Econ 1040 M1 – Flashcards

Macroeconomics is mostly focused on: the individual markets within an economy. only the largest industries in the economy. the economy as a whole. why specific businesses fail

The two topics of primary concern in macroeconomics are: short-run fluctuations in output and employment, and long-run economic growth. unemployment, and wage rates in labor markets. monopoly power of corporations, and small business profitability. oil prices and housing markets.

The business cycle depicts: fluctuations in the general price level. the phases a business goes through from when it first opens to when it finally closes. the evolution of technology over time. short-run fluctuations in output and employment.

The term "recession" describes a situation where: inflation rates exceed normal levels. output and living standards decline. an economy's ability to produce is destroyed. government takes a less active role in economic matters.

Which of the following statements is most accurate about advanced economies? Economies experience a positive growth trend over the short run, but experience significant variability in the long run. Economies experience a positive growth trend over the long run, but experience significant variability in the short run. Economies experience positive and stable growth over both the long run and short run. Economies experience little long-run growth in output, but can experience significant growth in the short run.

Real GDP measures the: total dollar value of all goods and services produced within the borders of a country using current prices. value of final goods and services produced within the borders of a country, corrected for price changes. total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes. value of all goods and services produced in the world, using current prices.

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. nominal GDP only includes goods and excludes services. nominal GDP is not adjusted for population changes. real GDP accounts for changes in the quality of goods and services produced.

Unemployment describes the condition where: equipment and machinery are going unused. a person cannot get a job, but is willing to work and is actively seeking work. a person does not have a job, regardless of whether or not they want one. any resource sits idle

Inflation is defined as: an increase in the overall level of prices. the rate of growth in nominal GDP. a situation where all prices in the economy rise simultaneously. the growth phase of the business cycle.

Why are economists concerned about inflation? Inflation generally causes unemployment rates to rise. Real GDP is necessarily falling when there is inflation. Inflation lowers the standard of living for people whose income does not increase as fast as the price level. Inflation increases the value of peoples' saving and encourages overspending on goods and services.

The three statistics that are the main focus for those measuring macroeconomic health are: real GDP, inflation, and unemployment. real GDP, nominal GDP, and inflation. nominal GDP, unemployment, and inflation. real GDP, nominal GDP, and unemployment.

Modern economic growth refers to countries that have experienced an increase in: real GDP over time. nominal GDP over time. real output spread evenly across all sectors of the economy. real output per person.

Before the period of modern economic growth: only civilizations such as the Roman Empire experienced economic growth. rates of population growth virtually matched rates of output growth. most economies realized high rates of growth in output per person. output and population growth were stagnant.

Which of the following is used to measure directly the average standard of living across countries? real GDP nominal GDP purchasing power parity GDP per person

Savings are generated whenever: prices are rising. current spending exceeds current income. current income exceeds current spending. real GDP exceeds nominal GDP.

When economists refer to "investment," they are describing a situation where: people are buying shares of corporate stock. resources are devoted to increasing future output. money is saved in a bank account. financial assets are purchased in the hope of a monetary gain.

Which of the following would an economist consider to be investment? Boeing building a new factory Oprah buying a $10 million home from a fellow celebrity . A stockbroker buying 10,000 shares of Starbucks stock All of the above

Banks and other financial institutions: are the primary investors in equipment, factories, and other capital goods. lack relevance in the modern economy because they focus primarily on financial assets and generally do not engage in real investment activity. promote economic growth by helping to direct household saving to businesses that want to invest. often hinder economic activity by creating barriers between household savers and firms wanting to invest in capital goods.

Shocks to the economy occur when: stock prices rise by more than 10 percent per year. government takes a more active role in the economy. prices are flexible. actual economic events do not match what people expected.

Demand shocks: refer to unexpected changes in the desires of households and businesses to buy goods and services. refer to unexpected changes in the ability of firms to produce and sell goods and services. always have a negative impact on the economy. cause fewer short-run fluctuations than supply shocks.

Supply shocks: occur more frequently than demand shocks. usually result from fiscal and monetary policy changes. occur when sellers face unexpected changes in the availability and/or prices of key inputs. have been responsible for most of the recessions in the United States since World War II.

When demand shocks lead to recessions, it is mainly due to: price inflexibility. the inability of government policy to affect demand. unexpected changes in the supply of goods and services. government regulations that prevent firms from adjusting output in response to the shocks.

(Consider This) Which of the following is an example of economic investment? Volvo buys an old factory building from General Motors. Nike buys a new machine that increases shoe production. Bill Gates buys shares of stock in IBM. Warren Buffet buys U.S. savings bonds.

(Consider This) The U.S. recession which occurred in 2008 and 2009 represented a case where: government policy intervention effectively offset the negative demand shock and minimized the effects on output and employment. prices were somewhat flexible, so the impact of the demand shock was felt about the same in terms of price and output changes. prices were relatively flexible, minimizing the impact on total output and employment. prices were relatively sticky and most of the impact was on total output.