shackles are on (econ midterm)

real GDP is a better measure of economic well-being than nominal GDP because real GDP....

measures changes in the quantity of goods and services produced by holding prices constant

Gross national product (GNP) equals gross domestic product (GDP) _____ income earned domestically by foreigners _____ income that nationals earn abroad.

minus; plus

the REAL interest rate is the:

nominal interest rate minus the rate of inflation

in the national income accounts, consumption expenditures include:

nondurable goods, durable goods, services

when a firm sells a product out of inventory, GDP is _____ ____

not changed

the labor force equals the:

number of employed and unemployed individuals

according to the usual seasonal pattern of the US economy, GDP is highest in the quarter of...

october, november, december

a fixed-weight price index like the consumer price index (CPI) _____ the change in the cost of living because it _____ take into account that people can substitute less expensive goods for ones that have become more expensive.

overestimates; does not

the use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in...

performing an experiment in an economic system

consumption depends ____ on disposable income, and investment depends _____ on the real interest rate

positively; negatively

consumer price index (CPI)

price of a fixed basket of goods and services, relative to the price of the same basket in a base year

a competitive, profit-maximizing firm hires labor until the

price of output multiplied by the marginal product of labor equals the wage

a competitive, profit-maximizing firm hires labor until the:

price of output multiplied by the marginal product of labor equals the wage

the real wage rate will increase if the

productivity of labor increases

government purchases may include:

purchases of military hardware, services provided by police officers, services provided by US senators (anything but social security)

the NOMINAL interest rate is the

rate of interest that investors pay to borrow money

in trying to explain the world, economists are _______; in trying to improve the world, they are _____ _______

scientists; policy advisers

in the national income accounts, all of these are classified as government purchases:

services provided by police officers, purchases of military hardware, services provided by US senators (NOT payments made to Social Security recipients)

the assumption that the factor's supply is fixed will imply that the factor's

supply curve is vertical

the assumption that the factor's supply is fixed will imply that the factor's:

supply curve is vertical

the GDP is equal to:

the ratio of nominal GDP to real GDP

gross domestic product (GDP)

the statistics economists use to measure the value of economic output

value added of an item produced

the value of a firm's output less than the value of the intermediate goods that the firm purchases

Real GDP

the value of goods and services measured in constant prices

how are economists NOT like mathematicians, physicists, and biologists?

they cannot run lab experiments

T/F: Assumptions can simplify the complex world and make it easier to understand

true

T/F: models assume away irrelevant details

true

If an increase of an equal percentage in all factors of production increases output of the same percentage, then a production function has the property called:

constant returns to scale

an increase in the supply of capital will

decrease the real rental price of capital

disposable personal income is defined as income after the payment of all

taxes

an increase in the price of imported goods will show up in:

the CPI but not in the GDP deflator

an increase in the price of goods bought by firms and the government will show up in:

the GDP deflator but not in the CP

compensation of employees

the largest component of national income

Nominal GDP

the value of goods and services measured in current prices

how are macroeconomists like scientists?

they both collect data, develop hypotheses, and analyze the results

if the unemployment rate is 6% and the number of employed is 188 million, then the labor force equals:

200 million

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately _____ percent

4.7

If the adult population equals 250 million, of which 145 million are employed and 5 million are unemployed, the labor-force participation rate equals _____ percent

60

macroeconomics

The study of the economy as a whole

other things equal, an increase in the interest rate leads to:

a decrease in the quantity of investment goods demanded

a trade in a barter economy requres

a double coincidence of wants

an increase in the supply of capital will:

decrease the real rental price of capital

exogenous variables

determined outside of the model

endogenous variables

determined within the model

economic models are most often composed of _______ and _______

diagrams, equations

a consumption function shows the relationship between consumption and:

disposable income

people are considered to be unemployed if they:

do not have a job but have looked for work in the past four weeks

what is true about economic models?

economists use different models to address different economic phenomena

3 important characteristics of macroeconomic models:

endo/exogenous variables, simplifying assumptions, implicit/explicit consistency with microeconomic foundations

expenditure on the economy's output of goods and services

exactly equal to the total income of everyone in the economy

the core inflation rate:

excludes food and energy prices

in an economic model, ____ affect ______ variables

exogenous; endogenous

macroeconomic models are used to explain how _____ variables influence ______ variables.

exogenous; endogenous

the marginal propensity to consume is:

expected to be between zero and one

a production function is a mathematical relationship between:

factors of production and the quantity of output produced

T/F: economic models can help us understand reality only when they include all details of the economy

false

GDP is the market value of all _____ goods and services produced within an economy in a given period of time

final

economists make assumptions to

focus their thinking on the essence of the problem at hand

measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation,

gives a better measure of ongoing, sustained price changes

the production function feature called "constant returns to scale" means that if we:

increase capital and labor by 10% each, we increase output by 10%

if nominal GDP increased by 5% and the GDP deflator increased by 3%, then real GDP _____ by ______%

increased, 2

in the national income accounts, goods bought for future use are classified as which type of expenditure?

investment

according to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person:

is going to school full time

an example of increasing returns to scale is when capital and labor inputs:

both increase by 5% and output increases by 10%

private investment goods as measure in GDP are purchased by:

business firms and households

the marginal product of labor is

additional output produced when one additional unit of labor is added

the marginal product of labor is:

additional output produced when one additional unit of labor is added

the labor-force participation rate is the percentage of the:

adult population that is in the labor force

the price received by each factor of production is determined by demand:

and supply of factors

economists use the term money to refer to:

assets used for transactions

an example of decreasing returns to scale is when capital and labor inputs

both increase 10% and output increases 5%

the two MOST important factors of production are:

capital and labor

positive statement

claims about how the world is

in a closed economy, the components of GDP are:

consumption, investment, and government purchases

the demand for output in a closed economy is the sum of:

consumption, investment, government purchases

the real wage is the return to labor measured in

units of output

the real wage is the return to labor measured in:

units of output

prices of items included in the CPI are:

weighted according to the quantity of the item purchased by the typical household

macroeconomics does NOT try to answer the question of:

what is the rate of return on education

if an increasing proportion of the adult population is retired, then the labor-force participation rate:

will decrease

if the number of employed increases while the number of unemployed doesn't change, the unemployment rate:

will decrease