UNIT 3 FINAL

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

The aggregate production function is represented as:

Y = f(L, H, K).

When a U.S. consumer buys Canadian maple syrup at the grocery store, this purchase is:

an import.

The consumer price index is an index that tracks the:

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

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

on average, prices went down across the economy.

The labor force participation rate is the:

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

A government can promote the development of human capital by:

subsidizing secondary school education.

The law of diminishing returns states that:

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

Human capital refers to:

worker skills and knowledge.

An underemployed person is one who is:

working but whose skills are not fully utilized.

A production function is:

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

The working age population includes people who are:

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

The "market value" of a good or service refers to the:

current dollar value of that good or service.

Frictional unemployment is unemployment:

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

A "final" good or service is one that is:

finished and ready for the final user.

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:

human capitol

Enforceable property rights encourage economic growth by encouraging:

investment.

Menu costs are the:

marginal costs of adjusting prices.

GDP is defined as the:

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

The Producer Price Index is an index that tracks the:

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

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:

substitution bias.