Chapter 5
If the price of movie tickets is $10 this year and $11 next year, then 200 movie tickets will contribute
$2,000 to this year's nominal GDP and $2,200 to next year's nominal GDP. This would contribute to 200*$10 = $2,000 toward nominal GDP this year, and 200*$11 = $2,200 toward nominal GDP next year. We cannot conclude anything about real GDP without using a reference year.
Identify the statement that best describes recession.
A recession is a period during which aggregate demand and production falls while unemployment rises.
_____ serves as an indication of a growing economy.
An increase in real GDP
Which of the following is measured in the United States' GDP?
California wines exported to France
Which of the following economic policy did the Bush and Obama administrations share?
Expansionary fiscal policy
Which of the following was suggested by Keynes to move the economy out of depression?
Expansionary monetary and fiscal policies
What followed the Reagan and Bush administration tax cuts?
High budget deficits
In 1973, rising oil prices caused by turmoil in the Middle East caused which two economic events to occur simultaneously?
High inflation and slow growth
Identify a possible effect of an aggregation of many markets into one.
It eliminates individual market differences.
Which of the following is a possible effect of a leftward shift in the aggregate demand curve and a rightward shift in the aggregate supply curve?
It will lead to a fall in the price level.
_____ as a result of the Great Depression.
People in the United States lost faith in the self-correcting ability of an economy
Identify a statement that defines real GDP.
Real GDP is nominal GDP adjusted for changes in the price level.
Which of the following is a difference between real GDP and nominal GDP?
Real GDP measures output of goods and services at constant prices, whereas nominal GDP measures the output of goods and services at current prices.
_____ is the name given to government programs implemented to prevent or shorten recessions and counteract inflation.
Stabilization policy
Which of the following is true of the aggregate demand curve?
The aggregate demand curve shows the quantity of domestic product demanded at each price level.
_____ due to an outward shift of the aggregate demand curve when the aggregate supply is held constant.
The economy experiences inflation
_____ is an example of an intermediate good.
The leather seats in your new car
_____ is an example of an abstraction used in macroeconomics.
The price level
_____ is measured on the vertical axis of the aggregate demand-aggregate supply model.
The price level
_____ is a true measure of national output.
The real GDP of a country
Identify a statement that defines gross domestic product.
The sum of the money value of all final goods and services produced in the domestic economy within a year
Which of the following is not captured in the United States' GDP?
The two hours you spend folding laundry each Saturday morning
Which of the following comes under the purview of macroeconomics?
The unemployment rate in a country
An economic aggregate is
an abstraction used to describe a feature of economic life.
Real GDP is not
an aggregate cost of living.
From 1966-73, inflation could not be attributed to
an increase in aggregate supply.
Stagflation refers to
an increase in the price level when an economy is growing slowly
According to Keynes, a pessimistic outlook of an economy leads to a(n)
decrease in planned spending.
A macroeconomic benefit of an increase in government spending is that it leads to a(n)
fall in the rate of unemployment.
In order to deal with a recessionary pressure, the government uses stabilization policy to
increase aggregate demand.
There is a(n) _____ due to an increase in aggregate demand in an economy.
increase in the general price level
Macroeconomics focuses primarily on the _____ of a nation.
inflation, unemployment, and growth
Price controls on consumer goods during World War II caused a(n) _____ in the economy.
inflationary pressure
Economic growth can be illustrated by a(n) _____ in the aggregate demand-aggregate supply model.
outward shift of the aggregate demand curve
Advances in computer and information technology can be illustrated by an
outward shift of the aggregate supply curve.
International GDP comparisons can be misleading because
the fraction of economic activity conducted in organized markets differ from country to country.
Aggregation refers to
the process of combining many individual markets into one overall market.
A stabilization policy used by a government to reduce inflation leads to an increase in
the rate of unemployment.
The _____ is measured on the horizontal axis of the aggregate demand-aggregate supply model.
total output produced in an economy
The calculation of GDP will include the
work done by an employee at an assembly line.