WorksheetsMacro Midterm Review
Total questions: 134
Worksheet time: 2hrs 14mins
Wealth Effect
“Sticky Wages” prevents wages from falling. The government should deficit spend to close the gap.
Price levels effect purchasing power which effects spending
When U.S. price levels rise, then GDP decreases due to an increase in imports and a decrease in exports.
Price levels and economy will fix itself. No Government involvement required
When price levels increase, lenders need to charge higher interest rates which decreases consumer and business investment spending.
Interest Rate Effect
“Sticky Wages” prevents wages from falling. The government should deficit spend to close the gap.
Price levels effect purchasing power which effects spending
When U.S. price levels rise, then GDP decreases due to an increase in imports and a decrease in exports.
Price levels and economy will fix itself. No Government involvement required
When price levels increase, lenders need to charge higher interest rates which decreases consumer and business investment spending.
Inflationary Gap
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Recessionary Gap
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Stagflation
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Expansionary Fiscal Policy
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Contractionary Fiscal Policy
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Inflationary Gap
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Recessionary Gap
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Stagflation
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Expansionary Fiscal Policy
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Contractionary Fiscal Policy
Output is low and unemployment is more than NRU. Actual GDP is below potential GDP.
Laws that reduce inflation, decrease GDP (Close an Inflationary Gap) –G or + taxes (- C)
Output is high and unemployment is less than NRU. Actual GDP is above potential GDP.
A gap with higher prices and a decrease in GDP
Laws that reduce unemployment and increase GDP (Close a Recessionary Gap) + G or – taxes (+C)
Long Run Aggregate Supply
Wages and Resource Costs will increase as price levels increase.
Measures the effect of the economy on inflation and unemployment with an inverse relationship
No tradeoff between inflation and unemployment, represented by a vertical line at the NRU.
Government spending might cause unintended effects that weaken the impact of the policy.
Wages and Resource Costs will not increase as price levels increase.
Short Run Aggregate Supply
Wages and Resource Costs will increase as price levels increase.
Measures the effect of the economy on inflation and unemployment with an inverse relationship
No tradeoff between inflation and unemployment, represented by a vertical line at the NRU.
Government spending might cause unintended effects that weaken the impact of the policy.
Wages and Resource Costs will not increase as price levels increase.
Gross Domestic Product
Prices increasing at slower rates.
Workers that are able and willing to work and actively looking for a job but aren’t working.
Parts that go into the production of the final good.
The dollar value of all goods and services produced within a country’s borders in a given year.
All the spending on final goods and services produced in a given year.
Intermediate goods
Prices increasing at slower rates.
Workers that are able and willing to work and actively looking for a job but aren’t working.
Parts that go into the production of the final good.
The dollar value of all goods and services produced within a country’s borders in a given year.
All the spending on final goods and services produced in a given year.
Expenditure Approach
Prices increasing at slower rates.
Workers that are able and willing to work and actively looking for a job but aren’t working.
Parts that go into the production of the final good.
The dollar value of all goods and services produced within a country’s borders in a given year.
All the spending on final goods and services produced in a given year.
Disinflation
Prices increasing at slower rates.
Workers that are able and willing to work and actively looking for a job but aren’t working.
Parts that go into the production of the final good.
The dollar value of all goods and services produced within a country’s borders in a given year.
All the spending on final goods and services produced in a given year.
Unemployment
Prices increasing at slower rates.
Workers that are able and willing to work and actively looking for a job but aren’t working.
Parts that go into the production of the final good.
The dollar value of all goods and services produced within a country’s borders in a given year.
All the spending on final goods and services produced in a given year.
Frictional Unemployment
Unemployment caused from a recession.
Temporary unemployment or being between jobs but have transferable skills.
Frictional plus structural unemployment. Unemployment that exists when the economy is healthy and growing.
People who are no longer looking for a job because they have given up.
Changes in the labor force make some skills obsolete and job loss is permanent.
Structural Unemployment
Unemployment caused from a recession.
Temporary unemployment or being between jobs but have transferable skills.
Frictional plus structural unemployment. Unemployment that exists when the economy is healthy and growing.
People who are no longer looking for a job because they have given up.
Changes in the labor force make some skills obsolete and job loss is permanent.
Cyclical Unemployment
Unemployment caused from a recession.
Temporary unemployment or being between jobs but have transferable skills.
Frictional plus structural unemployment. Unemployment that exists when the economy is healthy and growing.
People who are no longer looking for a job because they have given up.
Changes in the labor force make some skills obsolete and job loss is permanent.
Natural Rate of Unemployment
Unemployment caused from a recession.
Temporary unemployment or being between jobs but have transferable skills.
Frictional plus structural unemployment. Unemployment that exists when the economy is healthy and growing.
People who are no longer looking for a job because they have given up.
Changes in the labor force make some skills obsolete and job loss is permanent.
Discouraged Workers
Unemployment caused from a recession.
Temporary unemployment or being between jobs but have transferable skills.
Frictional plus structural unemployment. Unemployment that exists when the economy is healthy and growing.
People who are no longer looking for a job because they have given up.
Changes in the labor force make some skills obsolete and job loss is permanent.
Peak
Someone who wants more hours but can’t get them but is still considered employed.
Period of economic downturn when output and employment are falling.
The point at which a recession begins to improve and move into a period of recovery.
Period of economic upturn when output and employment are rising.
The point at which a recovery period slows down and begins to move into a recession.
Trough
Someone who wants more hours but can’t get them but is still considered employed.
Period of economic downturn when output and employment are falling.
The point at which a recession begins to improve and move into a period of recovery.
Period of economic upturn when output and employment are rising.
The point at which a recovery period slows down and begins to move into a recession.
Expansion
Someone who wants more hours but can’t get them but is still considered employed.
Period of economic downturn when output and employment are falling.
The point at which a recession begins to improve and move into a period of recovery.
Period of economic upturn when output and employment are rising.
The point at which a recovery period slows down and begins to move into a recession.
Contraction
Someone who wants more hours but can’t get them but is still considered employed.
Period of economic downturn when output and employment are falling.
The point at which a recession begins to improve and move into a period of recovery.
Period of economic upturn when output and employment are rising.
The point at which a recovery period slows down and begins to move into a recession.
Underemployed
Someone who wants more hours but can’t get them but is still considered employed.
Period of economic downturn when output and employment are falling.
The point at which a recession begins to improve and move into a period of recovery.
Period of economic upturn when output and employment are rising.
The point at which a recovery period slows down and begins to move into a recession.
Which of the following is true for all economies regardless of their economic system?
Every economy must determine what to produce and how it produces goods and services
Every economy must find a way to distribute income equally
Every economy must find ways to privatize markets to maximize efficiency
Every economy must prevent unemployment through government intervention
Every economy must open free trade with other economies
Which of the following is the best example of physical capital?
A $100,000 business loan from a bank
A business hiring 10,000 workers at a factory
A truck for a delivery company
An oven for a family of four
An increase in construction jobs
When making a decision, the next best alternative is called
The production possibilities
The opportunity cost
Scarcity
The absolute advantage
Efficiency
Which of the following must be true if an individual's next best alternative to going to the beach is studying for an economics exam?
They will decide to study for the exam
The opp. cost is seeing their friends at the beach
The person prefers playing volleyball at the beach to studying for the exam
The Opp Cost of going to the beach is all the other things they could have done
The Opp Cost of going to the beach is being better prepared for the exam.
If the Production possibilities curve (PPC) is concave from the origin (bowed out), then economists say that
Resources are scarce in the economy
Resources are not equally suited for the production of both goods
Economic growth is occurring in the economy
Resources are being inefficiently used in the economy
Resources are equally suited for the production of either good
A point outside the PPC would represent
An efficient use of resources
Future output once producers become more efficient
An inefficient use of resources
A combination that cannot be achieved due to scarcity
Full employment of resources in the economy
An increase in which of the following would cause an outward shift of the PPC for consumer goods and capital goods?
An increase in the demand for consumer goods
An increase in taxes on consumers
A decrease in unemployment
An increase in the resources to produce capital goods
The efficient production of consumer goods
If demand for golf balls decreases when the price of baseball gloves decreases, we can stay that baseball gloves and golf balls players are
normal goods
inferior goods
substitute goods
complementary goods
unrelated due to the substitution effect
If the price of cars significantly increases, then the
Supply of cars will increase
supply of auto repair shops will decrease
quantity supplied of cars will increase
The demand for cars will decrease
Car producers will find it more profitable to produce trucks
The relationship between quantity supplied and price is ________, and the relationship between quantity demanded and price is _________
direct, inverse
inverse, direct
inverse, inverse
direct, direct
strong, weak
Which of the following will NOT cause the demand for video games to change?
a change in the price of a close substitute
a change in consumer incomes
a change in the price of video games
a change in consumer tastes
a change in consumer preferences
An economist for a computer company predicts that a rise in consumer incomes will increase the demand for consumers. This prediction assumes that:
there are many subs for computers
there are many complementary goods for computers
there are few goods that are substitutes for computers
computers are normal goods
computers are inferior goods
Which of the following statements is correct?
A decrease in the price of X will increase the demand for substitute product Y
A decrease in income will decrease the demand for an inferior good
An increase in income will decrease the demand for a normal good
An increase in the price of X will decrease the demand for complementary product Y
An increase in the price of X will increase the demand for complementary product Y
A leftward shift of the supply curve for avocados ( a normal good) might be caused by:
an improvement in avocado picking techniques
a decrease in the wages that must be paid to avocado pickers
an increase in consumer incomes
some avocado farmers leaving the market
a news report stating that avocados are associated with good health
Assuming Ramen is an inferior good, a decrease in income will shift the:
supply curve for Ramen to the left
supply curve for Ramen to the right
demand curve for ramen to the right
demand curve for ramen to the left
there is no shift
Refer to Figure A (note: x axis should NOT be valued in $). At a price of $20, which of the following would occur?
Shortage of 100
Shortage of 150
Surplus of 200
Surplus of 50
Surplus of 100
Refer to figure A. What would be the effect of a price floor at $60
It would be ineffective
A shortage of 50
Quantity demanded would increse
a shortage of 100
a surplus of 100
If the cost of producing cell phones increases, the price and equilibrium quantity of cell phones will most likely change in which of the following ways?
P Increase Q increase
P Increase Q decrease
P decrease Q increase
P decrease Q decrease
P no change Q decrease
Other things staying equal, if the price of a key resource used to produce product X falls, the:
product supply curve of X will shift Right
product demand curve of X will shift to the right
product supply curve of x will shift to the left
product demand curve of x will shift to the left
both supply and demand of X will increase
Which of the following statements is correct?
If demand increases and supply decreases, equilibrium price will fall.
If the demand and the supply both fall at the same time, quantity will be indeterminate
if suppy increases and demand decreases, equil. price will fall
if supply falls and demand remains constant, equil. price will fall.
When the government establishes a binding price floor on a good or service then there will be:
An increase in demand for that good or service
a surplus because of the quantity demand will decrease
a shortage because the quantity supplied will decrease
no incentive to place a tax on the good or service
a decrease in the price once the market adjusts
Which of the following best explains why many US economists support free trade?
Workers who lose their jobs due to free trade can collect unemployment compensation
it is more important to reduce global inflation than to reduce domestic unemployment
workers are not affected by free trade since only domestic businesses suffer
government can protect domestic industries while encouraging free trade
Claire is an economist who can earn $150 per hour. She is also an excellent chef who can cook three times as fast as the best chef in the area, whose hourly wage is $20 per hour. Which of the following is a correct economic statement?
Claire has a comparative advantage in economics so she should specialize in econ and hire the chef to cook for her
Claire has an absolute and comparative advantage in both econ and cooking, so she should work as an economist and as a chef
claire is 3 times faster than any chef so she could give up econ and be a chef
when chefs work for economists, they should charge $150 per hour instead of $20 per hour
Because claire is an excellent chef, when the best chef works for claire, she should pay the chef only 1/3 the hourly rate.
If mike can make 2 surfboards per hour or 10 bikes per hour and joe can produce 4 surfboards per hour and 12 bike. Which of the following is true?
mike has an absolute adv in the production of surfboards
mike's Opp Cost for producing one bike is five surfboards
joe has comparative adv. in the production of both surfboards and bikes
mike has a comparative adv. in the production of bikes
joe's Opp Cost for producing one surfboard is 3 bikes
Atlantis can produce either 2 tons of grain or 4 cars with 10 units of labor. Zoltar can produce either 5 tons of grain or 25 cars with 10 units of labor. Based on this information, which of the following is true:
Atlantis has an absolute adv. in the production of grain, while Zoltar has a comparative adv. in the production of grain
Atlantis has a comparative adv. in the production of grain, while Zoltar has a comparative adv. in the production of cars
Atlantis has an absolute adv. in the production of grain, while Zoltar has a comparative adv. in the production of cars.
Atlantis has a comparative disadvantage in the production of both goods.
Niether country has a comparative adv in the production of either good
Which of the following is true for all economies regardless of their economic system?
Every economy must determine what to produce and how it produces goods and services
Every economy must find a way to distribute income equally
Every economy must find ways to privatize markets to maximize efficiency
Every economy must prevent unemployment through government intervention
Every economy must open free trade with other economies
When making a decision, the next best alternative is called
The production possibilities
The opportunity cost
Scarcity
The absolute advantage
Efficiency
Which of the following must be true if an individual's next best alternative to going to the beach is studying for an economics exam?
They will decide to study for the exam
The opp. cost is seeing their friends at the beach
The person prefers playing volleyball at the beach to studying for the exam
The Opp Cost of going to the beach is all the other things they could have done
The Opp Cost of going to the beach is being better prepared for the exam.
If the Production possibilities curve (PPC) is concave from the origin (bowed out), then economists say that
Resources are scarce in the economy
Resources are not equally suited for the production of both goods
Economic growth is occurring in the economy
Resources are being inefficiently used in the economy
Resources are equally suited for the production of either good
A point outside the PPC would represent
An efficient use of resources
Future output once producers become more efficient
An inefficient use of resources
A combination that cannot be achieved due to scarcity
Full employment of resources in the economy
An increase in which of the following would cause an outward shift of the PPC for consumer goods and capital goods?
An increase in the demand for consumer goods
An increase in taxes on consumers
A decrease in unemployment
An increase in the resources to produce capital goods
The efficient production of consumer goods
If demand for golf balls decreases when the price of baseball gloves decreases, we can stay that baseball gloves and golf balls players are
normal goods
inferior goods
substitute goods
complementary goods
unrelated due to the substitution effect
If the price of cars significantly increases, then the
Supply of cars will increase
supply of auto repair shops will decrease
quantity supplied of cars will increase
The demand for cars will decrease
Car producers will find it more profitable to produce trucks
The relationship between quantity supplied and price is ________, and the relationship between quantity demanded and price is _________
direct, inverse
inverse, direct
inverse, inverse
direct, direct
strong, weak
Which of the following will NOT cause the demand for video games to change?
a change in the price of a close substitute
a change in consumer incomes
a change in the price of video games
a change in consumer tastes
a change in consumer preferences
Which of the following statements is correct?
A decrease in the price of X will increase the demand for substitute product Y
A decrease in income will decrease the demand for an inferior good
An increase in income will decrease the demand for a normal good
An increase in the price of X will decrease the demand for complementary product Y
An increase in the price of X will increase the demand for complementary product Y
A leftward shift of the supply curve for avocados ( a normal good) might be caused by:
an improvement in avocado picking techniques
a decrease in the wages that must be paid to avocado pickers
an increase in consumer incomes
some avocado farmers leaving the market
a news report stating that avocados are associated with good health
Assuming Ramen is an inferior good, a decrease in income will shift the:
supply curve for Ramen to the left
supply curve for Ramen to the right
demand curve for ramen to the right
demand curve for ramen to the left
there is no shift
When the government establishes a binding price floor on a good or service then there will be:
An increase in demand for that good or service
a surplus because of the quantity demand will decrease
a shortage because the quantity supplied will decrease
no incentive to place a tax on the good or service
a decrease in the price once the market adjusts
Claire is an economist who can earn $150 per hour. She is also an excellent chef who can cook three times as fast as the best chef in the area, whose hourly wage is $20 per hour. Which of the following is a correct economic statement?
Claire has a comparative advantage in economics so she should specialize in econ and hire the chef to cook for her
Claire has an absolute and comparative advantage in both econ and cooking, so she should work as an economist and as a chef
claire is 3 times faster than any chef so she could give up econ and be a chef
when chefs work for economists, they should charge $150 per hour instead of $20 per hour
Because claire is an excellent chef, when the best chef works for claire, she should pay the chef only 1/3 the hourly rate.
Which country has the comparative advantage in producing trucks and what is their opportunity cost?
In economics, the pleasure, happiness, or satisfaction received from a product is called:
status fulfillment
marginal cost
rational outcome
utility
Economics may best be defined as the:
interaction between macro and micro considerations.
social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants.
empirical testing of value judgments through the use of logic.
use of policy to refute facts and hypotheses.
Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by:
an increase in the wages paid to workers producing this good.
the development of more efficient machinery for producing this commodity.
this product becoming less fashionable.
an increase in consumer incomes.
Select the three macroeconomic policy goals from the following list.
Keep the economy growing over time
Limit unemployment
Keep prices stable
Raise unemployment
Keep the economy shrinking over time
What measure shows how well the economy is doing over time?
Gross Domestic Product
Unemployment Rate
Inflation Rate
Which of the following is NOT included in a country's GDP?
Consumer Spending
Business Spending
Government Spending
Net Exports
Net Imports
What measure shows what percentage of the eligible workers do not have jobs?
Gross Domestic Product
Unemployment Rate
Inflation Rate
When people are in the process of looking for a job after being fired or are transitioning to a new position, this is called?
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
When people can't find a job because of a lack of demand for their skills or type of labor, this is called?
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
When people can't find a job because the economy is not doing well due to a recession, this is called?
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
In the United States, a healthy economy should have an unemployment rate of 4-6%.
True
False
What measure shows the rate at which the money supply is increasing relative to the number of people using it?
Gross Domestic Product
Unemployment Rate
Inflation Rate
An increase in the supply of money that leads to an increase in prices.
Inflation
Deflation
A decrease in the general price level of goods in services that can be negative in the long run by driving down the GDP and raising unemployment.
Inflation
Deflation
During Tulip Mania, there was a surge in the price of tulip bulbs, making them worth more than their actual value which was not sustainable in the long run. This phenomenon is called a?
Boom
Bust
Bubble
Breakdown
Fiscal policy, or making laws to alter government spending or change the tax rate to influence the economy, is controlled by who?
Congress and the President
The Federal Reserve
Monetary policy, or changing the money supply to influence the economy, is controlled by who?
Congress and the President
The Federal Reserve
The economy seems to be doing really well. Almost everyone has a job, which is good, but it's leading to inflation. If Congress and the President want to decrease the inflation rate, which policy should they choose?
Increase Government Spending
Decrease Government Spending
The economy seems to be doing really well. Almost everyone has a job, which is good, but it's leading to inflation. If the Chair of the Federal Reserve wants to decrease the inflation rate, which policy should they choose?
Lower the Federal Funds Rate
Raise the Federal Funds Rate
What was responsible for the bubble that led to the 2008 Financial Crisis?
Tulips
Bad Mortgages
Bad Car Loans
Bitcoin
Product Market
Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)
The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses
The “place” where goods and services produced by businesses are sold to households
Payment for the factors of production, namely rent, wages, interest, and profit
Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)
Factor/Resource Market
Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)
The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses
The “place” where goods and services produced by businesses are sold to households
Payment for the factors of production, namely rent, wages, interest, and profit
Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)
Factor Payments
Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)
The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses
The “place” where goods and services produced by businesses are sold to households
Payment for the factors of production, namely rent, wages, interest, and profit
Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)
Input Method
Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)
The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses
The “place” where goods and services produced by businesses are sold to households
Payment for the factors of production, namely rent, wages, interest, and profit
Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)
Output Method
Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)
The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses
The “place” where goods and services produced by businesses are sold to households
Payment for the factors of production, namely rent, wages, interest, and profit
Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)
Absolute Advantage
The producer with the lowest opportunity cost
When the government redistributes income
Any point on the PPC representing products that are being produced in the least costly way
The producer that can produce the most output OR requires the least amount of inputs (resources)
The most optimal point on the PPC representing products that are being produced are the ones most desired by society
Comparative Advantage
The producer with the lowest opportunity cost
When the government redistributes income
Any point on the PPC representing products that are being produced in the least costly way
The producer that can produce the most output OR requires the least amount of inputs (resources)
The most optimal point on the PPC representing products that are being produced are the ones most desired by society
Transfer Payments
The producer with the lowest opportunity cost
When the government redistributes income
Any point on the PPC representing products that are being produced in the least costly way
The producer that can produce the most output OR requires the least amount of inputs (resources)
The most optimal point on the PPC representing products that are being produced are the ones most desired by society
Assume that current real GDP falls short of full-employment output by $400 billion and the marginal propensity to consume is 0.8. What is the minimum increase in government spending that could bring about full employment?
$40 billion
$80 billion
$400 billion
$320 billion
A decrease in the price of inputs will result in which of the following in the short run?
An increase in short-run aggregate supply and an increase in long-run aggregate supply
An increase in short-run aggregate supply and a decrease in output
An increase in short-run aggregate supply and a decrease in price level
A decrease in aggregate demand and a decrease in price level
Assume the economy is in long run equilibrium and the government increases spending on healthcare
AD will shift right and an inflationary gap will result
AD will shift left and a recessionary gap will result
AS will shift right and an inflationary gap will result
AS will shift left and a recessionary gap will result
Assume the economy is in long run equilibrium and trading partners increase the price of oil, a key resource
AD will shift right and an inflationary gap will result
AD will shift left and a recessionary gap will result
AS will shift right and an inflationary gap will result
AS will shift left and a recessionary gap will result
Contractionary fiscal policy includes
Decreasing government spending
Tax increases
Tax decreases
Increasing government spending
Expansionary fiscal policy includes
Decreasing government spending
Tax increases
Tax decreases
Increasing government spending
Assume that the marginal propensity to consume is 0.75, net exports decline by $10 billion, and government spending increases by $20 billion. Given that there is no crowding out, the equilibrium gross domestic product can increase by a maximum of
$7.5 billion
$15.5 billion
$40 billion
$120 billion
Progressive tax structure is when
the tax rate declines as income increases
the tax rate increases as income increases
the tax rate remains the same, regardless of size of income
the tax rate increases the total volume of consumer expenditures
The economy has a recessionary gap of $100 billion and a multiplier effect estimated to be 4. How much should the government increase spending by to eliminate the gap?
$25 Billion
$50 Billion
$100 Billion
$400 Billion
$200 million.
$180 million.
$200 million.
$180 million.
the right, restoring long-run equilibrium.
In the short run, if wages are sticky,the AD
will shift to the right, lowering prices.
employment in the long run.
Assume the economy is in long run equilibrium and the government decreases taxes. What will be the impact on aggregate demand?
wages & resource costs increase so SRAS decreases
wages & resource costs decrease so SRAS increases
Consumer Spending decreases so AD decreases
Consumer Spending increases so AD will increase.
What is the affect on the Rgdp if Congress increases taxes by $250 billion and the mpc is .5?
Rgdp increases by $250 B
Rgdp decreases by $250 B
Rgdp increases by $125B
Rgdp decreases by $125B
Percentage of the labor force that is looking for work but unable to find it
opportunity cost
unemployment rate
interest rate
federal funds rate
Caused by a recession
capital stock
structural unemployment
frictional unemployment
cyclical unemployment
More job seekers than jobs available often due to outdated skills
Open Market Operations
interest rate
structural unemployment
frictional unemployment
The study of how society satisfies unlimited wants with limited resources
microeconomics
interest rate
recession
economics
Government spending and taxation used to stabilize the economy
Gross Domestic Policy
fiscal policy
budget deficit
monetary policy
The next best thing given up while making an economic decision
unemployment rate
discount rate
velocity of money
opportunity cost
Government spending exceeds tax revenue
macroeconomics
microeconomics
budget surplus
budget deficit
An economic downturn with an increase in unemployment
economics
recession
stagflation
inflation
Inventory of physical capital
economic growth
inflation
macroeconomics
capital stock
Business spending on physical capital
budget deficit
inflation
investment
interest rate
Total income minus taxes; income available to spend
velocity of money
microeconomics
disposable income
discount rate
An increase in the maximum output
economic growth
capital stock
inflation
macroeconomics
The total value of all final goods and services produced within a country in a year
Open Market Operations
fiscal policy
Gross Domestic Policy
monetary policy
Studying the economy as a whole
budget surplus
economic growth
macroeconomics
budget deficit
Tools, machine, and buildings used to produce other goods and services
physical capital
human capital
disposable income
opportunity cost
