macroeconomics final study guide
"if i didnt have class tonight I would save $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
During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year.
2%
Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?
3.0
consumption in the us is about ________ of GDP and it moves relatively little over time
68%
which of the following is correct
Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.
the model that economists use for illustrating the process of individual choice in a situation of scarcity is the _____sometimes also called the the opportunity set a diagram which shows what choices are possible
a budget constraint
which of the following is most likely a topic of discussion in macroeconomics
a decrease in the unemployment rate
The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:
a sharp increase in the demand for and construction of wood frame homes
the imposition of a price ceiling on a market often results in:
a shortage
The term "ceteris paribus" means that:
all variables except those specified are constant.
in macroeconomics the connect in from inputs to outputs for the entire economy is called ________
an aggregate production function
To compare the GDP of two different countries with different currencies, it is necessary to use _________________________.
an exchange rate
if exports and imports:
are equal, then trade is balanced.
which of the following are most likely classified by economists as consumer durable goods
automobiles, furniture
cyclical unemployment arises when
business activity in the macroeconomy declines.
the rise in unemployment that occurs because of a recession is known as cyclical unemployment because it is closely tied to the _________
business cycle
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
when demand is inelastic
consumers are not very responsive to changes in price.
a 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. it appears that
cross-price elasticity of demand for iced is -2
in countries like _______ the command economy predominates
cuba and north korea
the type of unemployment that occurs because of a recession is called
cyclical unemployment
From a macroeconomic perspective, if GDP economic indicators show a decline of 10% or more in a single year, then which of the following outcomes is most likely to result?
deep economic recession
_______ is a term referring to the fact that for many goods as the level of production increases the average cost of producing each individual unit declines
economies of scale
__________ argues that the productivity of workers will increase is 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
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.
elastic
a price cut will increase the total revenue a firm receives if the demand for its product is
elastic
If exports ______________, then the economy is said to have a trade surplus.
exceed imports
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________
excess demand
Goods and services produced in one country that are then sold in other countries are called
exports
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
In order to avoid double counting, statisticians just count the __________________.
final goods and services
the circular flow diagram of economic activity is a model of the
flow of goods, services, and payments between households and firms
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
At the outset of the 21st century most global trade took the form of
goods rather than services
the effects of inflation are seen in
goods, services, wages and income levels
in a command economy the _______ either makes most economic decisions itself or at least strongly influences how the decisions are made
government
Consumption is the purchase of goods and services by:
households
The term _________ is used to describe what those in one country buy from those in other countries
imports
Inflation implies that the level of all prices _____________________.
increase
If the demand curve is perfectly elastic, then an increase in supply will:
increase the quantity exchanged but result in no change in the price
Improvements in the productivity of labor will tend to:
increase wages
If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.
increases, fall
the price elasticity of demand for tickets to local baseball games is estimated to be equal to .89. in order to boost ticket revenues an economist would advise
increasing the price of game tickets because demand is inelastic
the percentage change in the price level from one time period to the next whether the price level is measured in terms of money or as a price index will be the __________
inflation rate
_______ implies that pressure for price increases reaches across ________ markets not just one
inflation, most
which of the following best describes a monetary policy tool?
interest rates
________ is a small category that refers to the goods produced by one business that have yet to be sold to consumers and are either still sitting in warehouses and on store shelves
inventories
investment in human capital
is characterized by both b) and c)
Macroeconomics
is concerned with the expansion and contraction of the overall economy
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.
Scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
the statement that GDP=C+I+G=X-M is an identity, because __________________
it is true according to the definition of GDP
Other things being equal, a __________ supply of workers tends to __________ real wages.
larger, decrease
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.
law of demand
Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.
law of diminishing marginal utility
If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase.
lower costs of production
Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
marginal analysis
in a _____ 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
which of the following would most likely be included in the positive side of the US current account balance
money earned by US firms in Europe
Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________.
new technologies
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
While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.
ongoing rise
Attending college is a case where the ________________ exceeds the monetary cost.
opportunity cost
the elasticity of supply is defined as the _______ change in quantity supplied divided by the __________change in price
percentage, percentage
the "law of supply" functions in labor markets: that is , a higher ______ for labor leads to a higher quantity of labor supplied
price
_____ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling
price floors
The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.
price, quantity demanded
The Producer Price Index is based on prices paid for supplies and inputs by
producers of goods and services
the value of what is produced per worker or per hour worked is called ________
productivity
To achieve a high standard of living, a nation should:
promote economic growth
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis.
quantity
when economists talk about supply they are referring to a relationship between price received for each unit sold and the _____
quantity supplied
a straightforward example of a _______ often used for simplicity is the interest rate
rate of return
Economists typically measure economic growth by tracking:
real GPD per capita
_________ are now the largest single component of the supply side of GDP representing over half of GDP
services
two factors that complicate the calculation of the inflation rate are
substitution and quality/new product bias
one of the reasons that arise in the price of a fixed basket of goods over time tends to overstate the rise in a consumers true cost of living is
substitution bias
The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.
sunk costs
As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
technology
inflation can be calculated in terms of how the overall cost of _______ changes over time
the basket of goods
the most commonly cited measure of inflation in the US is
the consumer price index (CPI)
_______ is a term 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
which of the following is unlikely to affect the rate of economic growth
the level of government spending
If a nation's labor force receives a significant influx of young workers:
the natural rate of unemployment is likely to increase
the most significant real economic cost of higher unemployment is
the potential goods and services that might have been produced but werent
As depicted in ______ it is necessary to give up some sort of one good to gain more of the other good
the production possibilities frontier
macroeconomic topics do not usually include
the profit maximizing decisions of an individual manufacturer.
which of the following is not counted as a part of GDP?
the purchase of 100 shares of AT&T stock by your grandfather
the price elasticity of demand measures the
the responsiveness of the quantity demanded to changes in price
GDP is:
the value of all final goods and services produced domestically
According to the law of supply,
there is a direct relationship between price and quantity supplied
Insofar as government public policy is concerned, the best way to battle unemployment would be __________________.
to minimize recessions
the term _______ describes circumstances where a country's imports exceed its exports
trade deficit
the term _________ describes circumstances where a countrys exports exceed its imports
trade surplus
Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be:
underemployed
Demand is said to be ___________ when the quantity demanded changes at the same proportions as the price
unit elastic
the general pattern that consumption of the first few units of any good tends to bring a higher level of _____ to a person than consumption of later units is a common pattern
utility
If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________.
will increase