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Macroeconomics > Final > Flashcards

Final Flashcards

1
Q

The cost-benefit principle states that a decision should be pursued only if the

A

benefits are greater than the costs.

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2
Q

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it?

A

The opportunity cost principle.

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3
Q

Sunk costs are costs that

A

are incurred in the past and cannot be reversed.

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4
Q

The __________ suggests, decisions about quantities are best made incrementally.

A

marginal principle

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5
Q

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle.

A

interdependence

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6
Q

The law of demand refers to

A

the inverse relationship between price and quantity demanded.

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7
Q

Diminishing marginal benefit

A

is when buying an additional item yields a smaller marginal benefit than the previous item

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8
Q

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are

A

normal goods.

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9
Q

What is quantity supplied

A

It is the amount of an item that a seller is willing to sell at a particular price

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10
Q

The law of supply refers to

A

the positive relationship between price and quantity supplied

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11
Q

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as ‘Fusion’ and ‘Taurus’ to focus on SUVs and trucks. Ford’s sedans and trucks/SUVs are

A

substitutes-in-production

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12
Q

If the price of jet fuel rises, the

A

quantity supplied of jet fuel increases

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13
Q

A market is a

A

setting that brings together potential buyers and sellers

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14
Q

An equilibrium price is a price where the

A

quantity supplied equals the quantity demanded

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15
Q

When quantity demanded exceeds quantity supplied, _____ exists

A

a shortage

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16
Q

Shifts in demand

A

lead to price and quantity to move in the same direction

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17
Q

Analysis based on value judgments is called _____ analysis

A

normative

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18
Q

The concept of equity focuses on

A

fairness

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19
Q

In a market graph, consumer surplus is the area

A

above the price and below the demand curve

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20
Q

On a market graph, producer surplus is the area that is

A

above the supply curve and below the price

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21
Q

A market’s deadweight loss is calculated as

A

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity

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22
Q

Market failure occurs when market forces lead to

A

an inefficient outcome

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23
Q

To maximize production, people should

A

focus on the task in which they have a comparative advantage

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24
Q

The person who has an absolute advantage in a task

A

is the one who is best at the task

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25
Q

Comparative advantage explains why people

A

specialize and trade

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26
Q

When a manager uses comparative advantage to assign tasks in a workplace, then each

A

task is assigned to the worker with the lowest opportunity cost for performing the task

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27
Q

Which of the following is a source of comparative advantage?

A

abundant inputs

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28
Q

A tariff is a

A

tax on imported products

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29
Q

What is social insurance

A

It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings

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30
Q

Which of the following is a social insurance program in the United States?

A

Social Security

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31
Q

Government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving your savings is known as a

A

social insurance system

32
Q

Intergenerational mobility is the extent to which

A

the economic status of children is independent of the economic status of their parents

33
Q

What is the difference between microeconomics and macroeconomics?

A

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

34
Q

GDP is defined as the

A

market value of all final goods and services produced within a country in a given year

35
Q

You just bought two used textbooks for $25 each. How much does GDP change because of your purchase?

A

GDP does not change

36
Q

The “market value” of a good or service refers to the

A

current dollar value of that good or service

37
Q

A “final” good or service is one that is

A

finished and ready for the final user

38
Q

When a U.S. consumer buys Canadian maple syrup at the grocery store, this purchase is

A

an import

39
Q

A production function is

A

a method through which inputs can be turned into outputs, given the available resources

40
Q

Human capital refers to

A

worker skills and knowledge

41
Q

A government can promote the development of human capital by

A

subsidizing secondary school education

42
Q

The law of diminishing returns states that

A

when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts

43
Q

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build

A

human capital

44
Q

Enforceable property rights encourage economic growth by encouraging

A

investment

45
Q

The working age population includes people who are

A

age 16 or older who are not in the military or institutionalized

46
Q

The labor force participation rate is the

A

percentage of the working age population that is either employed or unemployed

47
Q

An underemployed person is one who is

A

working but whose skills are not fully utilized

48
Q

Frictional unemployment is unemployment

A

due to the time it takes for employers to search for workers and for workers to search for jobs

49
Q

The consumer price index is an index that tracks the

A

average price that consumers pay over time for a representative basket of goods and services

50
Q

The Producer Price Index is an index that tracks the

A

price that businesses pay over time for the inputs used in the production process

51
Q

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is

A

substitution bias

52
Q

Menu costs are the

A

marginal costs of adjusting prices

53
Q

If you see that the consumer price index this year is lower than the consumer price index last year, this means that

A

on average, prices went down across the economy

54
Q

Which of the scenarios represents consumption spending

A

You eat at a fancy restaurant for Valentine’s Day

55
Q

The slope of the consumption function is the

A

marginal propensity to consume

56
Q

Credit constraints limit the

A

amount of money that people can borrow

57
Q

Investment refers to

A

spending on physical capital

58
Q

Depreciation refers to the

A

decline in capital due to wear and tear, obsolescence, accidental damage, and aging

59
Q

Which of the following is an investment

A

Marios builds a new house

60
Q

Future value is the

A

amount that your money will grow into by a future date as a result of earning interest

61
Q

The loanable funds market is the market for

A

funds used to buy, rent, or build capital

62
Q

Equilibrium in the loanable funds market determines the

A

equilibrium real interest rate

63
Q

The three major pillars of the financial sector are the

A

stock market, the bond market, and the banks

64
Q

A bank can make money by

A

giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest

65
Q

An initial public offering occurs when a company

A

first sells stock directly to the public

66
Q

A mutual fund is a fund that

A

buys a portfolio of stocks and bonds on your behalf

67
Q

The liquidity of an asset is defined as the

A

ability to quickly and easily convert the asset to cash, with little or no loss in value

68
Q

How is monetary policy different from fiscal policy

A

Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes

69
Q

What is the Federal Reserve’s mandate

A

to ensure maximum employment while maintaining stable prices

70
Q

The federal funds rate is the

A

nominal interest rate that banks pay on overnight interbank loans

71
Q

Forward guidance occurs when the Federal Reserve

A

provides information about the future course of monetary policy in order to influence expectations about future interest rates

72
Q

In Canada, all the provinces provide health care to all citizens and permanent residents. This is an example of

A

social insurance

73
Q

Mandatory spending is spending that

A

supports programs that do not get determined annually but instead are set in law

74
Q

Discretionary spending is spending that

A

is appropriated by Congress annually

75
Q

An excise tax is a tax on

A

a specific product

Macroeconomics (1 decks)

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