macroeconomics chap 1

Indicate which of the following are considered Macroeconomic policy topics. Multiple select question - Profit margins for defense contractors - Economic growth - A change in unemployment rates -Inflation

- Economic growth - A change in unemployment rates - Inflation

The introduction of rent controls could lead to which of the following?

-Lower rent for those who live in rent-controlled apartments -An decrease in the quantity of apartments available for rent

If Red Bull and Coke are substitutes, then a decrease in the price of Red Bull should lead to:

-a decrease in the price of Coke. -a decrease in the amount of Coke bought and sold in the market.

inflation rate equation

CPI this year - CPI last year / CPI last year x 100

a person has a ________ ________ at a particular if he or she can perform the task in fewer hours

absolute advantage

used to take the "birds eye view" of the economy

aggregation

economic efficiency

all good are produced at their socially optimal level

In the graph of a line, an increase in the vertical intercept will lead to ______.

an upward parallel shift

exports

are good and serves produced domestically and sold abroad

imports

are purchases in the US of goods and services produced abroad

total benefit / number of units

average benefit

total cost / number of units

average cost

Take an action if and only if the extra ______ are at least as great as the extra _______

benefits; costs (cost benefit principle)

What will happen to the equilibrium price and quantity of beef, if the price of chicken feed increases? (Assume that chicken and beef are substitutes.)

both will increase

income effect

buyers overall purchasing power goes down

Each person should focus on the activities for which they have the lowest opportunity cost

comparative advantage

A(n) _____ variable is a variable in an equation whose value is determined by the value taken by another variable in the equation.

dependent

You earn is $12 an hour at your job, and you earn $20 per week from your investments. If H is the number of hours you work each week, and M is your total weekly earnings in dollars, then which of the following equations best describes this situation? Multiple choice question.

m= 20+12h

is the increase in total benefit that results from carrying out one additional unit of an activity

marginal benefit

is the increase in total cost that results from carrying one additional unit of an activity

marginal cost

Real GDP

measure of GDP at base year prices

nominal GDP

measure of GDP at current year prices

studies choice and its implications for price and quantity in individual markets

microeconomics

exports minus imports =

net exports

focuses on what "should be"

normative

what analysis focus on what "is"

positive

Addressing the economic consequences of a particular event or policy, and NOT whether the consequences are desirable, is considered

positive analysis

a maximum allowable price set by law

price ceilings

inflation

rate prices in general are increasing

examples of price ceiling

rent control

Discouraged workers are people who

say they would like to have a job, but have made no effort to find one in the past four weeks

Although we have boundless needs and wants, the resources available to us are limited, so having more of one good thing usually means having less of another. This is called ______.

scarcity principle

When government spends less than it collects in taxes, it is called a budget

surplus

absolute advantage

the ability to produce a good using fewer inputs than another producer

The labor force participation rate is

the percentage of the working age population in the labor force

The socially optimal quantity is

the quantity of a good that maximizes the total economic surplus that results from producing and consuming the good.

The expenditure method of calculating GDP adds together

the total amount spent by households, firms, the government and the foreign sector and subtracts spending on imported goods and services

true or false: An equation describes the relationship between two or more variables.

true

If hot dogs and ketchup are complements, then an increase in the price of ketchup will lead to:

-a decrease in the price of hot dogs -a decrease in the number of hot dogs bought and sold in the market

1. refers to money supply 2. refers to govt expenditures and revenues 3. refers to the institutions of economic policy

1. monetary policy 2. fiscal policy 3. structural policy

If we get $10 of savings from walking to town, and our costs of walking to town are $9, then the economic surplus from walking to town is

10-9=1

Suppose you plan to buy a new pair of running shoes. To buy them online, the pair costs $9. However, the value you had placed on the buying the shoes online is $12. Based on this information, your economic surplus from buying the shoes online is _____.

3 (The benefit of buying the shoes online is $12, and the cost is $9. Thus, economic surplus is $12 - $9 = $3.)

Suppose you are considering whether to spend an additional hour studying for your economics midterm tomorrow. If you do not study you can either surf the web, which you value at $5, or you can talk to your roommate, which you value at $4. Your opportunity cost of studying for an additional hour is:

5 The opportunity cost of an action is the value you place on the next best alternative.

pitfall #3

Failure to think at the margin

pitfall #2

Ignoring implicit costs

Inflation Unemployment Growth Macroeconomics considers Monetary policy Deficits Tax

Macroeconomics

studies the performance of national economies and the policies that governments use to try to improve that performance

Macroeconomics

pitfall #1

Measuring costs and benefits as proportions instead of absolute amount

illustrates the combinations of two goods that can be produced w/ given resources

PPC

An Arizona student claims to have spotted a UFO over the desert outside of Tucson. How will this claim affect the supply (not the quantity supplied) of binoculars in Tucson stores?

Supply will not change. The demand for binoculars is likely to increase, leading to an increase in price and quantity supplied (but no change in supply).

Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause:

The U.S.'s production possibilities curve to shift outward faster than Nepal's.

economic surplus =

Total Benefits - Total Costs

correctly rank the amounts from largest to smallest? output per person total output average labor productivity

Total output average labor productivity output per person

Gross Domestic Product (GDP) may be calculated as the sum of

consumer spending, investment spending, government purchases of goods and services, and net exports.

In the graph of a straight line, the vertical intercept is the value taken by the

dependent variable when the independent variable is equal to zero.

aggregation measures in what value?

dollar value

Suppose that the extra cost to Tim of a third glass of soda is zero because he's at a restaurant that gives free refills. According to the Cost-Benefit Principle Tim should:

drink a third glass of soda if the extra benefit of doing so is positive.

The study of how people make choices under scarcity and the results of these choices for society

economics

Comparative advantage

everyone does best when each person concentrates on the activities for which their OC is the lowest

Unexpectedly high inflation ______ borrowers and ______ lenders.

help; hurts

Normative economic principle says

how people should behave

Positive economic principle predicts

how people will behave

Workers who would like to work full-time, but can find only part-time work are

involuntary part time workers

Buyers reservation price

is the highest price an individual is willing to pay for a good

If undertaking an activity includes both explicit and implicit costs, then, according to the textbook, the opportunity cost of that activity ______.

is the sum of its explicit and implicit costs

opportunity cost

is the value of what must be foregone in order to undertake an activity

The labor force is the total number of ______ and ______.

unemployed and employed

A price ceiling that is set above the equilibrium price:

will have no effect on the market.

For Buzz, the benefit of drinking an additional cup of coffee is $3. If a cup of coffee costs $1.50, and if Buzz has to use $1 worth of his time to go buy the coffee, should Buzz drink another cup of coffee?

yes (The benefit to Buzz of drinking another cup of coffee is greater than the cost ($3 > $2.50))