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.
contractionary
Developing the means to increase human capital, and using existing technology to connect to the global economy are generally associated with growth policies of:
converging nations.
While governments will play a different role across countries, all the ________________ economies have found that increasing ____________________ for firms and workers has been a critical ingredient in the recipe for faster growth.
converging; market-oriented incentives
According to the _____________________ argument, a market-oriented economy has no obvious way to implement a plan of systematic wage reductions.
coordination
In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation
cost of living adjustments
In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.
cost of living adjustments
When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right.
costs of production fall
The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions.
countercyclical
Which of the following represents a Keynesian point of view of macroeconomics?
creating increases in aggregate demand to reduce unemployment
The process of banks making loans in financial capital markets is intimately tied to the:
creation of money.
An increase in government borrowing can:
crowd out private investment in physical capital.
Economists typically rely on a broader measure of international trade known as the ___________________, which includes _____________________________.
current account balance; goods, services, international income flows, and foreign aid.
When the economy of a country is operating close to its full capacity:
cyclical unemployment is close to zero.
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.
Refer to Figure 3-3. A change from Point A to Point E represents a(n):
decrease in supply.
An increase in the government's budget surplus will cause the interest rate to:
decrease.
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
A country finds itself in the following situation: the government budget surplus is 2% of its GDP; private savings is 30% of GDP; and physical investment is 33% of GDP. Based on the national saving and investment identity, if the government budget surplus falls to zero, what will happen to this country's current account balance?
deficit increases from 1% to 3% of GDP
Another term used to describe negative inflation is:
deflation
Melanie decided to save 20% of her annual earnings for 10 years so she would have a down payment for a house. After 5 years, what change in the economy would cause an increase in the purchasing power of the funds she has managed to save?
deflation
With regard to the economy, the term negative inflation is synonymous with which of the following?
deflation
Which of the following would be classified in the M1 category of the money supply?
demand deposits
The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.
demand; right
If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow.
depend on borrowed money
The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.
diminishing marginal utility
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?
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 them to compete in world markets.
The two main sources for the supply of capital in the U.S. economy are:
domestic savings from individuals and firms and inflows of financial capital from foreign investors.
Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able.
double
If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.
double coincidence of wants
Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________.
downward sloping AD curve
If markets throughout the global economy all have flexible and continually adjusting prices, then:
each economy will always head for its natural rate of unemployment.
Refer to the graph shown below. At point B:
economic growth it low or even negative.
The concept of _________________ means that as the measure of output goes up, average costs of production decline—at least up to a point.
economies of scale
If the neoclassical argument that the economy always moves back to potential GDP is accepted, then which of the following will be more important?
encouraging long-term growth
Which of the following is generally accepted as a valid criticism of the production of useful goods and services?
environmental pollution
Refer to the table above. Suppose that D1 and S1 are the prevailing demand and supply curves for a product. If the demand schedule changes from D1 to D2, then:
equilibrium price increases from $6 to $8
The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.
equilibrium quantity
The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied.
equilibrium wage
A country's economic data indicates that there has been a substantial reduction in the financial capital available to private sector firms. Which of the following most likely had the greatest influence on this economy?
especially large and sustained government borrowing
What is crowding out and how can it affect the economy?
essentially when a government increases its level of borrowing high enough to where begins to damage the economy. It damages the economy through a massive increase in interest rates, which generally lowers small business investment.
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
A central bank must be concerned about whether a large and unexpected ___________________________ will drive most of the country's existing banks into bankruptcy.
exchange rate depreciation
Portfolio investments are often made based on beliefs about how _______________ are likely to move in the near future.
exchange rates or rates of return
If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?
expansionary
Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.
expansionary fiscal policy; lead to a budget deficit
Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run.
expansionary monetary policy
When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected?
federal funds rate
If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?
fighting inflation
In modern economies, _____________________ receive money from savers and provide funds to borrowers.
financial intermediaries
The main public policies of technological leading countries are _______________ focused on investment, including investment in human capital, in technology, and in physical plant and equipment.
fiscal policies
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 must be present in order for the aggregate supply curve to form an upward slope?
fixed cost of inputs combined with rising prices for outputs
Which of the following is a distinguishing characteristic of the neoclassical view?
flexibility of wages and prices over time
The circular flow diagram of economic activity is a model of the:
flow of goods, services, and payments between households and firms.
Which of the following government policies would be supported by neoclassical macroeconomic assumptions?
focus on long-term growth and on controlling inflation
People or firms use one currency to purchase another currency at the _______________________.
foreign exchange market
The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce:
frictional unemployment.
Some recent economic research has suggested that African countries' economic growth may have been limited by __________________
geography and climate
A reduction in government borrowing can:
give private investment an opportunity to expand.
In the ______________, households receive goods and services and pay firms for them.
goods and services market
Final goods or services used to compute GDP refer to:
goods and services purchased by the ultimate users.
A country's current account balance refers to a broad measure of the balance of trade that includes:
goods and services, international flows of income, and foreign aid.
The effects of inflation are seen in:
goods, services, wages and income levels
The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.
government
From a macroeconomic point of view, which of the following is a source of demand for financial capital?
government borrowing
Which of the following is not a short-run impact of imposing quotas on the American industries they seek to protect?
government tax revenues increase
Which of the following will have the greatest influence on shifting the aggregate supply curves of high-income countries to the right?
growth-oriented public policy
For most high-income countries of the world, GDP _________________ over time.
has risen gradually
In an AD/AS diagram, an increase in structural unemployment will:
have no effect on AS or AD.
In the long run, the most important source of increase in a nation's standard of living is a:
high rate of economic growth.
Which of the government policies below is most unlikely to encourage per capita economic growth?
high taxes on companies that spend a lot on capital formation
A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment.
higher interest rate
If the price level of what firms produce is rising across an economy, but the costs of production are constant, then:
higher profits will induce expanded production.
Consumption is the purchase of goods and services by:
households
When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting:
hyper-intense production will be unsustainable in the long run.
In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________.
hyperinflation
A government will likely ____________________________ to encourage investment in technology R&D by private firms?
implement fiscal policy establishing tax incentives
According to international trade theory, a country should:
import goods in which it has a comparative disadvantage.
Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:
imports exceed exports by $50 billion.
A decrease in the government's budget surplus will cause the interest rate to:
increase
If a country's GDP decreases, but its debt 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
Inflation implies that the level of all prices ___________________
increase
Introducing a tariff on vitamin Z would:
increase American consumption of domestically produced vitamin Z
Refer to Figure 3-3. A change from Point A to Point B represents a:
increase in quantity supplied
Improvements in the productivity of labor will tend to:
increase wages.
Which of the following is most likely to contribute to economic growth as measured by GDP per capita?
increased capital formation
If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.
increases; fall
When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.
indexed
The demand schedule for a good:
indicates the quantities that will be purchased at alternative market prices.
A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned.
inflation
In an economy with _______________, money loses some buying power each year, but it remains money.
inflation
If a government uses monetary policy to alter the exchange rate, then it cannot at the same time use monetary policy to address issues of ______________________.
inflation or recession
_____________ implies that pressure for price increases reaches across ____________markets, not just one
inflation; most
_____________ implies that pressure for price increases reaches across ____________markets, not just one.
inflation; most
If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur?
inflationary increase in price level
The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.
interest rate effect
Which of the following best describes a monetary policy tool?
interest rates
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
Expansionary monetary policy lowers ______________, and increases demand for investment and consumer borrowing, which shifts aggregate demand to the ________________.
interest rates; right
Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?
international trade
In a market-oriented economy, private firms will undertake most of the _____________________________, and ________________ should seek to avoid a long series of large budget deficits that might crowd out such investment.
investment in physical capital; fiscal policy
When government policy moves from a budget surplus to a budget deficit and the trade deficit remains constant:
investment will decrease if savings also remains constant.
When government policy moves from a budget deficit to a budget surplus and the trade deficit remains constant:
investment will increase if savings remain constant.
Macroeconomics
is concerned with the expansion and contraction of the overall economy.
Karen chooses to go to university fulltime rather than to work. Karen:
is not part of the labor force.
If a Phillips curve shows that unemployment is high and inflation is low in the economy, then that economy:
is producing at a point where output is less than potential GDP.
If a Phillip curve shows that unemployment is low and inflation is high in the economy, then that economy:
is producing at a point where output is more than potential GDP.
If a country's current account balance is zero and the financial payments flowing in and out of the country's economy are equal, then which of the following must be a true statement?
it is not an overall or a net investor in other countries
When banks hold excess reserves because they don't see good lending opportunities:
it negatively affects expansionary monetary policy.
Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model?
it shifts the AS curve in the long-term
Under what conditions would a nation be viewed as being neither a net borrower nor a net lender in the international economy?
its trade balance is zero
The equilibrium quantity of labor and the equilibrium wage increase when:
labor demand shifts to the right, if wages are flexible.
The equilibrium quantity of labor increases and the equilibrium wage decreases when:
labor supply shifts to the right, if wages are flexible,
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
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
In most high-income economies, including the United States, goods currently make up ___________, while services currently compose ____________.
less than half of total production; more than half of total production
When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being:
low inflation
A prolonged period of budget deficits may lead to ___________________.
lower economic growth
The unemployment rate may underestimate the true extent of unemployment if:
many part-time employees would like to work full-time but are unable to get the additional work.
Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
As a person receives more of a good, the _______________ from each additional unit of the good declines.
marginal utility
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 marginal benefit of a slice of pizza is the:
maximum amount that a consumer is willing to pay for the slice
An economy with a larger involvement in foreign trade:
may measure its exports as a share of GDP.
In macroeconomics, what name is given to the costs of changing prices that businesses must consider?
menu costs
An economics professor is discussing a measure of trade that involves a comparison of exports and imports of goods for the year just ended. What name is given to this measurement?
merchandise trade balance
The basic difference between macroeconomics and microeconomics is:
microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
The basic difference between macroeconomics and microeconomics is that:
microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).
Which of the following would most likely be included in the negative side of the current account balance?
money earned by Canadian firms in the U.S.
Which of the following would most likely be included in the positive side of the U.S. current account balance?
money earned by U.S. firms in Europe
The sum of all the income received for contributing resources to GDP is called ___________________.
national income (Y)
The ___________________ argument tends to view inflation as a cost that offers no offsetting gains in terms of lower unemployment?
neoclassical
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
Country Alpha and Country Beta initially have the same real GDP per capita. Country Alpha experiences no economic growth, while Country Beta grows at a sustained rate of 5 percent. In 14 years, Country Alpha's GDP will be approximately _________ that of Country Beta.
one-half
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 is a traditional tool used by the Fed during recessions?
open market operations
Attending college is a case where the ________________ exceeds the monetary cost.
opportunity cost
In many cases, it is reasonable to refer to the ________________ as the price
opportunity cost
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.
opportunity set
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
out of the labor force.
The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.
overstate
In uncertain economic times, ____________________ serves as a way of preserving economic value that can be spent or consumed in the future.
owning gold
Keynesian economics focuses on explaining why recessions and depressions occur, as well as offering a ______________________ for minimizing their effects.
policy prescription
Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.
positive statements
The term "full employment GDP" is synonymous with which of the following?
potential GDP
In the long-run neoclassical view, when wages and prices are flexible, ________________________ determine the size of real GDP.
potential GDP and aggregate supply
The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its _____________ and its ____________________.
potential GDP; natural rate of unemployment
The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.
price
In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.
price ceilings
The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.
price, quantity demanded
If a government experiences an increase in its budget surplus, which of the following possible outcomes will likely result?
private savings decrease while everything else holds constant
The U.S. economy has two main sources for financial capital; _______________________ and ____________________________.
private savings from U.S. households and firms; inflows of foreign financial investment.
Over the long run, ____________ per hour is the most important determinant of the average wage level in any economy.
productivity
The value of what is produced per worker, or per hour worked, is called ____________.
productivity
An additional investment in human capital, especially for the low-income nations of the world, will likely directly increase which of the following?
productivity and economic growth
If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is:
progressive
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
A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.
proportional tax
Low-wage U.S. workers suffer from protectionism in all the industries that they don't work in, because:
protectionism forces them to pay higher prices for basic necessities like clothing and food.
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis.
quantity
A demand curve shows the relationship between price and _________________ on a graph.
quantity demanded
_________________ refers to the total number of units that are purchased at that price.
quantity demanded
The quantity of money in an economy and the _____________________ are inextricably intertwined.
quantity of credit for loans
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
The theory of _____________________ holds that people will use all information available to them to form the most accurate possible expectations about the future.
rational expectations
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.
In a Keynesian cross diagram, what name is given to the distance between an output level that is below potential GDP and the level of potential GDP?
recessionary gap
If government tax policy requires Peter to pay $15,000 in tax 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:
regressive
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
Which of the following represents a financial inflow to the U.S. economy?
returns paid on U.S. financial investments in Switzerland
In the neoclassical view, the economy has a ___________________________ to move back to potential GDP.
self-correcting tendency
A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:
shift to the right, decreasing the price of the drug
Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be:
short-term
The time lag for monetary policy is typically ________________ the time lag for fiscal policy.
shorter than
Which of the following will strongly influence a nation's level of trade?
size of its economy, its geographic location, and its history of trade
A typical Keynesian aggregate supply (AS) curve _______________ and a typical Keynesian Phillips curve _____________.
slopes upward; slopes downward
Most contracts, wage levels, and interest rates are either indexed to inflation, or involve using the currency of another country to sidestep the problem of inflation in some converging economies. Following these policies caused
solid levels of economic growth for sustained periods of time with 10-30% inflation
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.
Why do neoclassical economists tend to put relatively more emphasis on long-term growth than on fighting recession?
standard of living is ultimately determined by long-term growth
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.
Two factors that complicate the calculation of the inflation rate are:
substitution and quality/new product bias
In any economy functioning at potential GDP, there are occasions when the short-term aggregate supply curve unexpectedly shifts, causing inflationary pressures. Which of the following is considered to be a common cause of this type of shift?
sudden rise in input prices
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 drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ .
supply curve to the right
Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________.
taking a management responsibility
As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.
technology
Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth.
technology
The quantitative easing policies adopted by the Federal Reserve are usually thought of as:
temporary emergency measures.
If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then;
the Canadian dollar appreciated against the U.S. dollar.
The Canadian dollar will most likely strengthen against the U.S. dollar if:
the Canadian inflation rate becomes extremely low.
Why do banks use a T-account?
the T-account separates assets on the left from liabilities on the right
Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.
the basket of goods
Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour.
If 1000 Mexican pesos could buy $1.00 U.S. dollar in 2006 and $0.87 U.S. dollars in 2010, then:
the dollar strengthened against the peso.
Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram above:
the economy begins using its resources efficiently to produce both food and clothing, the economy operates at its productive capacity once it reaches Point B, and the economy increases production of both clothing and food.
The graph above refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result?
the economy will experience lower economic growth
A government began 2013 with a budget deficit and a trade deficit. During the year, the government changed its policy and is now running a budget surplus. If all other factors hold constant, this change in policy will cause:
the exchange rate and the trade deficit to decrease.
A government began 2013 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause:
the exchange rate and the trade deficit to increase.
Which of the following is included in GDP?
the fees charged for a stock broker's services
Because China and the East Asian tigers are _________________________, their economies have all experienced rapid economic growth rates.
the highest savers in the world, often saving one-third or more of GDP
In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?
the macroeconomy
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.
Whenever there is a surplus at a particular price, the quantity sold at that price will equal:
the quantity demanded at that price.
According to the basic quantity equation of money, if price and output fall while velocity increases, then:
the quantity of money will fall.
If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:
the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.
If new manufacturers enter the computer industry, then (ceteris paribus):
the supply curve shifts to the right.
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
the supply curve.
In the national savings and investment identity framework, an 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
Which of the following is included in GDP calculations?
the university tuition paid to enroll in a course
GDP is:
the value of all final goods and services produced domestically.
GDP does not directly include:
the value of intermediate goods sold during a period.
The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:
there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.
According to the law of supply:
there is a direct relationship between price and the quantity supplied.
A ______________________ monetary policy can be used to decrease aggregate demand because it _____________ exports and _________________ imports .
tight; stimulates; reduces
Insofar as government public policy is concerned, the best way to battle unemployment would be __________________.
to minimize recessions
The money multiplier is equal to the _______________ in the economy divided by the original _________________.
total money; quantity of money
Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed.
total quantity; price level for output
The gap between exports and imports in a nation's economy is called the ___________.
trade balance
From a macroeconomic perspective, an economic transaction in the form of a financial investment is synonymous with which of the following?
trade in the financial capital market
A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy?
trade surplus
The unemployment rate measures:
unemployed workers as a percentage of the labor force.
When increasing oil prices cause aggregate supply to shift to the left, then:
unemployment and inflation increase.
In macroeconomics, a _______________ describes the common way in which market values are measured in an economy.
unit of account
But nearly all supply curves share a basic similarity: they slope _______________.
up from left to right
When inflation begins to climb to unacceptable levels in the economy, the government should:
use contractionary fiscal policy to shift aggregate demand to the right.
Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.
usury laws
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
In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate:
was 2.1%.
A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.
weakening; less
The _________________ means that a higher price level leads to lower real wealth.
wealth effect
Under what circumstances would it most likely be considered beneficial for a government to be a large borrower of foreign investment capital?
when those funds are invested in a way that sustains economic growth over time
In economics, the demand for a good refers to the amount of the good that people:
will buy at various prices.
In a number of middle to low-income economies around the world, governments may run an expansionary policy of huge and sustained budget deficits. This policy
will shift aggregate demand to the right, so that output is beyond the potential GDP level.
Using a neoclassical model, what will the level of cyclical unemployment be when an economy is producing at potential GDP?
zero
