Macroeconomics Final

substitution bias

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is

interdependence principle

Your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future

shifts in demand

_____ lead to price and quantity to move in the same direction

normative analysis

analysis based on value judgments

consumer price index

average price that consumers pay over time for a representative basket of goods and services

market failure

occurs when market forces lead to an inefficient outcome

above supply and below price

on a market graph, producer surplus is the area ______

comparative advantage

people specialize and trade due to ____

labor force participation rate

percentage of the working age population that is either employed or unemployed

social insurance program

social security is an example of a _____

underemployed

someone working but whose skills are not fully utilized

investment

spending on physical capital

mandatory spending

spending that supports programs that do not get determined annually but instead are set in law

frictional unemployment

unemployment due to the time it takes for employers to search for workers and for workers to search for jobs

abundant inputs

what is a source of comparative advantage

4.22%

what is the rate of inflation in 1991

initial public offering

when a company first sells stock directly to the public

lowest opportunity cost

when a manager uses comparative advantage to assign tasks, each task is signed to the worker with the _____

diminishing marginal benefit

when buying an item yields a smaller marginal benefit than the previous item

law of diminishing return

when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts.

shortage

when quantity demanded exceeds quantity supplied

forward guidance

when the federal reserve provides information about the future course of monetary policy in order to influence expectations about future interest rates

graph A

which graph shows what will happen in the market for luxury vehicles if a recession is imminent?

the opportunity cost principle

which principle tells you that the true cost of something is the next best alternative you have to give up to get it

human capital

worker skills and knowledge

marginal propensity to consume

slope of the consumption function

graph A

A coffee shop opens next to an existing coffee shop. Which of the following graphs shows the effect of this new coffee shop on the market supply curve for coffee in this area?

subsidizing secondary school education

A government can promote the development of human capital by....

graph D

A major technological advancement occurs in transportation technology, which leads to faster and more efficient train systems. Which graph depicts the effect on the supply of train rides?

tarrif

A tax on imported goods

marginal principle

Decisions about quantities are best made incrementally.

graph D

Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers?

substitutes in production

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are ____

investment

Enforceable property rights encourage economic growth by encouraging

equilibrium real interest rate

Equilibrium in the loanable funds market determines the...

graph A

If companies frequently start using drones to deliver products, which graph shows the effect this will have on the market for drones. ​

graph C

In 2011, Japan suffered a major earthquake and tsunami. Honda parts that were sourced from Japan could no longer be produced, which caused Honda to cut its production of cars. Which graph shows the effect of this shortfall?

25% higher

The CPI changes from 100 to 125. This means that overall prices are...

human capital

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build

stock market, the bond market, and the banks

The three major pillars of the financial sector

production function

a method through which inputs can be turned into outputs, given the available resources

equilibrium price

a price where quantity supplied equals quantity demanded

market

a setting that brings together potential buyers and sellers

excise tax

a tax on a specific product

liquidity

ability to quickly and easily convert the asset to cash, with little or no loss in value

fiscal policy

adjusts government spending and taxes (policy type)

monetary policy

adjusts interest rates (policy type)

working population

age 16 or older who are not in the military or institutionalized

Y = f(L, H, K)

aggregate production function

consumption spending

buying a fancy dinner on valentines day is an example of ....

investment

buying a new house is a form of ...

mutual fund

buys a portfolio of stocks and bonds on your behalf

sunk costs

costs that are incurred in the past and cannot be reversed

market value

current dollar value of that good or service

normal goods

expensive meals are an example of

final good

finished and ready for the final user

social insurance

government provided financial funding to households to compensate for bad outcomes such an unemployment, illness, disability, or outliving their savings

200.33 billion

how much is the company worth

quantity supplied rises

if price rises....

above price and below demand

in a market graph, consumer surplus is the area ___

menu costs

marginal costs of adjusting prices

GDP

market value of all final goods and services produced within a country in a given year

decrease in quantity supplied

movement from E to F represents

increase in quantity demanded

movement from M to N represents

an increase in demand

movement from M to Q

federal funds rate

nominal interest rate that banks pay on overnight interbank loans

producer price index

price that businesses pay over time for the inputs used in the production process

social insurance

providing health care to all citizens and permanent residents is an example of ....

quantity supplied

the amount of an item that a seller is willing to sell at a particular price

credit constraints

the amount of money that people can borrow

future value

the amount that your money will grow into by a future date as a result of earning interest

fairness

the concept of equity focuses one ____

benefits are greater than the costs

the cost-benefit principle states that a decision should be pursued only if the...

depreciation

the decline in capital due to wear and tear, obsolescence, accidental damage, and aging

deadweight loss

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity

intergenerational mobility

the extent to which the economic status of children is independent of the economic status of their parents

law of demand

the inverse relationship between price and quantity demanded

loanable funds market

the market for funds used to buy, rent, or build capital

absolute advantage

the one who is best at the task has _____

law of supply

the positive relationship between price and quantity supplied

federal reserve mandate

to ensure maximum employment while maintaining stable prices

comparative advantage

to maximize production, people should focus on the task in which that have ______