Macro Master Quizlet 💪
Refer to Table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals
$1,200.
Refer to Table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals
$1,600
Refer to Figure above. Suppose that investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2. If the MPC is 0.9, then what is the change in GDP?
$100 million
A banking system has $900 billion in deposits and $20 billion in excess reserves. The reserve requirement is 10%. How much does the banking system have in total reserves?
$110 billion
Bigtown Bank has total deposits of $900 million and total reserve of $150 million. It is subject to a required reserve ratio of 15%. What is the maximum amount of additional loans that Bigtown Bank could lend out today?
$15 million
In the above figure, what is the price after the price ceiling is instituted?
$25
In the figure, what is the new equilibrium price after the tax?
$25
Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP?
$27 million
Jim is willing to purchase a coffee mug for $20. The price of the mug is $15, but after the mug goes on sale, its new price is $12. What is Jim's consumer surplus based on the sale price?
$8
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2018, then the value of your grandfather's salary in 2018 dollars is approximately
$84,775.
Refer to Table above. Given the consumption schedule in the table above, the marginal propensity to save is
0.1
A country has a population of 11 million. There are 3 million persons under age 16 and 7 million persons age 21 or older. There are 6 million employed persons, 1 million unemployed persons, 500,000 retired persons, and 500,000 full-time homemakers. What is the U3 unemployment rate?
14.3%
Refer to Table above. Assume the market basket for the consumer price index has two products—meat and potatoes—with the following values in 2013 and 2018 for price and quantity: The Consumer Price Index for 2018 equals
141
Which of the following inflation rates do policymakers view as consistent with the Federal Reserve's mandate to achieve stable prices?
2%
Refer to figure above. What is the opportunity cost of moving from point B to point C?
2,000 cars
Refer to Table above. Consider the following values of the consumer price index for 1996, 1997, and 1998: The inflation rate for 1997 was equal to
2.5 percent
Table above provides the price index for Macroland for four years. What was the inflation rate in Macroland during year 4?
2.5%
Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is
2016
According to the rule of 70, how long will it take for Macroland's real GDP per capita to double if it has an annual growth rate of 2.5%?
28.0 years
David can wash four cars in one hour or cut two lawns. Ralph can wash three cares in one hour or cut two lawns. David's opportunity cost for cutting one lawn is _____ car washes, and Ralph's opportunity cost for cutting one lawn is _____ car washes.
2; 1.5
Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?
3 percent
Refer to Table above. Using the table above, what is the approximate growth rate of real GDP from 2017 to 2018?
3%
Refer to figure above. If this economy is producing 4,000 video games, what is the opportunity cost of 2,000 more video games?
3,000 cell phones
The consumer price index (CPI) is 150 in year 1, 156 in year 2, and 160 in year 3. What is the inflation rate for year 2? Round to nearest whole percentage.
4%
If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita?
4.7%
If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?
475 million
The required reserve ratio is 20%. What is the maximum possible potential deposit multiplier?
5
In the United States, the natural rate of unemployment is approximately:
5%.
According to the rule of 70, what annual growth rate would allow a country's output to double in 14 years?
5.0%
Jonia's population of 500,000 includes 95,000 children below age 16, 80,000 retirees, 20,000 discouraged workers, 228,000 employed persons, and 12,000 unemployed persons. What is the unemployment rate of Jonia?
5.0%
The consumer price index (CPI) is 100 in year 1, 156 in year 2, and 160 in year 3. What is the inflation rate for year 2?
5.6%
Econland's population of 260,000 includes 60,000 children below age 16, 40,000 retirees, 5,000 discouraged workers, 30,000 full-time homemakers, 110,000 employed persons, and 10,000 unemployed persons. What is the labor force participation rate of Econland?
60%
What is the formula to calculate the time required to double GDP according to the rule of 70?
70/g = doubling time
What is the equilibrium price?
8
Refer to Table above. Given the information above, calculate the rate of increase in the price level from 2017 to 2018
8.6%
Refer to Table above. Given the information above, calculate the rate of increase in the price level from 2017 to 2018.
8.6%
In the above figure, which area represents total surplus?
A + B
__________ consists of all actual and potential buyers and sellers of a particular resource or product
A market
Which of the following may cause an economy's production possibilities frontier (PPF) to shift to the left?
A massive earthquake and tsunami damage much of the country's infrastructure
__________ occurs when a country imports more than it exports
A trade deficit
Labor force participation rate measures percentage of _______ in labor force.
Adult population
Which of the following is NOT an appropriate way to cope with the imperfections in macroeconomic statistics such as the unemployment rate?
Assume that macroeconomic statistics should not be relied on to provide measures of economic issues
Mathematically, GDP equals
C + I + G + NX
Which of the following describes the accuracy of the Consumer Price Index?
Changes in the CPI overstate the true rate of inflation.
All modern dynamic economies are subject to ____ of job.
Creative-destruction
Econia decreases its money supply. What is likely to happen to the value of Econia's currency in foreign exchange markets and to the level of Econia's net exports?
Currency appreciates, and net exports decrease.
The BLS produces data on unemployment from a regular survey of households called the
Current population survey
Deviation of unemployment from natural rate is ____ rate of unemployment:
Cyclical
Which of the following causes the unemployment rate to understate the true extent of joblessness?
Discouraged workers are not counted as unemployed.
In the figure, what is the total producer surplus with the price ceiling?
E
Labor force is ______ workers in the economy
Employed + Unemployed
Net Export is calculated as _______________
Export-Imports
The value of which of the following items would NOT be included in GDP?
Fabric purchased by a shirt factory
A durable good is a product that can be used by more than one consumer.
False
A person who owns and manages his own company would NOT be counted as part of the labor force.
False
Accumulating a greater number of inputs will ensure that an economy will experience economic growth.
False
Almost all of the high-income countries that have been able to prosper due to their natural resource endowment have relied heavily on abundant supplies of fertile farmland.
False
An increase in the price level in the United States will shift the aggregate expenditure line upward.
False
Countries without well-developed financial systems are able to sustain high levels of economic growth.
False
Deadweight loss occurs when the government imposes equilibrium
False
Eliminating frictional unemployment would be good for the economy.
False
Exchange rates determined by economic or market conditions are fixed rates
False
If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase.
False
If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.
False
It will take 17.5 years for Macroland's real GDP per capita to double if it has an annual growth rate of 2.5%.
False
Paying efficiency wages are a way for a company to cut costs and become more efficient, and are therefore lower than market wages.
False
Residential investment includes spending by firms on office buildings.
False
Scarcity of resources does not apply to advanced economies
False
The Fed has complete control over the money supply.
False
The consumer price index (CPI) is 150 in year 1, 156 in year 2, and 160 in year 3. Then there is an inflation from year 1 to year 2 and deflation from year 2 to year 3.
False
The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time.
False
The minimum price that a seller will take for a good or service is called willingness to supply.
False
The time necessary to make all adjustments to new economic circumstances is known as the short run
False
The trough stage of the business cycle is immediately followed by a peak.
False
Transfer payments is included in government purchases in the calculation of GDP?
False
Turkey and chicken are substitutes. The price of turkey falls. As a result, we expect the price of chicken to increase.
False
Under conditions of excess supply, prices are below equilibrium price.
False
When a country has a comparative advantage it will be able to consume beyond the production possibilities frontier (PPF)
False
When allocative efficiency is achieved, then government surplus is maximized.
False
When inflation occurs, incomes are falling.
False
When the government faces a budget deficit, which usually causes Crowding-in phenomena.
False
The _____ is a 12-person group that plays an important role in determining the policy of the Federal Reserve System.
Federal Open Market Committee
What is the difference between a fiat money system and a commodity money system?
Fiat money has value because people trust it and not because of its raw material, and commodity money is valuable because of the material out of which it is made.
Which of the following is a public policy to foster economic growth that typically would be favored by the government of a high-income country rather than a developing country?
Foster agglomeration of similar industries.
Which price index considers the prices of the largest number of goods and services?
GDP deflator
Which of the following is NOT one of the problems with using GDP per capita to measure standard of living?
GDP does not include services
A country's productivity is measured by
GDP per hour worked.
A country's productivity is measured by:
GDP per hour worked.
Refer to Figure below. Which country has a comparative advantage in the production of coconuts?
Guatemala
An unemployed man will no longer be classified as unemployed if either of what two things happens to him?
He exits the labor force or gets a job.
Refer to Figure above. If the U.S. economy is currently at point N, which of the following could cause it to move to point K?
Households expect future income to decline.
In the short run, an increase in the money supply will have which of the following impacts on the market for money?
Interest rates will fall.
How does a decrease in government spending affect the aggregate expenditure line?
It shifts the aggregate expenditure line downward.
Which of the following is NOT an example of a way that people become unemployed?
Jose retires and begins to receive a pension each month.
Marginal analysis is involving comparing
MB and MC
__________ is the extra revenue earned by a business from selling one additional item
Marginal revenue
What two goals are the dual mandate of the U.S. Federal Reserve System?
Maximize employment, and keep price level stable.
What is the difference between gross domestic product (GDP) and net domestic product (NDP)?
NDP = GDP - Depreciation of capital
If inflation in the United States is lower than inflation in other countries, what will be the effect on net exports for the United States?
Net exports will rise as U.S. exports increase.
Refer to Figure above. Which of the following is consistent with the graph depicted above?
New government regulations decrease the profitability of new investment.
Which describes the product quality improvement bias in the consumer price index?
New versions of a product may have more features than older versions, and yet the price may not be higher.
Refer to Figure above. Based on the graph of the labor market above, if a minimum wage is set at $5 per hour, which of the following will occur?
None of the above will occur.
__________ cost is what is given up in order to acquire or do something else
Opportunity
Which price index tends to be the most volatile over time?
PPI
__________ allow(s) __________ to be more productive
Physical labor; labor
The market is currently at equilibrium at point A. Which of these represents an increase in quantity demanded, but not a change in demand?
Point B
What do most economists believe regarding public policies that have a goal of fostering economic growth?
Poor and wealthy countries may need to use different policy approaches to maximize growth.
__________ analysis considers questions involving cause and effect
Positive
Which measure provides businesses with the best estimate of the economic health of the typical consumer in an economy?
Real GDP per capita
The GDP is the market value of goods and services produced by _____________ of a country.
Residents
Which statement is correct with regard to sustained growth rates?
Small differences in growth rates across countries have a large impact over time.
The GDP is not a perfect measure of standard of living because it does not take _____________ of increasing production into account
Social Problems
The histogram below shows real GDP per capita and the economic growth for select countries between 1913 and 2016. Which country had the greatest economic growth?
South Korea
Natural Rate of unemployment is the sum of:
Structural + Frictional
What is another name for excess supply?
Surplus
According to the text, which of the following is the best way to define economic growth?
Sustained increases in a nation's real GDP per capita over time.
Which of the following is NOT a way that economic growth is often harmed when corruption is widespread?
Taxes are raised on everyone, which adds the efficiency of all firms.
Which of the following is an example of monetary policy?
The Federal Reserve reduces the money supply in an effort to reduce inflation.
How does the consumer price index (CPI) differ from the personal consumption expenditure (PCE) index?
The PCE is chain-weighted, and the CPI has a fixed market basket
Which of the following statements is NOT true regarding recent economic data in the United States?
The female unemployment rate is considerably higher than the male unemployment rate.
Which of the following is a true statement about the multiplier?
The multiplier rises as the MPC rises.
What connection does the underground economy have to the money supply?
The underground economy often uses currency for its transactions.
What is the difference between commodity money and fiat money?
The value of commodity money is based on the material out of which it is made, and the value of fiat money comes from its acceptance by its users.
Which of the following is an argument against foreign aid?
There are many cases where the aid has been diverted away from the intended purpose.
What is the difference between a recession and a depression?
They both have rising unemployment and falling output, but a depression is much more severe.
Trends over the last 70 years for the consumer price index (CPI), producer price index (PPI), and gross domestic product (GDP) deflator show that
They have changed in similar but not identical patterns
Why is a "real" measure used as the basis for a nation's economic growth rate?
This is an adjustment for the cost of living, so the measure captures growth of output rather than price.
Which of the following equations is correct?
Total reserves = Required reserves + Excess reserves
A decline in the value of money occurs when inflation occurs.
True
A government program that temporarily provides unemployed persons who have lost a job with transfer payments to replace part of their lost income is called unemployment insurance.
True
Allocative efficiency means ensuring that the optimal mix of goods and services is produced
True
Among the countries where natural resources have been key to high incomes, oil resources has been most important.
True
An economy is in a liquidity trap when interest rates are near zero.
True
An example of a lagging economic indicator is unemployment rate.
True
Business performance can be analyzed through economics
True
Housing is the largest component of the U.S. CPI market basket.
True
If aggregate expenditure is more than GDP, then inventories fall and GDP rises.
True
If inflation is higher than expected, this helps borrowers (by reducing the real interest rate they pay) and hurts lenders (by reducing the real interest rate they receive).
True
If planned aggregate expenditure equals GDP, the economy is in macroeconomic equilibrium.
True
In an economy with money, as opposed to barter, people are more likely to specialize in the production of goods and services.
True
Inflation is an increase in the average price level in an economy.
True
Lower resource cost will cause price to decrease
True
Monetarists recommend that the money supply should grow at a slow, steady rate that is based on the long-run real GDP growth rate.
True
Most U.S. currency held outside the U.S. banking system is held by foreigners.
True
Natural resources emphasized less than other factors in a nation's production function because the amount of natural resources is relatively fixed.
True
Producer surplus increases when price rises.
True
Salaries is NOT a component of GDP when calculated by the expenditure approach?
True
The economist who is the best-known monetarist is Milton Friedman.
True
The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.
True
The real value of income is the amount of goods and services that it will buy.
True
To stabilize an economy, the Keynesian policy approach tends to favor using fiscal policy over monetary policy.
True
Which of the following is NOT a reason for considering unemployment a problem?
Unemployment may prevent people from going to school.
In the figure, what area represents tax revenue?
X + Y
The equation of the GDP components is:
Y=C+I+G+NX
Which of the following is an example of a microeconomic issue?
a decision by Boeing to open another plant
A good is a ________ good if demand increases as income increase
a normal
When inflation occurs, a unit of money will buy _____ amount of goods than before the inflation.
a smaller
The shadow banking system is
a system that is outside the regulation system of commercial banks but provides many of the same banking services.
All of the following are components of aggregate expenditure except
actual investment spending.
The labor force consists of
all persons age 16 or older who are classified as employed or unemployed
During the early 2000s, the Federal Reserve had _____ monetary policy that contributed to _____ home sales and home prices.
an easy; rising
The trough stage of the business cycle is immediately followed by:
an expansion
Which of the following will cause a direct increase in consumption spending?
an increase in disposable income
An example of the asset price effect occurs when the increase in the money supply leads to:
an increase in the prices of shares of stocks.
If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?
an increase in wealth
A good is ________ good if demand decreases as income increases
an inferior
Deposit insurance helps to reduce the likelihood of
bank runs.
When the U.S. dollar appreciates relative to the Brazilian currency, the real, products that are produced by U.S. companies and exported to Brazil
become more expensive in Brazil
An asset is liquid when it
can be converted into money easily, quickly, and without loss of value
Recent research has discovered that consumers are drinking less soda because of a decline in its popularity. Which determinant of demand does this represent?
changes in tastes and preferences
Gains from trade are based on __________ rather than __________
comparative advantage; absolute advantage
In a __________ market, the product is homogeneous, and there are many buyers and sellers
competitive
In a __________ market, the product is homogeneous, and there are many buyers and sellers.
competitive
Products for which an increase in the price of one good reduces demand for the other good are ________ goods
complementary
If the PPF is linear, then the opportunity cost of producing a good or service is
constant
What statistic measures the average price level that is faced by citizens of a country as they make their household purchases?
consumer price index
Which of the following price indices comes closest to measuring the cost of living of the typical household?
consumer price index
In the aggregate expenditure model, ________ has both an autonomous component and an induced component.
consumption spending
The largest component of spending in GDP is
consumption spending.
Which of the following is NOT a key issue that is used to explain the long-run poverty or prosperity in a country?
current employment versus unemployment levels
Nominal GDP is measured in _____, and real GDP is measured in
current market prices; constant prices
The GDP deflator is a ratio of _______________ prices
current to fixed;
Reduction in total surplus resulting from a market distortion is called
deadweight loss
Investment spending ________ during a recession, and ________ during an expansion.
declines; increases
When people are living on a fixed income, inflation will
decrease the real value of their income
When people are living on a fixed income, inflation will:
decrease the real value of their income.
If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would
decrease.
Consider the following data for a closed economy. (view table) Based on the information above, what is the level of public saving?
deficit of $1 trillion
The income effect and the substitution effect help explain the law of
demand
When the Federal Reserve reduces the money supply, aggregate ____ will _____, causing short-run output to:
demand; fall; fall.
Which is NOT a tool used by the Federal Reserve to control the U.S. money supply?
deposit insurance
Earned income plus unearned income minus taxes is a measure called
disposable personal income
A nation's total real GDP is NOT used as an indicator of the living standard of the people in the nation because it
does not take into consideration the population of the nation.
Gross domestic product in the economy is measured by the
dollar value of all final goods and services produced in the economy.
When the number of discouraged workers increases, the U3 unemployment rate will _____, giving a false impression that the economy is
drop; healthier
Disposable personal income is
earned income plus unearned income minus taxes
An increase in the money supply is referred to as _____ money policy.
easy
Producing as much as possible with available resources results is known as
efficiency
A firm chooses to pay wages that are above equilibrium for the skills needed in hopes that the workers will work hard. Economists call this wage practice:
efficiency wages.
The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.
employed
Macroeconomics, as opposed to microeconomics, includes the study of what determines the level of
employment in the economy.
Individuals who combine various resources into a business in pursuit of profit are known as
entrepreneurs
In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services.
equals
Where quantity supplied equals quantity demanded, the market is experiencing
equilibrium
Fairness of output and income distribution is known as
equity
Every society faces a trade-off between
equity and efficiency
One of the basic principles of economics is that trade makes
everyone better off
The rate at which one country's currency can be converted to another country's currency is known as the __________ rate
exchange
The opportunity cost of an economic model is known as the
exclusion of real-world complications
In the figure, point B represents a:
expansion
The figure above shows effective monetary policy over the business cycle. What does point 2 represent?
expansionary policy during recession
High tax rates on personal income that are used to fund high salaries for government leaders are an example of government acting as an
extractive institution
High tax rates on personal income that are used to fund high salaries for government leaders are an example of government acting as an:
extractive institution.
When the Federal Reserve sets an interest rate goal, it typically focuses on having the _____ rate reach that goal.
federal funds
The interest rate that a bank pays to borrow another bank's excess reserves is called the:
federal funds rate.
Which of the following areas of bias are NOT included in the consumer price index?
foreign production bias
McDonald's has locations in more than 100 countries. This is an example of
globalization
A positive relationship between price and quantity supplied implies that as price
goes up, quantity supplied rises
Demand for which of the following is NOT increased by low interest rates?
hamburgers
In order to be classified as unemployed, a person must meet all the criteria below EXCEPT
have the skills for job openings
The real value of income is
he amount of goods and services that it will buy
Which of the following is not an example of a transfer payment?
health insurance payments to an army private
Worker productivity can be improved through investments in
healthcare, education, and infrastructure
If both price and quantity increase, it must be from
higher demand
Which of the following is NOT a cost of inflation?
higher real values of output
If the supply curve shifts to the left, the result is a ________ equilibrium price and a ________ equilibrium quantity
higher; lower
Gross domestic product understates the total production of final goods and services because of the omission of
household production.
Skills that are acquired through education, experience, and training and that allow labor to be more productive are known as
human capital
Scarcity occurs when
human wants and needs exceed the resources that are available to meet those wants and needs
Goods and services that are produced in a foreign country but sold domestically are
imports
Adjustments for business inventory of product or inputs that are accumulated or sold during a year helps to ensure the accuracy of GDP by ensuring that GDP
includes all of the time period's production.
The laws, practices, and customs through which all individuals have the opportunity to create wealth are referred to as _______ institutions.
inclusive
The __________ effect describes the change in consumer purchasing power that occurs when the price of a good changes
income
When a central bank buys bonds on the open market, the country's money supply will
increase
If the Federal Reserve wishes to maintain an unchanging target interest rate and the demand for money is rising, then the Fed will
increase the supply of money.
The U.S. unemployment insurance program
increases the amount of time the unemployed spend searching for a job.
A decline in the value of money occurs when _____ occurs.
inflation
Sources of economic growth include
innovation, investments in physical capital, and improvements in human capital
New houses are included in the ______________ component of the GDP.
investment
An advantage of the establishment survey over the household survey of the labor market is that the establishment survey
is based on actual payrolls, rather than on unverified answers.
A durable good is a product that
is expected to last more than one year
Jim Clifton of the Gallup polling company has called the U3 unemployment rate a big lie because:
it fails to include discouraged workers and underemployed as part of the unemployed.
The supply curve will shift when
labor costs change
Which of the following factors does NOT impact productivity?
labor force participation rate
Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?
labor force participation rate
The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as
labor productivity.
As the quantity of one input rises while the amounts of other inputs remain constant, output tends to rise by smaller and smaller increments. This pattern is referred to as the:
law of diminishing returns.
For a good to be included in the GDP, it must be produced
legally
Which of the following would cause price to decrease?
lower resource cost
Foreign direct investment occurs when an investor in one country
makes an investment in business activities in another country that gives the investor ownership rights
Foreign direct investment occurs when an investor in one country:
makes an investment in business activities in another country that gives the investor ownership rights.
The sum of individual demand for a product at each price is
market demand
The sum of individual supply for a product at each price is
market supply
GDP is defined as the
market value of all final goods and services produced in a country in a time period
The value-added method for computing GDP
measures the additional value to a product or raw material in each stage of production
Inflation can cause small inefficiencies in an economy, such as the need to change price tags, reprint catalogs, and update websites. These inefficiencies are referred to as
menu costs
Which is NOT a category of expenditures in GDP?
monetary expenditures
In the circular flow model, people usually work for ________ in the ________ market
money; resource
Durable good is a good that can be used for:
more than one period
Inputs that are found in nature and that can be used in the production process are known as
natural resources
When price increases, producer surplus could increase because
new sellers enter the market
Inflation rate is measured as percentage change in prices from one period to the ________ period
next
Prices not adjusted for inflation are
nominal
Bank reserves are
not part of M1 or M2.
Real GDP will increase
only if the quantity of final goods and services produced rises.
Which of the following is not a function of money?
open market operations
Comparative advantage is defined in terms of:
opportunity cost
What must be given up in order to acquire or do something else is known as
opportunity cost
During an economic expansion, _____ rises and _____ falls.
output; unemployment
Changes in the producer price index tend to _____ changes in actual producer costs.
overstate
What stage of the business cycle immediately follows an expansion?
peak
Which of the following does NOT lead to an underestimation of the unfulfilled desires to work in the computation of the U3 unemployment rate?
people who pretend to be looking for work but who do not really want a job
Rational self-interest predicts that
people will alter their behavior in response to changing incentives and circumstances
On the 45 degree line-diagram, for points that lie above the 45 degree line
planned aggregate expenditure is greater than GDP.
The graph below illustrates the concept of a production function and diminishing returns, where area 1 and area 2 respectively represent:
poor nations; rich nations
The PPF shows the ________ combination of goods and services a firm can produce
possible and efficiently
Movement along the supply curve occurs due to a change in
price
A price floor is a type of
price control
The price index that focuses on the prices of inputs and raw materials is known as the:
producer price index.
Goods and services are found in the __________ market
product
The __________ is an economic model that shows the limit of what an economy can produce when all resources are used efficiently
production possibilities frontier model
Minimizing production costs per unit is also known as
productive efficiency
In the calculation of GDP, which is NOT included as part of investment?
purchases of lawn mowers by households
In economics, when a business increases investment, it is
purchasing equipment and machinery
The amount of a good that buyers are willing and able to buy at a specific price is known as
quantity demanded
Labor productivity will increase if the ________ increases and ________.
quantity of capital per hour worked; technology improves
If both supply and demand increase, ________ will increase, and ________ is unclear
quantity; price
The assumption that people are________ is one of the basic assumptions in economic studies
rational
A good measure of the standard of living is
real GDP per capita.
A nation's economic growth is best measured by the annual growth rate of:
real GDP per capita.
The period between a business cycle peak and a business cycle trough is called
recession.
India's rapid growth can be explained by
reduced regulations and market-based reforms.
Which of the following is NOT a component of GDP when calculated by the expenditure approach?
salaries
The basic principle in economic studies is
scarcity
A country's central bank typically does NOT
serve as a commercial bank for individual depositors.
If Macroland has a higher economic growth rate than Econia over a twenty-year period, then Macroland's production possibilities frontier (PPF) will
shift outward more rapidly than Econia's PPF during the time period.
If Macroland has a higher economic growth rate than Econia over a twenty-year period, then Macroland's production possibilities frontier (PPF) will:
shift outward more rapidly than Econia's PPF during the time period.
Taxes on a good paid by sellers will generally
shift the supply curve to the left
If the cost of doing business decreases, we expect the supply curve will
shift to the right
When there is a change in demand, the demand curve
shifts either to the left or right
In the above figure, there is a _____ of _____ as a result of the price ceiling.
shortage; 10
At a price of $6, a ________ of ________ exists
shortage; 4
A change in the required reserve ratio will impact a nation's money supply by changing the
size of the potential deposit multiplier and the amount that is held in excess reserves.
The opportunity cost of the good on the x-axis is the ________ of the PPF
slope
At macroeconomic equilibrium, total ________ equals total ________.
spending; production
Sam has been saving for his retirement for twenty years. He has a plan and has estimated how much he needs to save each year to provide the standard of living that he wants in retirement. Sam is emphasizing which of the following functions of money as he saves for retirement?
store of value
Peter, a high school student with a part-time job, saves some money each payday, believing that it will provide him with the purchasing power to buy books and pay tuition when he attends college in two years. He is relying heavily on money as a
store of value.
Minimum wage laws that require wages of low-skill workers to be above equilibrium contribute to what type of unemployment?
structural
People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering
structural unemployment.
The price of chicken has doubled. As a result, Andre will purchase pork instead of chicken. This is an example of the __________ effect.
substitution
A price floor is intended to benefit
suppliers
In the above figure, there is a _____ of _____ as a result of the price floor.
surplus; 2
What does the PPI measure?
the average of the prices received by producers of goods and services at all stages of the production process
Inflation is an increase in:
the average price level in an economy.
The slope of the consumption function is equal to
the change in consumption divided by the change in disposable income.
Liquidity refers to
the ease with which a financial security can be traded for cash.
The figure above shows a decrease in the money supply through open market sales. Which of these is INCORRECT concerning this figure?
the equilibrium interest rate decreases.
The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by
the level of aggregate expenditure.
A chain-weighted price index is different from the consumer price index because
the market basket is not fixed but reflects the current mix of items purchased
The Federal Reserve's mandate to achieve maximum employment means that the Fed is trying to achieve:
the natural rate of unemployment.
Marginal analysis is
the process of comparing the additional benefits of an activity with the additional costs
Human capital per worker affects productivity because
the skill and knowledge levels of workers are positively related to their productivity
To calculate GDP using the value-added method, one would add up
the value added by each firm involved in the production of final goods and services.
Suppose in 2018, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2018?
the value of the services of the real estate agent
When the labor market is at full employment
there is no cyclical unemployment in the economy.
Which of the following is a reason that governments may institute price ceilings?
to make a product more affordable to low income individuals
When allocative efficiency is achieved, _____ is maximized.
total surplus
When individuals, firms, and policymakers make decisions, these decisions often have both costs and benefits. This is an example of
trade-offs
The government purchases do not include the
transfer payments
What stage of the business cycle immediately follows a recession?
trough
A government program that temporarily provides unemployed persons who have lost a job with transfer payments to replace part of their lost income is called
unemployment insurance
To reduce the bias in the consumer price index, the Bureau of Labor Statistics
updates the market basket every two years, rather than every 10 years.
The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is
vertical.
The maximum price that a consumer is willing to pay for a good or service is called
willingness to pay
