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Macroeconomics > Final > Flashcards

Final Flashcards

1
Q

The basic concern of economics

A

To study the choices people make

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2
Q

When were forced to make choices

A

scarcity

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3
Q

The concept of scarcity indicates

A

almost all goods have alternative uses

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4
Q

A free good is

A

a good with no opportunity cost

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5
Q

The fundamental economic questions every society must answer

A

What
How
For whom

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6
Q

Opportunity cost is

A

The highest valued alternative choice that could have been made

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7
Q

The economic way of thinking includes

A

emphasis on how choices are made at the margin

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8
Q

A statement of hypothesis or fact

A

positive

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9
Q

Statements that make value judgements

A

normative

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10
Q

Unemployment and inflation are

A

major topics in macroeconomics

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11
Q

Economic resources used on the production process

A

factors of production

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12
Q

Capital

A

a factor of production that has itself been produced

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13
Q

Increasing the level of education will

A

lead to workers possessing greater human capital

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14
Q

Human capital is

A

the set of acquired skills and abilities that workers bring to the production process

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15
Q

Technology

A

knowledge that can be applied to the production of goods and services

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16
Q

A person who seeks to earn profits by finding ways to organize factors of production and who bears the risk

A

an entrepreneur

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17
Q

The production possibilities curve represents the fact that

A

if all resources of an economy are being used, more of one good can only be produced if less of another good is produced

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18
Q

An economy is said to have a comparative advantage if it

A

has the lowest cost for producing a particular good

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19
Q

The concept of comparative advantage is based on

A

relative opportunity costs

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20
Q

The law of increasing opportunity costs is a result of the fact that

A

resources are not equally productive in all output categories

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21
Q

The law of increasing opportunity costs is associated with the slope of the

A

production possibilities curve

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22
Q

If all factors of production that are available for use under current market conditions are being utilized, then the economy has

A

full employment

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23
Q

When economists study the behavior of buyers, they are studying

A

demand

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24
Q

A decrease in the price of eggs will result in

A

a greater amount of eggs demanded

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25
Q

A shift in the demand curve to the right, all other things unchanged, will

A

increase price and quantity

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26
Q

If income increases what happens to the market for steak

A

The equilibrium price falls, and the equilibrium quantity rises

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27
Q

If the price of oranges rises, what happens to the market for apples (a substitute for oranges)?

A

The equilibrium price and quantity rise

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28
Q

An example of a demand shifter

A

consumer preferences

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29
Q

If people demand more of product A when the price of B falls, then A and B are

A

compliments

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30
Q

If demand decreases

A

the demand curve shifts left

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31
Q

The slope and location of the demand curve depends on

A

of buyers
tastes
incomes

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32
Q

How a supply curve is sloped and located depends on

A

technology
resource prices
the number of producers or sellers

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33
Q

If the price of a good increases, one would expect

A

the quantity supplied to increase

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34
Q

A decrease in supply is caused by

A

An improvement in the technology for producing the good

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35
Q

The intersection of the supply and demand curves indicates that

A

The market is in equilibrium

36
Q

If the quantity supplied in a market exceeds the quantity demanded, the price would be expected to

A

increase

37
Q

In the personal computer industry, the reason for the fall of prices and the increase in quantity after 1980 was

A

primarily due to technological change and an increase in the number of sellers

38
Q

A minimum price set above the equilibrium price

A

price floor

39
Q

The value at current market prices of the final goods and services produced during a particular period

A

gross domestic product

40
Q

A complete business cycle is defined as the passage from

A

one peak to the next peak

41
Q

The point on a business cycle when real GDP stops falling and starts rising

A

trough

42
Q

Inflation

A

increase in the average level of prices

43
Q

When inflation is not anticipated

A

lenders will be hurt and borrowers benefit

44
Q

According to the official unemployment rate, a person who is not working and not looking for work

A

not a member of the labor force

45
Q

If the labor force totals 100million workers and 5 million are unemployed but actively seeking work, then the unemployment rate is

A

unemployment/labor force

5million/100million = 5%

46
Q

The rate of unemployment that exists when the economy is at full employment

A

The natural rate of unemployment

47
Q

Unemployment that exists because it takes workers and employers time to find one another

A

frictional unemployment

48
Q

The relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged

A

aggregate demand

49
Q

The level of output achieved when the economy achieves its natural level of employment is

A

potential output

50
Q

The wealth effect suggests

A

A negative relationship between the price level and consumption spending

51
Q

The interest rate effect is the tendency for changes in the price level to affect

A

The quantity of investment demanded, and therefore interest rates

52
Q

Aggregate demand changes in response to a change in

A

All of the above
(The total amount of consumer goods and services demanded at every price level
The total amount of investment demanded by firms at each price level
The value of net exports demanded at each price level)

53
Q

Real GDP eventually moves to its potential output level because in the long run all

A

wages and prices are assumed to be flexible

54
Q

The long-run aggregate supply curve is

A

vertical at potential output

55
Q

The intersection of the economy’s AD and LRAS curves

A

All of the above
(Determines its equilibrium real GDP in both the long run and short run
Determines its equilibrium price level in both the long run and the short run
Occurs at the economy’s potential output)

56
Q

The short-run aggregate supply curve is

A

All of the above
(A graphical representation of the relationship between production and the price level in the short run
A result of stickiness or inflexibility of some prices and wages
Drawn holding constant the capital stock, factor prices, and technology)

57
Q

Changes in the short run aggregate supply can be caused by changes in

A

the price level

58
Q

If the short-run aggregate supply curve and the demand curve intersect to the left of the long-run aggregate supply curve there will be

A

a recessionary gap

59
Q

An inflationary gap occurs if

A

unemployment is less than the natural rate

60
Q

Economic growth is most closely related to

A

long-term changes in the standard of living

61
Q

Economic growth is defined in terms of

A

All of the above
(An outward shift in the production possibilities curve
A series of events that increase the economy’s ability to produce goods and services
A process that increases potential output)

62
Q

Given an upward sloping supply curve for labor, an increase in the demand for labor will cause the long-run aggregate supply curve to

A

shift to the right

63
Q

In the long run, economic growth can be expected to lead to

A

All of the above
(increase in consumption
increase in the capital stock
outward shifts in the production possibilities curve)

64
Q

The medium of exchange function means that money is used

A

to pay for goods and services

65
Q

An economic system that lacks a medium of exchange is

A

a barter system

66
Q

When a person makes price comparisons among products, money is being used as

A

A unit of account

67
Q

Inflation of the general price level reduces the ability of money to serve as a

A

store of value

68
Q

Money that has value apart from its use a money is

A

commodity money

69
Q

The total quantity of money in the economy at any one time

A

the money supply

70
Q

The ease with which an asset can be converted into money

A

liquidity

71
Q

An institution that collects money from lenders and distributes these funds to borrowers is

A

a financial intermediary

72
Q

A bank’s reserves are

A

Assets banks hold that they can use against deposit liabilities

73
Q

A bank’s excess reserves

A

may equal zero

74
Q

If a bank has 100,000 in checkable deposits and 30,000 in reserves, and the required reserve ratio is 20%, the bank can make loans equal to

A

$10,000
100,000 X .20 = 20,000
30,000-20,000 = 10,000

75
Q

An increase in the reserve requirement would

A

have a contractionary effect on the economy

76
Q

The cost to a member bank of borrowing from the federal reserve bank is measured by the

A

discount rate

77
Q

The tool of monetary policy that involves the fed buying and selling government securities is

A

open market operations

78
Q

The payment for the use of money

A

interest rate

79
Q

The relationship between the quantity of money people want to hold and the factors that determine the quantity is the

A

demand for money

80
Q

The money people hold for contingencies that they know might occur, but at an uncertain time and in an uncertain amount

A

precautionary demand

81
Q

demand for labor is based on

A

derived demand for goods and services

82
Q

individual supply of labor based on

A

reciprocal of demand or leisure

83
Q

income effect:

substitution effect:

A

cause people to work less

cause people to work more

84
Q

3 components of interest (discount) rates

A

inflation
risk premium
real rate

85
Q

3 types of demand for money

A

precautionary
transactional
speculative

Macroeconomics (4 decks)

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