Macroeconomics Practice Exam Questions Test Questions – Flashcards
Unlock all answers in this set
Unlock answersquestion
what you give up in order to get something else
answer
What is opportunity cost?
question
$50,000
answer
A college cost $20,000 per year. The job you give up to go to college pays $30,000 a year. What is the opportunity cost of going to college?
question
true
answer
Demand has a negative slope
question
movement
answer
A price change would do what to the demand or supply curves?
question
shift
answer
Income, taste, or population changes do what to the demand curve?
question
true
answer
Supply curve has a positive slope
question
shift
answer
Cost of production, technology, or natural factors changes would do what to the supply curve?
question
labor land capital entrepreneur raw materials energy
answer
What are the factors of production?
question
the total income earned by all factors of production equal to GDP
answer
What is national income?
question
Sum of the money values of all final goods and services produced within the US borders in a year
answer
What is GDP?
question
No
answer
Are intermediate goods included in GDP?
question
GDP in current dollars
answer
What is nominal GDP?
question
GDP in constant dollars adjusts for inflation
answer
What is real GDP?
question
a graph that shows the fluctuations in real GDP growth
answer
What is the business cycle?
question
closed because our import is low
answer
Is the US economy open or closed?
question
export + import / GDP
answer
How do you measure the openness in an economy?
question
the amount of output a worker produces in a unit period of time
answer
What is labor productivity?
question
technology capital training
answer
What influences labor productivity?
question
a graph that shows the combination of two goods produced given all resources are employed under existing technology
answer
What is the Production Possibilities Frontier?
question
It is unattainable
answer
A point outside the PPF means what?
question
It is attainable but inefficient
answer
A point inside the PPF means what?
question
attainable and maximum efficiency
answer
A point on the PPF line means what?
question
GDP produced by maximum possible employment
answer
What is potential GDP?
question
real GDP is less than potential GDP
answer
What is a recessionary gap?
question
real GDP is more than potential GDP
answer
What is an inflationary gap?
question
cuts taxes and increases government expenditure
answer
What does fiscal policy do during a recession?
question
tax decrease = budget deficit increase government expenditure increase = budget deficit increased
answer
What does fiscal policy do to the budget deficit?
question
government expenditure - tax
answer
What is budget deficit?
question
it is bad for income distribution because wealthy companies are paying less tax and becoming even more wealthy
answer
What does fiscal policy do to income distribution?
question
-MPC / 1-MPC
answer
How do you find tax multiplier?
question
-4
answer
If MPC = 0.8, what would tax multiplier be?
question
it would increase by $4
answer
If tax decreases by $1, what would the tax multiplier output be?
question
1 / 1-MPC
answer
How do you find government spending multiplier?
question
5
answer
If MPC = 0.8, government expenditure multiplier would be?
question
It would increase by $5,000,000
answer
If government expenditure increased by $1,000,000, how would the output change?
question
1 / 1-MPC
answer
How do you find investment multiplier?
question
5
answer
If MPC = 0.8, investment multiplier would be?
question
it would increase by $5,000,000
answer
If investment increased by $1,000,000, how would the output change?
question
medium of exchange unit of account store of value
answer
What are the three roles of money?
question
standard object used in exchanging goods and service
answer
What is medium of exchange?
question
standard unit of quoting prices
answer
What is unit of account?
question
money maintains its power; value not lost over time
answer
What is store of value?
question
currency + demand deposit
answer
What is money supply?
question
ALL money coins and paper notes held by the public
answer
What is currency?
question
all money deposited into checking and savings accounts held by commercial banks
answer
What is demand deposit?
question
the central bank of the US
answer
What is the federal reserve?
question
money supply inflation federal funds rate
answer
What does the federal reserve control?
question
collects deposit from depositors and makes loans to borrowers
answer
What does a commercial bank do?
question
helps control monetary policy
answer
How do commercial banks help the federal reserve?
question
average of all goods and service in the economy
answer
What is price level?
question
SUSTAINED increasing price level in the economy
answer
What is inflation?
question
your purchasing power
answer
How can real wage be defined?
question
2 apples
answer
If you have $10 and an apple costs $5, what is your real wage?
question
Your real wage would decrease because price level would rise but your money would remain the same
answer
How does inflation effect real wage?
question
nominal interest rate - inflation
answer
What is real interest rate?
question
low
answer
Do borrowers like to pay low or high interest rates?
question
the dollar is strong and export decreases
answer
What happens if the US dollar is appreciated?
question
the dollar is weak and export increases
answer
What happens if the US dollar is depreciated?
question
decreased federal funds rate increase of money supply increase in bond prices decreased bond interest rates decreased credit cards, auto loans, mortgage rates, etc. ******decreases all interest rates*******
answer
Easy monetary policy leads to what during a recession?
question
pursue a tight monetary policy
answer
What does the federal reserve do during a case of high inflation?
question
increased interest rates decreased investment spending decrease in total spending GDP decreases *******Price level goes down******
answer
Tight monetary policy leads to what during inflation?
