CHAPTER 24: An intro to Macroeconomics

Savings are generated whenever:

current income exceeds current spending.

Macroeconomics is mostly focused on

economy as a whole

China's GDP per person in 2011 was about one-third of U.S. GDP per person in 2011. (T or F)

false

Modern economic growth refers to any situation where a nation's output increases. (T or F)

false

Output per person has grown steadily since the beginning of the Roman Empire. (T or F)

false

Real GDP measures the change in the price level over time. (T or F)

false

The business cycle is primarily concerned with changes in the level of overall prices over time. (T or F)

false

Higher rates of unemployment are linked with:

higher crime rates as the unemployed seek to replace lost income.

Which of the following would an economist consider to be investment?

Boeing building a new factory.

What's the difference between financial investment and economic investment?

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

Which of the following is used to measure directly the average standard of living across countries?

GDP per person.

In 2008 and 2009, the U.S. experienced what has come to be known as the:

Great Recession.

Which of the following is most closely related to recessions?

Negative real growth in output.

Which of the following countries would economists say definitively is achieving modern economic growth?

Nigeria experiences a 2.7 percent increase in real GDP per person

Which of the following is an example of economic investment?

Nike buys a new machine that increases shoe production.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Nominal GDP would rise, but real GDP would be unchanged.

For an economy to increase investment, it must:

increase saving.

In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?

The quantity of resources available to the economy.

A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption. (T or F)

True

A sometimes short, sometimes extended period of declining output and living standards is (T or F)

True

A sometimes short, sometimes extended period of declining output and living standards is referred to as a recession (T or F)

True

Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness. (T or F)

True

In 2008-2009, the U.S. economy lost 8 million jobs and saw the unemployment rate rise from 4.6 percent to as high as 10.1 percent. (T or F)

True

Inflation reduces the purchasing power of a person's income and savings. (T or F)

True

The amount of investment in an economy is ultimately limited by the amount of savings in that economy. (T or F)

True

The business cycle reflects both short-run fluctuations in output and long-run economic growth. (T or F)

True

The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses. (T or F)

True

Inflation is defined as:

an increase in the overall level of prices.

Increased present saving:

comes at the expense of reduced current consumption.

Real GDP is preferred to nominal GDP as a measure of economic performance because:

nominal GDP uses current prices and thus may over- or understate true changes in output.

Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would:

not consider this as an economic investment; no new capital is created through the purchase.

The term "recession" describes a situation where:

output and living standards decline.

Banks and other financial institutions:

promote economic growth by helping to direct household saving to businesses that want to invest.

Before the period of modern economic growth:

rates of population growth virtually matched rates of output growth.

The three statistics that are the main focus for those measuring macroeconomic health are:

real GDP, inflation, and unemployment.

Modern economic growth refers to countries that have experienced an increase in:

real output per person.

When economists refer to "investment," they are describing a situation where:

resources are devoted to increasing future output.

If an economy wants to increase its current level of investment, it must:

sacrifice current consumption.

In order to achieve modern economic growth, a nation's output must grow faster than its population. (T or F)

true

Nominal GDP measures a nation's output in current year prices. T(T or F)

true

Real GDP measures the:

value of final goods and services produced within the borders of a country, corrected for price changes.

The two topics of primary concern in macroeconomics are:

A. short-run fluctuations in output and employment and long-run economic growth.

Which of the following statements is most accurate about advanced economies?

Economies experience a positive growth trend over the long run but experience significant variability in the short run.

Increasing investment in the present means forgoing future consumption. (T or F)

FALSE (present consumption)

Any person without a job is considered to be unemployed. (T or F)

False

Economists and policymakers are generally more concerned about nominal GDP than real GDP. (T or F)

False

Economists refer to purchases of stocks and bonds as "investment." (T or F)

False

From 1995 until the start of the recession in 2007, the U.S. economy grew at the same rate as the economy of Japan (T or F)

False

If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment. (T or F)

False

A nation that realizes a 3 percent increase in its output per person is experiencing modern economic growth. (T or F)

True

Why are high rates of unemployment of concern to economists?

There is lost output that could have been produced if the unemployed had been working.

Unemployment describes the condition where:

a person cannot get a job but is willing to work and is actively seeking work.

The business cycle depicts:

short-run fluctuations in output and employment.