MACRO Final Exam review
If the unemployment rate is 8%, then this means:
8% of the labor force is unemployed.
____________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.
Automatic stabilizers
Which of the following are most likely classified by economists as consumer durable goods?
Automobiles, furniture.
Which of the following results in a rightward shift of the market demand curve for labor?
An increase in demand for the firm's product
A __________ means that government spending and taxes are equal.
Balanced budget
If a window gets broken and somebody says, 'do not fret, this creates wealth because it creates a job for the glass maker'. What is that an example of:
Broken Window Fallacy
Which of the following government policies would be supported by neoclassical macroeconomic assumptions?
Focus on long-term growth and on controlling inflation.
Which of the following best describes the relationship between economic growth and literacy?
Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, from people consume more education.
A surplus happens when
Market price is above market equilibrium
If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system?
Medium of exchange
In modern economies, credit cards are a _____ because of their wide acceptance as a method of payment for both goods and services.
Medium of exchange
______ is output per hour in the business sector.
Productivity
A ________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.
Progressive tax
A _____ is calculated as a flat percentage of income earned, regardless of level of income.
Proportional tax
The difference between nominal GDP and real GDP is:
Real GDP adjusts for inflation
For a given aggregate supply curve, if the aggregate price level in an economy rises, _______.
Real GDP increases
When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is _________________.
Regressive
__________ means selling goods below their cost of production.
Dumping
_____ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.
Efficiency wage theory
When we want to measure wage inflation in the labor market, we use the:
Employment Cost Index
The ___________ is the only price where quantity demanded is equal to quantity supplied.
Equilibrium price
The _____ is an example of a large-scale common currency.
Euro
In macroeconomics, a _____ describes the common way in which market values are measured in an economy.
Unit of account
A tariff differs from a quota in that a tariff is:
a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.
Frictional unemployment occurs when:
a worker decides to quit one job to seek another job
Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." (correct or incorrect)
The statement is correct.
Aggregate demand curves slope downwards for each of the following reasons EXCEPT:
The substitution effect: As the price level falls, people buy more of the cheaper goods and less of the other goods.
The relationship between the price level and the total quantity of output or real GDP firms will produce to sell is known as
aggregate supply.
In macroeconomics, the connection from inputs to outputs for the entire economy is called
an aggregate production function.
If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:
budget surplus
An import quota or tariff on French wine that raises the prices for wine will probably:
hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices
When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting:
hyper-intense production will be unsustainable in the long run
If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.
increase
What changes when the national debt rises?
interest payments, federal tax collections, and government spending
"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement: (correct or incorrect)
is essentially correct
The unemployment rate may underestimate the true extent of unemployment if:
many people become discouraged and cease looking for work.
A university student who is enrolled in school full-time and not seeking employment is considered:
out of the labor force.
George looked for work for six months but could not find the job to his liking. He now spends his time at the beach. For purposes of employment, he is considered:
out of the labor force.
One factor that complicate the calculation of the inflation rate is:
quality bias sometimes called new product bias
What is Market Equilibrium?
quantity demanded= quantity supplied
One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living is:
substitution bias
If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then:
the Canadian dollar appreciated against the U.S. dollar.
Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour
Which of the following is included in GDP? a) revenue from the sale of a three-year old car b) the fees charged for a stock broker's services c) the receipts from a sale of land d) the value of lawn care service provided by a sixteen-year-old as part of his weekly chores
the fees charged for a stock broker's services
The unemployment rate measures:
unemployed workers as a percentage of the labor force
In the neoclassical model, economic growth overtime shifts potential GDP and the ______ gradually to the right.
vertical AS curve
In 2009, 1 U.S. dollar purchased 1400 Korean won and in 2013 it purchased 900 Korean won. How much did 1000 Korean won cost in U.S. dollars in 2009 and 2013?
2009: 0.71 dollars; 2013: 1.11 dollars
In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?
2010: 0.12 U.S. dollars; 2012: 0.15 U.S. dollars
In 2010, 1 Canadian dollar cost .56 British pounds and in 2012 it cost .63 British pounds. How much would 1 British pound purchase in Canadian dollars in 2010 and 2012?
2010: 1.79 dollars, 2012: 1.59 dollars
In 2010, 100 Japanese yen purchased 0.88 U.S. dollars and in 2013, it purchased 0.93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013?
2010: 113.6 yen, 2013: 107.5 yen
If nominal GDP is 1800 and the money supply is 450, then what is velocity of circulation?
4
Craigburg has a working age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________.
8.3%; 60% 1 million (unemployed)/12 million (11 employed+1 unemployed) = 8.3% 12 million/20 million (population) = 60%
What is a chart that shows all possible combinations a country can produce of two different goods. It shows the tradeoff of producing more of one good over another one.
A Productions Possibility Frontier
Which of the following is the best example of a quota?
A limit imposed on the number of men's suits that can be imported from a foreign country.
Name something that could cause supply to shift:
A natural disaster is likely to harm production and shift supply to the left.
If imports exceed exports, as in recent years, then _____ exists.
A trade deficit
Typically, if consumers in business confidence is falling then _____ and if consumer and business confidence is rising then _____.
AD shifts to the left; AD shifts to the right
Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ____________ in the economy as a whole.
Aggregate demand
A _________ is created each time the federal government spends more than it collects in taxes in a given year.
Budget deficit
As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage.
Comparative; comparative
Which of the following represents a Keynesian point of view of macroeconomics?
Creating increases in aggregate demand to reduce unemployment.
With respect to measuring the money supply, which of the following terms describes a checking account?
Demand deposits
Which of the following would be classified in the M1 category of the money supply?
Demand deposits also known as checking accounts
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?
Discount rate
In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
Division of labor
The percentage change in the price level from one-time period to the next, whether the price level is measured in terms of money is the ______.
Inflation rate
_________ implies that pressure for price increases reaches across _________ markets, not just one.
Inflation; most
What name is given to the index based on the prices of exported or imported merchandise?
International Price Index
Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model?
It shifts the AS curve in the long-term
Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?
It would fall.
When discussing economic growth, it is often useful to focus on ___, to avoid studying changes in the size of GDP that represent only having more people in the economy and focus on those increases in GDP which represent an actual rising the standard of living on a per person basis.
GDP per capita
Which of the following best describes a fiscal policy tool?
Government spending
Aggregate Demand (AD) is defined as C+I+G+(X-M). M=_____.
Import expenditure.
___________ are numerical limitations on the quantity of products that can be imported.
Import quotas.
Tariffs are taxes imposed on ___________.
Imported products
If a country's GDP increases, but its debt also increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.
Increase or decrease
Which of the following is generally accepted as a valid criticism of the production of useful goods and services?
Environmental pollution
Whether the economy is in a recession is illustrated in the AD/AS model by how close the ____________ is to the potential GDP line.
Equilibrium
The _____ is the quantity where quantity demanded and quantity supplied are equal at a certain price.
Equilibrium quantity
Which of the following is omitted in a barter transaction?
Money
_____________ serves society in three functions: medium of exchange, unit of account, and store of value.
Money
Philosophers draw a distinction between positive statements, which describe the world as it is, and ________s, which describe how the world should be.
Normative statement
The neoclassical perspective on macroeconomics emphasizes that in the long run, the economy seems to rebound back to its __________________ and its __________________.
Potential GDP; natural rate of unemployment
The law of supply functions in labor markets; that is, a higher __ for labor leads to a higher quantity of labor supplied.
Price
The information that markets generate to guide the distribution of resources is called:
Price Signals
The value of what is produced per worker, or per hour worked, is called ___.
Productivity
In the neoclassical model, the AS curve shifts to the right over time as ______ and potential GDP expands.
Productivity increases
________ equalizes the prices of internationally traded goods across countries.
Purchasing power parity
When a government uses a ___________ exchange rate policy, it usually allows the exchange rate to be set by the market.
Soft peg
Most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.
Market-oriented economy
Foreign direct investment is the term used to describe purchases of firms in another country that involve ______.
Taking a management responsibility
As the ____ substitute for low-skilled labor becomes available, the demand curve for low-skill labor will shift to the left.
Technology
Which of the following institutions oversees the safety and stability of the U.S. banking system?
The Federal Reserve
__________________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
The Industrial Revolution
When consumers and businesses have greater confidence that they will be able to repay in the future, ___.
The QUANTITY DEMANDED of financial capital at any given interest rate will SHIFT to the RIGHT.
Which of the following scenarios would cause an increase in the quantity of real GDP supplied?
The aggregate price level has increased and if the wages are sticky, businesses have hired more employees as labor has become relatively cheaper.
From a neoclassical view, which of the following is a true statement?
The economy cannot sustain production above its potential GDP in the long run.
__________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.
The infant industry argument
Which of the following would be expected if the tariff on foreign-produced automobiles were increased?
The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.
Exchange rates are an effective way to analyze the price of one currency in terms of another currency with ___________.
The tools of demand and supply
In a market for a good, if there is a shift in supply (supply goes up). What happens to demand?
There is a movement down along the demand curve.
Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?
There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.
Explain what will happen to supply and demand if a hurricane hits an oil plant?
There would be a decrease in supply and increase in demand. People use oil every day. Taking advantage of that, the prices of oil, gasoline, and diesel are raised. People make profit, since they know that oil is in demand.
What do goods like gasoline, tobacco, and alcohol typically share in common?
They are all subject to government excise taxes.
Increased investment alone will guarantee economic growth.
This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.
Which of the following is not counted as a part of GDP? a) the purchase of 100 shares of AT&T stock by your grandfather. b) the purchase of a snow plough by the city of Minneapolis. c) the unsold additions to inventory at an appliances store d) the purchase of a loaf of bread by a consumer
The purchase of 100 shares of AT&T stock by your grandfather.
What does a budget constraint show?
Various combinations of goods or services an individual can purchase with their income.
A depreciating U.S. dollar is _____ because it is worth ____ in terms of other currencies.
Weakening; less
A depreciating US dollar is _____ because it is worth _____ in terms of other currencies.
Weakening; less
The _______ means that a higher price level leads to lower real wealth.
Wealth effect
How does inflation in one country affect the exchange rate between that country and one with low inflation?
When a country has a higher inflation than another country, that country's currency will lose value compared to the country that had low inflation.
What happens to equilibrium price when demand goes up?
When demand goes up, it shifts to the right, which increases the equilibrium price of the item in the market.
International trade is fundamentally a ___________. (win-lose, win-win, or lose-lose)
Win-win situation
If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:
a budget deficit
In macroeconomics, ______ describe the situation in which two people each want to exchange some good or service that the other can provide.
a double coincidence of wants
If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to:
a floating exchange rate
Which of the following events would cause interest rates to increase?
a higher discount rate
A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________.
a non-tariff barrier
A decrease in aggregate demand (AD) can cause
a recession in the economy.
In the neoclassical version of the AD/AS model, which of the following should you use to represent the AS curve?
a vertical line drawn at the level of potential GDP
If the price index moves from 107 to 110, the rate of inflation is:
2.80%
Who wrote: "The Wealth of the Nations"?
Adam Smith
What distinguishes the real value of a statistic from the nominal value of a statistic?
Adjusting for inflation
What is a market?
Anyplace that buyers and sellers meet to exchange goods and services.
What items could cause equilibrium quantity to go up?
Demand goes up. Supply goes up.
Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.
all else is held equal
The demand measure of GDP accounting adds together:
consumption, investment, government purchases, and trade balance
Choose the correct statement concerning natural disasters. They
create jobs at the expense of other jobs, and they destroy wealth.
Economists typically measure economic growth by tracking:
real GDP per capita
The most commonly cited measure of inflation in the United States is:
the Consumer Price Index (CPI)
Investment (I) includes:
the amount spent on new factories and machinery.
As depicted in _________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
GDP does not directly include:
the value of intermediate goods sold during a period
True or False: The demand curve has a negative slope.
True
A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:
frictionally unemployed
Final goods or services used to compute GDP refer to:
goods and services purchased by the ultimate users.
The effects of inflation are seen in:
goods, services, wages and income levels
Karen chooses to go to university full-time rather than to work. Karen:
is not part of the labor force.
A nation can achieve higher economic growth if:
it devotes more resources to research and development.
The ___ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave in the least-attractive workers, with fewer employment alternatives, are more likely to stay.
adverse selection of wage cuts
A vertical AS curve means that the level of aggregate supply (or potential GDP) will determine the real GDP of the economy, regardless of the level of:
aggregate demand (AD)
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:
aggregate demand curve will shift to the right
The term "ceteris paribus" means that:
all variables except those specified are constant.
Which of the following is considered to be a relatively weak tool of monetary policy?
altering the discount rate
One of the following groups is not participating in the foreign exchange markets. Which one?
an Iowa travel firm that arranges vacation tours for local seniors to Hawaii
If the economy is in a recession, appropriate policies to pursue may include
an income tax cut that shifts the AD curve to the right.
Which of the following will not result in a rightward shift of the market supply curve for labor?
an increase in labor productivity
Which of the following will not result in a leftward shift of the market demand curve for labor?
an increase in the wage rate
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
$44
Match the terms with the actions: As demand goes up, what happens to the demand curve? As quantity demand goes up, what happens to the movement of the demand curve?
1. The demand curve shifts to the right. (Demand goes up) 2. There is a movement down the demand curve. (Quantity demanded goes up)
Once every ____, the Census Bureau does a comprehensive survey of housing and residential finance.
10 years
Given the following price and quantity supplied and quantity demanded combinations, which price puts the market in equilibrium? a. Price of $2, quantity supplied of 5, and quantity demanded of 7. b. Price of $3, quantity supplied of 6, and quantity demanded of 6. c. Price of $4, quantity supplied of 7, and quantity demanded of 5
b. It is at a price of $3 because equilibrium is when quantity supplied is equal to quantity demanded.
The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely:
borrow for the short term from the central bank
In the Circular Flow Model do businesses demand or supply? (tricky question, think about it, there are two markets in the model)
both
A central bank that wants to increase the quantity of money in the economy will:
buy bonds in open market operations
In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:
buyers and sellers
The nature of demand indicates that as the price of a good increases:
buyers desire to purchase less of it
How are the specific interest rates for the lending and borrowing markets determined?
by the forces of supply and demand
A forestry worker who is out of work because of the temporary low demand for wood products associated with a recession is defined as:
cyclically unemployed
Specialization
can lead to an increase in overall production.
Which of the following is not included in GDP? a) the payments for a chiropractor's services b) cash income paid to a day laborer that is not reported to the tax authorities c) the replacement of brake pads on your six-year-old vehicle d) the fees for legal services rendered by your lawyer
cash income paid to a daily laborer that is not reported to the tax authorities
With regard to the economy, the term negative inflation is synonymous with which of the following?
deflation
When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:
discretionary fiscal policy
The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:
domestic producers can attain the economies of scale to allow them to compete in world markets.
The neoclassical view holds that long term expansion of potential GDP due to ______ will determine ______.
economic growth; the size of the economy
What is the name given to the macroeconomic equation MV=PQ? basic quantity
equation of money
If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?
expansionary
Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then:
exports exceed imports by $50 billion.
If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?
fighting inflation
Which of the following is a distinguishing characteristic of the neoclassical view?
flexibility of wages and prices over time
When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is:
following a loose monetary policy.
People or firms use one currency to purchase another currently at the ______________.
foreign exchange market
If Evelyn uses her debit card to buy an iPod, then the money to pay the retailer will come from:
her M1 funds
In the long run, the most important source of increase in the nation's standard of living is a:
high rate of economic growth.
Consumption is the purchase of goods and services by:
households
Improvements in the productivity of labor will tend to:
increase wages
A payment is said to be ____ if it is automatically adjusted for inflation.
indexed
When a prize, wage, or interest rate is adjusted automatically with inflation, it is said to be_____.
indexed
If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur?
inflationary increase in price level
Which of the following best describes a monetary policy tool?
interest rates
Investment in human capital:
is characterized by can be acquired through on-the-job training and is an important source of economic growth.
If the Canadian dollar is strengthening, then:
it has appreciated in terms of other currencies.
Suppose that a rise in business confidence has led to more investment in the economy and higher levels of output. In the short-run Keynesian analysis, the rise in aggregate demand will:
lower unemployment.
The basic difference between macroeconomics and microeconomics is that:
microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).
If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is:
progressive
To achieve a high standard of living, a nation should:
promote economic growth
Low-wage U.S. workers suffer from protectionism in all the industries that they don't work in, because:
protectionism forces them to pay higher prices for basic necessities like clothing and food.
In an Aggregate Demand- Aggregate Supply model:
real GDP is shown on the horizontal axis
If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:
regressive
Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?
reserve requirements
A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:
shift to the right, decreasing the price of the drug
A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _________________.
supply curve to the right
The quantitative easing policies adopted by the Federal Reserve are usually thought of as:
temporary emergency measures
Which of the following is a valid criticism of the rational expectation's theory?
the assumption seems too strong
Inflation can be calculated in terms of how the overall cost of ________ changes over time.
the basket of goods
The opportunity cost of attending university is likely to include all except which of the following?
the cost of haircuts received during the school term
If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchase $1.00 U.S. in 2009, then:
the dollar depreciated against the yen.
If 20 Mexican pesos could buy $2.00 US dollars in 2006 and $1 US dollars in 2010, then:
the dollar strengthened against the peso.
What is Trade-off?
the idea that in order for a country to produce more of one good, they had to give up some of another good.
When the central bank decides it will sell bonds using open market operations:
the money supply decreases.
Tariffs results in a decrease in consumer surplus because:
the price of the protected good increases and quantity consumed decreases
Macroeconomic topics do not usually include:
the profit maximizing decisions of an individual manufacturer.
Which of the following is included in GDP calculations? a) sales revenue received from a yard sale b) cash income received by a self-employed landscaper that is not reported to the IRS c) a crisp $50 bill received on your birthday d) the university tuition paid to enroll in a course
the university tuition paid to enroll in a course
Frictional unemployment is:
unemployment that is due to normal turnover in the labor market.
Scarcity
unlimited wants and limited resources
Scarcity exists because of:
unlimited wants and limited resources.
In the market for labor, what happens to real wages when there is an increase in the demand curve?
will increase
True or False: In the circular flow model looking at just firms and households. Do physical goods and money flow in the same direction?
False
True or False: Is the product market (goods market) and the factor market (AKA resource market) the same thing?
False
True or False: Demand for a good goes up. Because of this the price of the good rise.
True
True or False: If measuring opportunity cost on a budget constraint line. Can the opportunity cost be less than one? Can it be one-half a good?
True
True or False: Is the budget constraint a visual of the opportunity cost between two goods?
True
A typical _____ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.
contractionary
The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ___.
Business cycle
Ethiopia has a GDP of $8 billion (measured in US dollars) in a population of 55 million. Costa Rica has a GDP of $9 billion (measured in US dollars) in a population of 4 million. Calculate per capita GDP for each country.
Ethiopia= $145.00 Costa Rica= $2250.00
Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?
Fiscal policies
______ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
Full Employment GDP
A nation's prosperity is sometimes measured in terms of _____.
GDP per capita
Explain how inflation is a tax on those that hold money?
Long-term inflation lowers the value of money, which thus, is a tax on those that hold money.
Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?
M1
Which category of the money supply would you be contributing to if you invest in money market funds?
M2
Which one looks at the big picture
Macroeconomics
It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the __________.
National Interest Argument
________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.
Neoclassical economists; long run
_______ economists place an emphasis on ________ run economic performance.
Neoclassical; long
Which of the following is a traditional tool used by the Fed during recessions?
Open market operations.
The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.
Overstate
In uncertain economic times, ______ serves as a way of preserving economic value that can be spent or consumed in the future.
Owning gold
If Sarah uses her smart card to purchase movies over the Internet, then the money to pay the retailer will come from:
Sarah's M1 funds
Using the AD/AS model, a ______ could explain a decrease in cyclical unemployment.
Shift in AD to the right
Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?
Store of value
Which of the following will have the greatest influence on the slope of the demand curve in a single market model?
Substitute goods
What are the effects of globalization? Globalization lowers the prices of imported, and raises the prices of exported goods. a. What happens to the quantity of options of goods and services available: b. How do prices of goods and services change in the importing country: c. How do prices of goods and services change in the exporting country: d. How does globalization effect equality:
a. The quantity increases, since there are multiple companies to make similar products. If people from the U.S. make connections with people from across the world, there will be more options of goods and services that they can trade. b. Importing country= inflation and economy. c. Exporting country= inflation and interest rates. d. Globalization leads to inequality. It benefits high-income and increases costs for low-income.
The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:
potential GDP
The Keynesian view of economics assumes that:
wages are sticky.