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In the "paradox of thrift

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increased saving by individuals increases their chances of becoming unemployed.

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The widely held view that the government should take an active role in the macroeconomy dates back to

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The great depression

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The modern tools of macroeconomic policy are:

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fiscal policy and monetary policy.

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Fiscal policy refers to:

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the control of government spending and taxations.

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In recent times the U.S. government has been trying to help the economy through one of the worst economic slumps. The policies used are based on:

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Keynesian theory.

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Keynesian economics propagates the economic ideas:

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that argue that the government can help a depressed economy through fiscal and monetary policies.

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John Maynard Keynes believed that the

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government should actively try to mitigate the effects of recessions by using fiscal and monetary policies.

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Periods in which output and employment are falling are known as

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recessions

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An expansion is a period in which:

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output rises

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Recessions are periods when

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output and employment are falling.

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The short-run alternation between economic downturns, recessions, and economic upturns and expansions is known as the:

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business cycle

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The basic difference between an economic recession and economic depression is that:

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during depressions employment falls faster than during recessions

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If during a period of several months we observe the economy to be simultaneously increasing its level of output and employment, we could assume that the economy is in:

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an expansion

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A business cycle is:

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short-run alternation between economic upturns and downturns.

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Long-run growth is the sustained upward trend in:

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aggregate output per person over several decades

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Long-run growth is:

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sustained upward trend in aggregate output per person over several decades

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Long-run growth is represented by:

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the sustained upward trend in the economy's overall output per person that generates higher incomes and higher standard of living for its members

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Which of the following is (are) true?

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Inflation means an increase in the overall level of prices.

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deflation is:

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encourages people to hold cash rather than invest in new factories and productive assets.

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. If the economy grew at a 3% rate this year and average prices grew ______, people would be better off this year compared with last year.

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) 3%

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If wages grew at a 5% rate last year and average prices grew at a 3% rate, then the average worker is:

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better off

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Which of the following is true about inflation and deflation?

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Both inflation and deflation can pose problems for the economy.

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An increase in the nation's overall price level is known as _____.

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inflation

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Inflation is a situation where:

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the average price level increases

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Price stability refers to a situation where

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the overall cost of living is changing very slowly

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One of the issues of importance to macroeconomists is

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understanding how living standards change over time.

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Fiscal and monetary policies:

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are used to correct for short-term economic fluctuations.

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Fiscal policy involves

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deliberate changes in taxation and/or government spending.

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In macroeconomics

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aggregate data such as real GDP, the price level and unemployment are analyzed.

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The paradox of thrift highlights:

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how individual decisions to save more may worsen a recession

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Keynesians argue that a lack of spending is:

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possible and can lead to prolonged recessions

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. Changes in interest rates and the money supply in an effort to change overall spending in an economy is:

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monetary policy.

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Changes in government spending and taxes in an effort to change overall spending in an economy is

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) fiscal policy.

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During the Great Depression, unemployment rates reached as high as:

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) 25%.

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During a recession, one will often observe

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unemployment rates will be increasing while aggregate output is falling.

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When economists measure economic growth, they often use:

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) real GDP

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One normally expects that unemployment increases while aggregate output and aggregate incomes decrease during

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a recession

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When an economy experiences a contraction in its business cycle, this is often:

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) considered to be a recession

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When an economy is operating between the business cycle trough and the business cycle peak, this is considered to be:

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an expansion

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An economic recovery is all of the following except:

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the end of the business cycle.

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When an economy is in an expansion, unemployment:

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tends to fall, and overall prices tend to rise

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When an economy's overall production grows faster than its population, this is referred to as:

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long-run growth per capita.

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When the overall price level decreases, this is:

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deflation.

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When overall price levels rise over time, this is referred to as

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inflation

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Which of the following statements about U.S. Gross Domestic Product (GDP) is true?

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U.S. GDP measures the market value of all final goods and services produced within the U.S. in a given period of time

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Which of the following activities would NOT be included in the calculation of GDP for the United States

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Texas Instruments, a U.S. company, produces computer chips at a manufacturing plant in Mexico.

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What of the following are considered Investment expenditures in the calculation of GDP?

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NONE! Financial Assets are not counted in GDP.

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Which of the following is counted in the Investment expenditure category for GDP?

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Gail Penn purchases a $1,000 printing machine for her tee-shirt printing busines

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2008 GDP of country A is 1,000 millions of $. 2008 population of country A is 200 million.

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What is GDP per capita of country A in 2008? GDP per capita = GDP / Population = 1000 mil / 200 mil = 5 mil

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The following are national income accounting figures for a hypothetical country for a given year. Consumption Spending $700 Investment Spending $100 Government Spending on Goods and Services $200 Exports $300 Imports $400

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GDP = C + I + G + EX - IM = 700 + 100 + 200 + 300 - 400 = 900

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The following figures are for a country in 2006, expressed in billions of dollars: GDP 2,000 Consumption 1,000 Investment 500 Government Spending 400 Exports 300

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GDP = C + I + G + EX - IM 2000 = 1000 + 500 + 400 + 300 - IM 2000 = 2200 - IM IM = 200

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Consumption 5,000 Investment 2,000 Government Spending 1,000 Imports 3,000 GDP 15,000 GDP = C + I + G + EX - IM

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15000 = 5000 + 2000 + 1000 + EX - 3000 15000 = 5000 + EX EX = 10000 Net Export= EX - IM Net Export = 10000 - 3000 = 7000

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Sometimes in the U.S. we have seen Nominal GDP increasing while Real GDP was declining. During such times which of the following things could be happening:

answer

output of goods and services declining and prices increasing

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output of goods and services declining and prices increasing

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Elizabeth lost her full-time factory job last month. She is spending every day looking for a new full-time job, but so far has not worked since losing her factory job.

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During the decade from 1929-1939, nominal output decreased and real output increased because:

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prices decreased, but the physical output of goods and services increased

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The topics studied in macroeconomics include:

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Inflation. Unemployment. economic growth.

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There is some criticism that the official unemployment statistics understate the extent of joblessness in the United States. One reason for this criticism is the presence of discouraged workers. Discouraged workers

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do not have a job but are not considered unemployed because they have given up looking for a job.

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If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment,

answer

labor force= Employed + Unemployed = 135 million + 15 million = 150 million

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If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment,

answer

unemployment rate= unemployment/ Labor force X 100 = 15/150 X 100 = 10%

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If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment,

answer

labor force participation rate =Labor Force / Population X 100 = 150/200 X 100 = 75%

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