Terms in this set (51)
Which of the following is a macroeconomic statement?
The U.S inflation rate was three percent in 2007.
The circular flow is used to make the point that
production generates income.
The value of all final goods and services produced during a given time period measures a nation`s
gross domestic product
Gross domestic product calculations count only final goods and services because
counting all goods and services would lead to double counting of many activities.
For the purpose of GDP accounting, consumption expenditures include
durable goods, non durable goods and services.
How does real gross domestic product (GDP) differ from nominal GDP
Real GDP controls for price changes, while nominal GDP does not.
Exports ____ GDP and imports _____ GDP.
When there are sustained increases in real GDP over time, we say that the economy is undergoing
Transfer payments are excluded from government purchases in GDP accounting because
nothing is being produced in return for the payment.
The largest component of GDP is
Net investment is
what is left over from the total new private investment after depreciation.
For the purpose of GDP accounting, government purchases
include wages and benefits paid to government workers.
A trade surplus occurs when
a country sells more abroad than it purchases from abroad.
The amount of income that households keep after paying taxes is
personal disposable income.
Social Security payments are examples of
Net exports include goods produced
domestically that are sold abroad, less goods that are produces abroad that are sold domestically.
When gross domestic product (GDP) is adjusted by adding any income earned abroad by U.S firms or residents which is sent back to the U.S and by subtracting any income earned in the U.S by non U.S corporations or foreign nationals which is sent back to their home countries, it is called
Gross national product (GNP)
Depreciation is subtracted from GNP to determine
Net National Product (NNP)
Which of the following is the largest component of national income?
compensation of employees by firms
When GDP is measured in Current prices it is known as the
Recession refers to a period when the economy
fails to grow for at least 6 months.
Business cycles are
used to describe fluctuations in GDP.
Three of the major concerns of macroeconomics are
inflation, output growth, and unemployment.
Final goods and services are those that are
sold to ultimate or final purchasers
Economists define the unemployed as individuals who are
not currently working but are actively looking for work.
If Sam does not have a job and is not looking for work, he is considered
not in the labor force.
Economists define the labor force to include.
people who are not working but are actively looking for a job and people who are working.
The unemployment rate
rises during recessions and falls during booms.
Cyclical unemployment occurs
with the economic fluctuations: it increases during bad times and decreases during good times.
Juanita quit her job to move to Santa Fe to be closer to her family. She is actively looking for a new job in Santa Fe. Juanita is considered
Economists say that the economy is at full employment when the
cyclical unemployment is 0.
The index most widely used by the government and the private sector to measure changes in the cost of living is the
When wages or benefits are automatically increased based on the reported inflation rate, it is called the ________ adjustment.
cost of living
Social Security payments automatically increase when the CPI goes up because of the
cost of living adjustments
The cost of inflation that arises from trying to reduce cash holdings are known as
shoe leather costs.
What happens to your purchasing power if inflation is less than you anticipated.
In modern economies
some prices are very flexible while others are not.
The short run in macroeconomics is the period in which
demand determines output.
The relationship between the level of prices and the total demand for all goods and services is known as
The aggregate demand curve is
The increase in spending that occurs because the real value of money increases when the price level falls is known as the
The increase in spending that occurs because domestic goods become cheaper relative to foreign goods when the price level falls is known as the
international trade effect.
When interest rates are lower, consumers and companies are able to borrow money cheaply in order to make major purchases. As a result, the demand for goods in an economy will generally
Which of the following would cause a decrease in aggregate demand
a fall in investor confidence.
The multiplier represents the ratio of the total shift in aggregate demand to the
initial shift in aggregate demand
If the government increases its purchases of goods and services by $5,000 and the MPC is .9, GDP and income will eventually increase by
If the government increased its purchases of goods and services by $10,000, and this resulted in an eventual increase in GDP and income of $40,000, the MPS would be equal to
In a boom economy
it is difficult for firms to recruit and retain employees
In the long run
the level of output is independent of the price level.
An implication of the long run aggregate supply curve is that continuous increases in the money supply will result in continuous
increases in price.
Assuming a long run aggregate supply curve, a decrease in taxes results in _____ in output and _____ in prices.
no change, increase
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