Econ 201 Final Review

The central mission of modern macroeconomics is to prevent:

A deep recession like the Great Depression

Assuming that pretzels are a substitute for popcorn, what would cause the demand curve for pretzels to shift to the left?

A lower price of popcorn

The adding up of individual economic variables to obtain economy wide totals is called:

Aggregation

With regard to the aggregate price level, economists generally believe:

Deflation is worse than inflation

"Macroeconomics is nothing but a simple aggregation of all of the microeconomic parts." Agree or disagree:

Disagree, because there is a lot more to study of macroeconomics, though it includes many microeconomic parts

A(n) ______ is a sharp decline in asset prices that forces borrowers to sell off additional assets, further depressing prices and creating economic problems

Economic crisis

The process of steady increases in the quantity and quality of goods and services the economy can produce is called:

Economic growth

If the demand curve shifts to the left, and the supply curve does NOT change, then the:

Equilibrium price and quantity both will decrease

Keynes argued that during an economic downturn, the government should:

increase spending and reduce taxes

The Great Recession was caused by:

over-zealous loan officers and a housing market bubble that burst

How is Unemployment measured:

By dividing the number of unemployed workers looking for employment by the number of people in the labor force

The case for increasing infrastructure spending in the U.S. is:

Compelling even when the economy is at full employment

The main tools of macroeconomic policy are:

Fiscal policy and monetary policy

If tax revenues equal 20 percent of total output and government expenditures equal 25 percent of total output, then there is a:

Government budget deficit

All of the following describe economic conditions during the Great Depression in the U.S. EXCEPT:

High rates of inflation

The last time gas prices increased drastically, sales of large SUV's fell. Why?

Higher gas prices increased the cost of driving an SUV

When we say that the demand curve slopes downward, we mean that:

Higher prices are associated with lower quantities demanded

The Circular-Flow Diagram that we used in class shows in part:

How wages flow from firms to the household

Provide one difference between a centrally-planned economy and a market economy:

In a centrally-planned economy a small group or individual determines prices and quantities for goods and services whereas in a market economy prices and quantities are self-regulating based on buyers and sellers in the market

If the price of a bale of cotton increases from $0.80 to $1.20, and a pound of Kenyan coffee decreases from $12 a pound to $10 a pound (note: these goods are not related), we can expect:

Increase in the quantity demanded of Kenyan coffee

True or False: An analysis that shows the number of people employed is an example of positive economics

True

True or False: An effective price ceiling would be set below the equilibrium price

True

What is infrastructure spending:

Infrastructure spending is government spending on public works projects to create jobs and stimulate the economy

Classical macroeconomic theorists believed that during an economic downturn, unemployment would:

Lead wages to fall

Consider gas stations. As a result of an economic recession and a decrease in consumer incomes, we would expect to see a ___ shift and ____ prices:

Leftward shift in the station's demand curve and lower gas prices

When U.S. housing prices began to fall in 2007:

Many Americans were forces to sell their homes because they could no longer take out loans against the rising value of their houses

True or false: If the price of banana increase, then we expect that the price of peaches would also increase

True

What is meant by "there is no such thing as a Free Lunch"

No free lunch means that everything comes at a cost because we must include the implicit or opportunity cost of taking the action

Water is considered a scarce good because:

Not enough is available for all needs

Average labor productivity equals:

Output per employed worker

The plan to create private accounts in Social Security will reduce benefits for some workers in an example of a ____statement, while Social Security will be better if the private accounts are allowed is an example of a _____ statement.

Positive, normative

Some governments (federal, state, and local) continue to impose price controls such as price ceilings and floors. What is NOT a valid reason for this?

Price controls are always effective since they will have to pay them more

A surplus arises when:

Quantity supplied exceeds quantity demanded

Austerity measures are designed to:

Reduce the governments budgets deficit

If wages are "sticky downwards", then wages:

Resist falling when there is an excess supply of labor

In a free market, if the price of a good is above the equilibrium price then:

Sellers, dissatisfied with growing inventories, will lower their prices

The remedy for the Great Depression involved:

Significant increases in government spending

In the U.S., decisions to increase interest rates are made by the ____ and decisions to increase taxes are made by_____

The Federal Reserve; Congress

If air travel to Hawaii becomes less expensive, what is likely to happen FIRST in the market for hotel rooms in Hawaii?

The demand curve for hotel rooms will shift to the right

A depression occurs when:

The economic downturn becomes extremely deep and prolonged

A business-cycle downturn occurs when:

The economy moves from expanding to contracting

The marginal benefit of an activity is the:

The extra benefit associated with an additional unit of the activity

The opportunity cost of an activity includes the value of:

The next-best alternative that must be forgone

If the minimum wage is a binding price floor, then:

The number of workers who want to work will be greater than the number of jobs available

A trade imbalance occurs when:

The quantity of a country's exports differs significantly from the quantity of imports

Many firms compete in providing overnight delivery services. If the market for overnight delivery services experiences an increase in price, what must have happened?

There was an increase in demand and an equal decrease in supply

Three major economic questions are:

What causes economic growth, why does inflation vary over time and across countries, and what are the causes of unemployment?