Terms in this set (51)
Macroeconomics differs from microeconomics in that
microeconomics is the study of individual markets while macroeconomics deals with the nations economy as a whole.
GDP is the
total market value of all final goods and services produced within a given period by factors of production located withing a country.
Gross National Product (GNP) is
the total market value of all final goods and services produced within a given period by factors of production owned by a country`s citizens, regardless of where the output is produced.
A rancher raises sheep. Once a year he shears them and sells the raw wool to a processor who cleans it and spins is into yarn. The yarn is then sold to a knitting mill which produces and sells sweaters. In calculating GDP we would count
only the sweaters
Peanut butter, Jelly beans, watermelon, canned soup and cheese are considered to be _____ goods.
An example of an intermediate good is
A firms value added can be measured as the value of its
total sales, less purchases from other firms
When GDP is measured in current prices it is known as
GDP understates the value of output produced by an economy because it
excludes value added from the underground economy, such as tips taken under the table.
Investment consists of
residential construction, consumer durables and changes in inventories
the estimated amount of physical capital that is worn out or used up producing goods during the period.
A nations net exports consist of
its exports minus its implorts
A trade surplus occurs when
a country sells more abroad than it purchases from abroad.
The GDP equation is
Y = C + I + G + NX
When there are sustained increases in real GDP over time, we say that the economy is undergoing
The amount of income that households keep after paying taxes is
personal disposable income
Which of the following is the largest component of nation income
compensation of employees by firms
Which of the following is not counted in the GNP of the US
The profit earned by a restaurant located in the U.S but owned by a Mexican company.
A depression is
a very severe recession
The expansion of an economy occurs after
a decrease in the overall price level
Stagflation occurs when the economy`s inflation rate is high an
the unemployment rate is high
Economists define the unemployed as individuals who are
not currently working but are actively looking for work
Economists define the labor force to include
people who are not working but are actively looking for a job, and people who are working.
Frictional unemployment refers to that portion of the labor force consisting of individuals who
qualify for employment but who are temporarily out of work
The use of automated teller machines (ATMs) has cause some bank tellers to lose their jobs. This is an example of
At full employment the unemployment rate equals the
structural unemployment rate plus the frictional unemployment rate
Steel workers laid off from their jobs as the result of a recession are considered
The demand for refrigerators falls when the economy enters a downturn. If a refrigerator manufacturer lays off workers during the economic down turn, this would be an example of
Classifying discouraged workers as unemployed would
increase the unemployment rate.
Social security payments automatically increase when the CPI goes up because of the
cost of living adjustments
When consumers spend and buy things regardless of their level of income, this is known as
autonomous consumption spending
When consumers realize additional income in a household and spend the additional monies, it is called the
marginal propensity to consume
The multiplier represents the ratio of the total shift in aggregate demand to the
initial shift in aggregate demand
The marginal propensity to save (MPS) is the
fraction of additional income that is saved.
When the price level is low and the demand for domestic goods increases, how does it affect international trade.
Net exports will increase.
The purchasing power of money decreases as the
price level increases
The increase in spending that occurs because the demand for investment goods increases when the price level falls is known as the
interest rate effect
Which of the following would shift the aggregate demand curve to the left
an increase in taxes.
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 wealth effect
Aggregate demand refers to the relationship between
the price level and quantity of real GDP demanded
If the government decreases its purchases of goods and services by $15,000 and the MPC is .5 GDP and income will eventually decrease by
Assume the economy in DREAMLAND is described by the following relations
Consumption Function C = a+bY
Investment Function I = Io
Equilibrium Condition Y = C + I
Y = (a+Io)/(1-b)
Assuming the price level has not changed, how would an increase in the aggregate demand affect real GDP?
The relationship between the level of prices and the quantity of real GDP supplied is known as
The short run aggregate supply curve slopes upward to the right because
profit margins increase as costs are fixed in the short run while the price level is variable.
In a boom economy
it is difficult for firms to recruit and retain workers
The level of output determined by the intersection of the short tun aggregate supply curve and the aggregate demand curve.
may be above, below, or equal to full employment output.
Assuming a long run aggregate supply curve an increase in the money supply results in ____ in output _____ in prices.
no change, an increase
Assuming a long run aggregate supply curve, a decrease in consumer confidence results in _____ in output and _____ in prices.
no change, a decrease
Assuming a long run aggregate supply curve, a decrease in government spending results in ____ in output _____ in price
no change, decrease
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