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 ______