Exam 1

Question 1

Goals of macroeconomists?

Answer 1

a) To understand how the macroeconomy functions.
b) To devise hypothesis and theories that help to understand economic relationships.
c) To use economic data and theories to predict economic outcomes

Question 2

Define macroeconomics

Answer 2

Study of the economic behavior of entire economies

Question 3

What are resources (list)

Answer 3

capital
Labor
entrepreneurial ability (most important)
Natural resources

Question 4

Decision makers in the economy

Answer 4

a) Households
b) Firms
c) Government
d) Other countries

Question 5

List the reasons why the law of demand is accepted

Answer 5

1.the income effect supports it
2. substitution effect suppports it
3 its common sense
4. it’s supported by experience.

Question 6

List the factors that cause shift in demand curve

Answer 6

1. Change in consumer income.
2. Change in the price of other goods/services.
   3.Change in consumer expectations.
   4.Change in consumer tastes.
3. Change in number of consumers

Question 7

List the factors that cause shift in supply curve

Answer 7

1.Changes in technology.
2.Changes in the prices of inputs.
3.Changes in the prices of alternative goods.
4.Changes in producer expectations.
5.Changes in the number of producers

Question 8

What is change in quantity demanded?

Answer 8

is only caused by a change in the price of the product sold,a change in the specific quantity of a product that buyers are willing and able to buy.

Question 9

What is a change in demand?

Answer 9

a change in demand and supply are caused by the factors listed

Question 10

What changes must be made so that the income and expenditures approach es produce the same results

Answer 10

a) The income of U.S. citizens abroad must be subtracted and theincome of foreigners in the U.S. must be added.
b) Subsidies and indirect taxes (sales taxes etc.) must be added.
c) Depreciation must be added.

Question 11

How do you adjust GDP figures for inventory?

Answer 11

When inventories increase, they must be added to GDP.When inventories decrease, they must be subtracted from GDP

Question 12

What are the different types of unemployment?

Answer 12

Frictional, cyclical, structural, seasonal

Question 13

Why was unemployment falling prior to the current recession?

Answer 13

a) Technology enabled job seekers and employers to locate each other more rapidly.
b) The aging of the baby-boomers reduced the unemployment rate.
c) The incarceration rate has increased in the United States.

Question 14

How do you calculate GDP through the expenditures approach?

Answer 14

a) Add all of the purchases that occur in a single year in the U.S.economy.
b) Add exports.
c) Subtract imports.
d) Add inventory increases.
e) Subtract inventory decreases.

Question 15

What is nominal GDP?

Answer 15

nominal GDP; GDP based on prices prevailing at the time of production

Question 16

What is real GDP?

Answer 16

GDP that has been adjusted to compensate for price changes from year to year.
nominal GDP/price index)x100.

Question 17

How do you calculate unemployment rate?

Answer 17

(Unemployment/labor force)x100

Question 18

What is demand pull inflation?

Answer 18

a sustained rise in the price level caused by a rightward shift of the aggregate demand curve (increase in the aggregate demand, everyone is demanding more so price increases)

Question 19

What is cost push inflation?

Answer 19

a sustained rise in the price level caused by a leftward shift of the aggregate supply curve (decrease in aggregate supply)

Question 20

What is gdp?

Answer 20

The market value of all final goods and services produced in a year by resources located in the US regardless of who owns the resources.