question

What event was a major influence on the development of macroeconomics?

answer

the great depression

question

A business cycle is?

answer

the periodic fluctuation of economic activity

question

U.S. business cycles since 1950 have shown

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expansions to be longer than recessions

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Which organization determines the beginning and end dates of a recession?

answer

the National Bureau of Economic Research

question

The idea that all income ultimately goes to households, which then use it to buy goods and services from firms, is a central idea of the

answer

circular flow diagram

question

GDP can be found either by adding up all of the __________ or all of the __________ in the economy.

answer

spending; income

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The U.S. gross domestic product is equal to the total market value of all

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final goods and services produced by resources in the United States

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The largest component of GDP is

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consumption expenditure

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GDP Expenditures for 2010 Expenditure Billions Personal consumption $10,353.5 Gross private domestic investment 1,769.1 Exports 1,746.1 Imports 2,251.5 Government purchases 2,975.1 Capital consumption allowance 1,030.2

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$14,592.3 billion

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The value of the cars that the Ford Motor Company produces in a German plant

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is a part of U.S. GNP

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The U.S. median household income in 2013 was about

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$55,000

question

The twin evils of the modern macroeconomy are said to be

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inflation and unemployment

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Which one of the following would NOT lead to higher prices?

answer

increases in the supply of food

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Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living

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fell by about 1%

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_____ is a reduction in the rate of inflation.

answer

disinflation

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If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is

answer

125

question

Core inflation is found by removing _________ from the consumer price index.

answer

food and energy

question

If the current year's consumer price index is 214 and last year's was 209, then the rate of inflation is

answer

2.4%

question

If your salary was $50,000 last year and this year you receive a cost-of-living increase tied to the consumer price index (CPI), what will your salary be, assuming the CPI has risen from 110 to 114?

answer

$51,818

question

Which of the following persons is considered to be unemployed

answer

Tiffany, who is going on interviews, hoping to get her first job

question

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as

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discouraged workers

question

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing

answer

structural unemployment

question

Full employment:

answer

occurs if cyclical unemployment is zero

question

If actual unemployment is at its natural rate:

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inflation is very low

question

If an economy's GDP will double in 25 years, then its growth rate must be about

answer

2.8%

question

If a country's population increases at a higher rate than the growth in its real GDP

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the standard of living in the country has declined

question

If the Bureau of Economic Analysis reports that the annualized U.S. growth rate was 2.5% for the second quarter, then the actual growth rate from the first quarter to the second quarter was

answer

0.625%

question

The ability to use physical resources in creative ways to produce goods and services is known as

answer

entrepreneurial ability, technology, and ideas

question

According to Joseph Schumpeter, what is the driving force behind business cycles?

answer

waves of innovations

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Developed nations tend to have

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limited labor supplies but lots of capital

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What is the primary explanation for the rapid growth of the U.S. economy over the last century?

answer

technological progress

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Over the past century, when worker productivity rose:

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real wages rose

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Developing countries can achieve higher productivity per unit of capital because they can use technologies developed by other countries. This is known as the:

answer

catch-up effect

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The government decides to subsidize the development of a new communications network. It is acting in its role to promote economic growth by

answer

enhancing physical and human capital

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Which of the following factors is NOT generally viewed by economists as critical to economic growth?

answer

access to large amounts of natural resources

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The relationship between economic freedom and per capita GDP is:

answer

positive

question

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____.

answer

disposable income; consumption

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If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume?

answer

0.6

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In the Keynesian model, the principal determinant of saving is:

answer

income

question

_____ is the change in consumption associated with a change in income.

answer

The marginal propensity to consume

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If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase?

answer

$900

question

The slope of the saving schedule is:

answer

1 minus the marginal propensity to consume

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After the acceptance of Keynesian analysis, government:

answer

actions toward macroeconomic policy grew significantly

question

The 45-degree line in the Keynesian model represents

answer

AE = Y

question

If AE = $7,600 and Y = $8,000, businesses will produce

answer

less, lowering both employment and income

question

If the marginal propensity to consume is 0.85, how much is the spending multiplier?

answer

6.67

question

If $1,000 of additional spending occurs (from investment, say) and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output.

answer

$5,000

question

If the multiplier is 2 and investment spending falls by $5 billion, then equilibrium income

answer

decreases by $10 billion

question

Which of the following illustrates the paradox of thrift?

answer

Consumer uncertainty causes people to save more; consumption drops; equilibrium income and production drop; savings drop because income is lower.

question

Suppose full employment real GDP is $13 trillion, current real GDP is $13.2 trillion, and the marginal propensity to consume is 0.5. The inflationary gap is:

answer

$0.1 trillion

question

Components of spending in GDP

answer

-consumption -investment spending -government spending -net exports (exports-imports)

question

stabilization policy as compared to economic growth

answer

stabilization policy: how can we make the GDP line smoother economic growth: how can we make the GDP line steeper over the course

question

phases of business cycle

answer

the peak, recession(contraction),

question

Circular flow diagram

answer

business+ households

question

Current value of US GDP

answer

17 trillion

question

What is inflation?

answer

generalized in price increase

question

what causes inflation?

answer

demand side factors(people have money to spend) supply side factors(higher costs of production) government factors(controlling the money supply)

question

why is inflation a bad thing?

answer

interferes with the communicative ability of the price

question

deflation

answer

general decrease in price

question

disinflation

answer

decreasing rate of inflation

question

hyperinflation

answer

inflation over 100%

question

who benefits from unexpected inflation?

answer

borrower's

question

what is economic growth?

answer

-a sustained rise in the standard of living -an increase in real GDP per capita -an economy producing make of many different types of goods *Did not exist in the past but sustained to our living today

question

How does economic growth occur?

answer

1. acquiring more resources 2. finding ways to make better use of resources we have

question

total factor productivity

answer

tied to entrepreneurship the increase in output no explained by the increase in inputs

question

rule of 70

answer

the number of years for a value to double =70/annual percentage increase

question

catch up effect

answer

It's easier for relatively poor countries to grow more quickly why? 1.diminishing marginal returns to capital 2.poor countries can free ride on others innovation

question

The role of government in promotion economic growth

answer

infrastructure subsidize education subsidize scientific research provide a good legal system-> contracts property rights stable financial system competitive market economic freedom

question

Thomas Malthus' predictions

answer

that short-term gains in living standards would inevitably be undermined as human population growth outstripped food production, and thereby drive living standards back toward subsistence

question

keynes' motivation for using this framework known as the keynesian cross

answer

shows that an economy will reach an equilibrium level of income, but it may not be the full employment level of income.

question

aggregate expenditure line

answer

embodies the key Keynesian principle of effective demand, shows the relation between aggregate expenditures and the actual level of aggregate income or production in the domestic economy.

question

MPC,MPS,APC,APS

answer

MPC-Marginal propensity to consume MPS-Marginal propensity to save APC-Average propensity to consume APS-Average propensity to save

question

Multiplier

answer

a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable.

question

Balanced-budget multiplier

answer

The balanced-budget multiplier measures the change in aggregate production triggered by an autonomous change in government taxes.

question

Paradox of thrift

answer

It states that individuals try to save more during an economic recession, which essentially leads to a fall in aggregate demand and hence in economic growth. Renowned economist John Maynard Keynes.

question

GDP Gap

answer

difference between actual GDP and full employment

question

Inflationary gap

answer

the cut in government spending needed to decrease GDP to its full employment level

question

Recessionary gap

answer

the amount of government spending needed to increase GDP to its full-employment level

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