Macroeconomics approaches the study of economics from the viewpoint of:
answer
the entire economy.
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Microeconomics approaches the study of economics from the viewpoint of:
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consumers and producers
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Which of the following questions is not appropriate to the study of macroeconomics?
answer
How much will Sony charge for the new game system to be introduced later this
year?
question
Alexandra has determined that studying two hours for her economics quiz will improve
her grade on the quiz from 75 to 100. She also determines that this improvement is
worth $20. To study for her economics quiz, however, she will have to work two fewer
hours at her part-time job. Alexandra should:
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. study for the quiz as long as her hourly wage rate is less than $10
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Opportunity cost:
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. is the net benefit forgone by not undertaking the next best alternative
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Which of the following is a normative statement?
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Excessive income inequality threatens the well-being of democratic institutions in the
U.S.
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Which of the following is the best example of a positive question?
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How many people are unemployed
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When your wages rise, the:
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opportunity cost of an hour of leisure increases.
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A production possibilities curve shows:
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the various combinations of two goods that can be produced when society employs
all of its resources.
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One trading partner is said to have a comparative advantage in the production of a
good if:
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its resources are better suited to the production of that good than are the resources
of the other trading partner
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The principle of increasing opportunity cost holds in which of the following cases?
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Some inputs are better for producing particular goods.
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Increasing opportunity cost means that the production possibility curve is:
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. bowed out so that for every additional unit of a good given up, you get fewer and
fewer units of the other good.
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If no resources had a comparative advantage in the production of any good, the
production possibility curve would be:
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a downward-sloping straight line.
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Capitalism:
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is based on private property and the market
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Socialism in theory is based on the principle that individuals should:
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cooperate with one another to meet their needs.
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Welfare capitalism is an economic system in which:
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markets operate, but government regulates markets significantly
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In the goods market:
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businesses produce goods and services and sell them to households and
government.
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In the factor market:
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households supply land, labor, and capital to business and are paid by business for
doing so
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Businesses are on the:
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demand side of factor markets and the supply side of goods markets
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Households do all of the following except:
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demand labor services from businesses in the factor market.
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In principle, households ultimately control:
answer
both businesses and the government.
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Businesses do all of the following except:
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demand goods and services from households in the goods market.
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When Coca Cola introduced a new, low-calorie version of Coca Cola called C2, despite
a major marketing effort, sales of C2 were weak and many doubted that the product
would last. Coke's experience with C2 illustrates the economic concept of:
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consumer sovereignty.
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Government regulation of working conditions is an example of:
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government as referee.
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The government serves as an actor in the economy when it:
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increases spending on public education.
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Economists have identified several consecutive quarters of rising output and forecasts
for the next few quarters suggests more of the same. At what point in the business cycle
is the economy?
answer
upturn or expansion
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The business cycle consists of several stages or phases. Which is the accurate
sequence?
answer
Recession, trough, expansion, peak
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A recession is often consider to be:
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an economic downturn that persist for at least two consecutive quarters
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When the National Bureau of Economic Research (NBER) says that a recession is over,
what are they saying?
answer
economic activity is no longer declining
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The laissez-faire policy prescription to eliminate unemployment was to:
answer
eliminate labor unions and government policies that hold wages too high
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British economist John Maynard Keynes famously said
answer
In the long run, we are all dead.
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According to the National Bureau of Economic Research (NBER), the most recent
economic downturn in the United States:
answer
. began in December 2007 and ended in June 2009
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Classical School:
answer
Long-run, Short-run problems are temporary
laissez faire approach to government intervention, economy will return to potential on it's own.
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Keynesian School
answer
Short-run view
look at short-run fluctuation and how to stabilize output using activist government policies,
government intervention can prevent economy from a downward spiral following a
shock, like a crash in the stock market or housing market.
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Economic growth is defined as:
answer
an increase in GDP.
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Goods and services produced in other countries and consumed in the U.S. are known as:
answer
imports.
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Which of the following is an example of an intermediate good?
answer
tires purchased from Goodyear by General Motors for newly produced electric cars
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GDP is the:
answer
total market value of all final goods and services produced in one year
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GDP is the sum of:
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personal consumption, investment, government purchases, and exports minus imports.
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. G stands for:
answer
government purchases of goods and services
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Investment spending is defined as:
answer
the purchase of new capital goods by firms.
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Households use the largest share of their total income to:
answer
consume
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The largest expenditure category in the United States is
answer
consumption expenditures.
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If an economy produces 100 pencils and 100 pens, and pencils sell for twice as much as pens:
answer
the value of pencils is weighted as twice as important in the economy compared to pens
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Which of the following is a consumption good?
answer
a Wii game console
question
A change in business inventories is:
answer
counted in GDP as investment.
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. If nominal GDP increases from one year to the next:
answer
either output or prices or both must have risen from one year to the next.
question
If nominal GDP in a given year is $16,200 and the GDP deflator is 110 , how much is real GDP?
answer
$14,727
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The unemployment rate is:
answer
the percent of the labor force that is unemployed
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You are a college student and not working or looking for work. You are:
answer
not part of the labor force.
question
The National Bureau of Economic Research announced that the U.S. economic recession that began in
December of 2007 hit a trough in June of 2009. During that period, which type of unemployment
increased for sure?
answer
cyclical unemployment
question
The full-time homemakers and retirees are classified in the BLS data as:
answer
Not in the labor force
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The unemployed are those people who:
answer
Are not employed but are seeking work
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Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are
employed, the unemployment rate is:
answer
8 percent
question
The total adult population of an economy is 175 million, the number of employed is 122 million, and the
number of unemployed is 17 million. The percent of adults who are not in the labor force is:
answer
20.6 percent
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In calculating the unemployment rate, part-time workers are:
answer
Counted as employed because they are receiving payment for work
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Official unemployment rate statistics may:
answer
Understate the amount of unemployment because of the presence of "discouraged" workers who are
not actively seeking employment
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When tax revenues exceed government spending, the budget
answer
has a surplus
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Government expenditures for social security are, for GDP accounting purposes, considered:
answer
transfers, and are not included in government spending as part of GDP
question
The public debt is the amount of money that:
answer
the Federal government owes to taxpayers
question
Aggregate demand can be shown as a curve depicting the
answer
relationship between the price level and the quantity of output demanded
question
Which of the following does NOT shift the aggregate demand curve?
answer
a change in the price level
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Given aggregate supply, an increase in the aggregate demand curve will, in the short run, change:
answer
both output and the price level
question
The slope of the aggregate supply curve shows that, all else the same, the
answer
quantity of output supplied increases as the price level increases.
question
A change in the distribution of income affects the AD curve because:
answer
workers are more likely than owners of capital to spend the income they receive.
question
Define a recessionary gap and inflationary gap and explain the dynamics that will drive the
macroeconomy back towards equilibrium in the Keynesian model. Be sure to illustrate these dynamics
on a graph.
If the debt of the federal government decreases by $20 billion in one year the budget:
answer
surplus in that year must be $20 billion.
question
If the debt of the federal government increases by $10 billion in one year the budget:
answer
deficit in that year must be $10 billion
question
In POW camps during World War II, nearly everything was traded for cigarettes. For
example, one bar of soap cost two cigarettes, and two candy bars cost four cigarettes.
During the time of the POW camps, cigarettes:
answer
served as money because they served as a unit of account, medium of exchange,
and store of wealth.
question
When the interest rate rises, people are:
answer
less likely to borrow, that is, sell a financial asset
question
Which is not a function of the Fed?
answer
Directly financing U.S. budget deficits
question
What is the U.S. Federal Reserve? Describe the composition of the U.S. Federal Reserve
System. When was it established and how? What are the goals of the Federal Reserve as
defined by law?
answer
Central Bank of the United States. Began in 1913 as an act of Congress. It's mandate is to keep
prices stable, sustainable economic growth, reasonable unemployment, and stable LR interest
rates. Consists of 12 regional banks with headquarters in Washington D.C. FOMC is ultimately
reasonable for monetary policy, includes 7 person Board of Governors (including the
chairperson and vice chair person of the Fed), President of the NY fed, and a rotating
committee of 4 other regional bank presidents.
question
inflation
answer
continued rise in price level
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Asset inflation/deflation
answer
assets are things like gold, housing, stocks, bonds. Inflation can cause bubble that if is no longer supported by demand will have negative economic impact on borrowers
question
CPI
answer
Measures prices of a fixed basket of consumer goods, weighted according to each components share of the average consumers expenditures
question
acceptable amount of inflation
answer
2.5-3%
question
Distributional effects of inflation
answer
Wages: if inflation were 3% and normal wages dont change erodes real value (purchasing power) of wages by 3%
question
Phillips curve short run
answer
Shows relationship between unemployment rate and inflation rate with expectations held constant
question
Phillips curve long run
answer
vertical curve at the unemployment rate consistent with potential output
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