Macroeconomic Chapter 24, 25, & 26

Which of the following is an example of a supply shock?

A dramatic increase in energy prices increases production costs for firms in the economy.

The term "recession" describes a situation where:

output and living standards decline

Which of the following is an example of a demand shock?

Consumers become worried about job loss and buy fewer goods and services than expected.

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.

Inflation is defined as:

an increase in the overall level of prices

Economic growth can be portrayed as:

an outward shift of the production possibilities curve.

A nation's gross domestic product (GDP):

can be found by summing C + Ig + G + Xn.

The largest component of total expenditures in the United States is:

consumption.

The number of years required for real GDP to double can be found by:

dividing 70 by the annual growth rate

Transfer payments are:

excluded when calculating GDP because they do not reflect current production.

Net exports are:

exports less imports

Final goods and services refer to:

goods and services purchased by ultimate users, rather than for resale or further processing.

The most likely cause of a shift from AB to CD would be a(n):

increase in productivity.

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.

Supply shocks:

occur when sellers face unexpected changes in the availability and/or prices of key inputs.

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

real GDP, inflation, and unemployment.

Demand shocks:

refer to unexpected changes in the desires of households and businesses to buy goods and services.

If intermediate goods and services were included in GDP:

the GDP would be overstated.

Macroeconomics is mostly focused on:

the economy as a whole.

Real GDP is:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

Real GDP measures the:

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

A competitive market system:

encourages growth by allowing producers to make profitable investment decisions based on market signals.

Free trade:

encourages growth by promoting the rapid spread of new inventions and innovations.

GDP is:

$121

At an annual growth rate of 7 percent, real GDP will double in about:

10 years.

Given the annual rate of economic growth, the "rule of 70" allows one to:

calculate the number of years required for real GDP to double.

Real GDP in year 3 is:

$150

Which of the following is not a supply factor in economic growth?

Aggregate expenditures of households, businesses, and government.

The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the:

Bureau of Economic Analysis.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?

Goods and services produced in the underground economy.

Why are economists concerned about inflation?

Inflation lowers the standard of living for people whose income does not increase as fast as the price level.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

The child-care services provided by stay-at-home parents.

Which of the following is an intermediate good?

The purchase of baseball uniforms by a professional baseball team.

A price index is:

a comparison of the current price of a market basket to a fixed point of reference.

Unemployment describes the condition where:

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

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation during a specific period of time.

Growth is advantageous to a nation because it:

lessens the burden of scarcity.

Realized economic growth is best represented by a:

move from X on AB to Y on CD.

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by:

national income

The system that measures the economy's overall performance is formally known as:

national income accounting.