question

how do we measure economic growth?

answer

increases in real GDP

question

how do the bureau of labor statistics and the census bureau estimate unemployment each month?

answer

randomly survey 60,000 US households

question

why might the official measure of unemployment be an understatement?

answer

some workers might be discouraged and are not even searching employment, and because the statistic includes the part-time workers

question

which formula is correct for determining the civilian unemployment rate?

answer

number of unemployed divided by number of civilian in the labor force times 100

question

the phases of the business cycle are

answer

peak, recession, trough, expansion

question

GDP reaches minimum level in the

answer

trough

question

which is not a variable in the index of leading indicators?

answer

prime rate

question

which of the following is a coincidental indicator?

answer

personal income, industrial production, manufacturing and trade sales

question

the labor force consists of

answer

16 years or older who are working and actively seeking work

question

people who are not working will be counted as employed if

answer

they are on vacation, absent from job due to weather or labor dispute

question

the number of people officially unemployed as the number of people who can't find a job because

answer

discouraged workers are not counted

question

frictional unemployment applies to

answer

short periods of unemployment needed to match jobs and unemployment

question

structural unemployment is caused by

answer

shifts in the economy that make certain jobs obsolete

question

unemployment that is due to a recession

answer

cyclical unemployment

question

sum of frictional unemployment and structural is

answer

full employment unemployment rate

question

which statement is true?

answer

full employment exists in an economy when the unemployment rate equals the sum of frictional and structural unemployment

question

which group typically has the highest unemployment rate

answer

teenagers

question

which of the following is true?

answer

GDP gap is difference between full employment real GDP and actual real GDP, economic growth measured by increase in nation's real GDP, discouraged workers are reason rate is understated

question

economy is considered to be at full employment when

answer

rate of cyclical unemployment is zero

question

what does the GDP gap refer to

answer

difference between "full employment" real GDP and actual real GDP

question

what defines inflation?

answer

increase in general average price level of goods and services in the economy

question

rate of inflation

answer

Year 2 - Year 1 / Year 1

question

real income

answer

nominal income / CPI (decimal)

question

which describes a wage spiral?

answer

an increase in nominal wages cause inflation, inflation causes workers to demand even higher wages in order to keep income constant, cycle spirals

question

real interest rate

answer

nominal interest rate - inflation rate

question

inflation is

answer

increase in general price level

question

CPI is

answer

cost of basket of products in Year A / cost of same basket in Year B

question

deflation is

answer

decrease in general price level

question

which of the following would overstate the consumer price index?

answer

improving quality of goods and substitution bias

question

when inflation rate rises, the purchasing power of nominal income

answer

decreases

question

if the nominal rate of interest is less than the inflation rate,

answer

the real interest rate is negative

question

demand pull inflation is caused by

answer

full employment and excess total spending

question

cost pull inflation is due to

answer

resource cost increases

question

says law refers to the concept that

answer

supply creates its own demand

question

classical economists believe that

answer

wage, price and interest rates are flexible

question

MPC is between 0 and 1 and is based on

answer

the consumption function

question

what are components of consumption function?

answer

autonomous consumption, MPC, disposable income

question

Jean Baptist Say states

answer

supply creates its own demand

question

autonomous consumption is

answer

independent of the level of disposable income

question

consumption function represents relationship between

answer

consumer expenditures and disposable income

question

Keynes proposed that the MPC is

answer

less than 1 but greater than 0

question

what occurs after break even disposable income?

answer

saving

question

upward shift in the consumption function

answer

increase in consumer wealth

question

also, an upward shift in the consumption function is when households

answer

become optimistic about state of economy

question

investment demand curve represents the relationship between business spending for investment goods and

answer

interest rates

question

what produces a leftward shift in investment demand curve?

answer

an increase in business taxes

question

MPC

answer

in greater than one

question

MPS

answer

less than one

question

aggregate expenditures function (AE) represents

answer

consumption function, investment demand curve, gov expenditures, net exports, (all of the above)

question

spending multiplier

answer

1 / 1-MPC

question

net exports line can be

answer

positive, negative and zero

question

there will be unplanned inventory investment when

answer

aggregate output (real GDP) exceeds AE

question

Haynes said multiplier effect can correct economic depression. based on this, an increase in equilibrium output would be created by

answer

increase in investment and gov spending

question

Keynes's theory said the multiplier effect would restore an economy to full employment if

answer

government spending were increased

question

is MPC decreases which is true?

answer

it takes a smaller decrease in autonomous AE to shift AE curve upward to full employment real GDP level

question

why aggregate demand curve is down sloping?

answer

real balances effect

question

interest rate effect

answer

if price level decreases, consumer purchasing power increases, the demand for credit falls, interest rates fall, real GDP demanded increases

question

which describes aggregate supply curve?

answer

a curve that shows levels of real GDP produced at different price levels

question

if equilibrium GDP is below full employment level, an increase in aggregate demand will result in?

answer

real GDP will rise, price level will remain constant

question

at full employment, increase in demand

answer

GDP will remain constant and price level will rise

question

aggregate demand curve is defined as?

answer

real GDP purchased at different price levels

question

real balance effect occurs because a higher price level reduces the value of peoples

answer

financial assets

question

net exports effect is the relationship between net exports and

answer

price level

question

aggregate demand curve to the left

answer

decrease in gov spending

question

before Great depression

answer

classical economics

question

classical econ believed

answer

price system will automatically adjust to full employment in the long run

question

not a range on the supply curve

answer

monetary range

question

macro econ equilibrium occurs when

answer

AD equals AS

question

decrease in AD curve will decrease

answer

price level

question

decrease in resource prices will shift

answer

supply curve rightwards

question

increase in price level caused by a rightward shift in AD

answer

demand pull inflation

question

cost push

answer

supply left

question

demand pull

answer

demand right

question

in self correcting demand and supply mode, wages and salaries are

answer

Constant

question

SRAS curve (short run aggregate supply curve) is real GDP

answer

purchased at various saving rate levels

question

increase in the price level causes

answer

leftward shirt in SRAS curve

question

nominal wages are assumed fixed in the short run because

answer

workers have wages stated in their contracts

question

SRAS curve is

answer

postively sloped

question

assumption under SRAS

answer

wages are constant for a year

question

LRAS curve

answer

prices are flexible after one year

question

long run macro equilibrium is

answer

midpoint of aggregate demand curve

question

increase in nominal income of workers results in

answer

SRAS curve shifting to the left

question

LRAD result in _______ of full employment real GDP and _________ price level

answer

no change and a decrease

question

leftward shift in LRAS

answer

advance in technology

question

contractionary fiscal policy is gov action that

answer

decreases gov spending and increases taxes

question

spending multiplier

answer

1 / (1 - MPC)

question

tax multiplier

answer

1 - spending multiplier

question

what is not an automatic stabilizer?

answer

defense spending

question

supply side economics

answer

reagan

question

MPS + MPC always equals

answer

1

question

MPS is

answer

1-MPC

question

us gov expenditures as large as

answer

WW2

question

ability to pay

answer

those with higher incomes can afford to pay higher taxes

question

largest and 2nd largest gov expenditures

answer

social security and national defense

question

same GDP percentage to taxes as US

answer

japan

question

benefits received

answer

every person leaving by plane pays a tax that is used tp pay for the airport

question

a flat tax is also called a

answer

proportional tax

question

progressive tax

answer

higher incomes pay higher percentage

question

fairest way economists believe

answer

progressive tax

question

5 percent tax on food is a

answer

regressive tax

question

politicians tend to favor

answer

short run benefits and long run costs

question

public choice theory

answer

politicians follow self interest, reelection

question

described nationally debt

answer

total amount of money owed by federal government

question

during 1998-2001 fed budget deficits were

answer

removed

question

federal gov finances deficits by

answer

selling treasury securities

question

national debt is approx

answer

20 trillion

question

national debt percentage GDP is

answer

same size as 1950

question

which country as smallest debt as percentage of gdp

answer

australia

question

us national debt by foreigners is a

answer

burden

question

crowding out (deficit occurs)

answer

situation when increased interest rates lead to a reduction in private investment spending

question

crowding in effect

answer

is defined as when governmental deficits' spur investment. In this, government spending actually increases a demand for goods

question

us national debt was highest after

answer

WW2

question

natl debt won't go bankrupt because

answer

new bonds can be issued

question

supply side economists argue that less gov spendings

answer

would make more investment capital available at lower rates of interest

Macroeconomics chapters 6-13 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards