Econ Ch 1

Question 1

Microeconomics

Answer 1

Study of households + firms making choices, now they interact W/ markets & how govtries to influence choices

Question 2

Macroecon

Answer 2

Study of economy as a whole ( inflation, unemployment, & economic growth)

Question 3

Short-Run - business cycle

Answer 3

Alternating periods of economic expansion & recession

Question 4

Long run- Lr Econ growth

Answer 4

The process of which increasing productivity raises standard of living

Question 5

Long run - labour productivity

Answer 5

Quantity of goods services that can be produced by one worker or by 1 hr of work

Question 6

What is one determinant of growth?

Answer 6

→ ability to expand& fund operations

Question 7

Real GDP

Answer 7

→ market value of final goods & services adjusted for the price level

Question 8

Lr Econ.. Growth is measured by.

Answer 8

Real GDP product /person

Question 9

Real GDP calculation

Answer 9

Original price x quantity

Question 10

Labour force

Answer 10

Sum of employed & unemployed workers

Question 11

Unemployment rate

Answer 11

% Of labour force that is unemployed

Question 12

Inflation rate

Answer 12

% Increase in price level from year to year

Question 13

Deflation

Answer 13

Sustained decrease in price level

Question 14

Monetary policy

Answer 14

Actions by central banks to manage
→ supply
→ interest rates
That are intended to achieve macroeconomic policy objectives

Question 15

Fiscal policy

Answer 15

Changes in gov taxes + purchases that are intended to achieve macroeconomic policyobjectives

Question 16

Financial crisis

Answer 16

Involves significant disruption in flow of funds from lenders to borrowers

Question 17

Best ways to analyze macroeconomic issues

Answer 17

① gather data

② form models capable of analyzing data

Question 18

Economic variables

Answer 18

Something measurable that can have diff values [ rate of inflation ]

Question 19

Endogenous variable

Answer 19

Explained by an economic model

Question 20

Exogenous variable

Answer 20

Taken as given & not explained by model

Question 21

Positive analysis

Answer 21

→ concerned W/ “what is”
~ examines from objective POV
~ measures costs & benefits of different course ofaction
~ Econ about + analysis

Question 22

Normative analyses

Answer 22

“What ought to be”

Question 23

Quantitative easing

Answer 23

Purchases [ or sales ] of long term gov assets

Question 24

Forward guidance

Answer 24

Announcement by central bank that interestrates will remain low for extendended period of time

Question 25

Automatic stabilizer

Answer 25

Mechanisms impacting taxes & spending when in a recession

Question 26

Great Recession - policy response

Answer 26

① fiscal policy used ② higher gov spending ③ automatic stabilizers ④ active & automatic fiscal policies raised by gov deficit & debts ⑤ debt ofmany countries exploded ⑥ increased debt caused problems

Question 27

Common features of financial crises

Answer 27

① asset price boom & bust ② insolvencies@ financial institutions ③ falling confidence

Question 28

The TED spread measures _

Answer 28

Perceived credit risk of banks

Question 29

What happened to the severity of the business cycle since 1950?

Answer 29

There has been greater economic stability W/ smaller fluctuations in real GDP, longer expansions & shorter recessions

Question 30

Most periods of high inflation have been during _. In the last 40 years periods of deflation have been _

Answer 30

① late 1970 & early 1980’s,② uncommon

Question 31

a country like china is more open than Belgium bc it is larger has a higher total value of importsand exports

Answer 31

Openness is defined by the ratio of foreign trade to GDP

Question 32

Leverage=

Answer 32

Assets ÷[ assets-liabilities ]

Question 33

How can nominal GDP & real GDP be used to calculate a price index?

Answer 33

=[ nominal ÷ real ]* 100