Final Test Flashcards
An increase in _ GDP guarantees that more goods and services are being produced by an economy.
Real
Net Exports are
Exports less imports
GDP can be calculated by summing:
Consumption, Investment, Government Expenditure and Net Exports
Transfer payments are excluded when calculating the GDP because:
They do not reflect current production
If the demand for a firm’s output unexpectedly decreases and prices are sticky, you would expect its inventory to:
Increase
Assume that price is fixed at $37,000 and that Buzzer Auto needs 5 workers for every 1 automobile produced. How many cars will Buzzer produce and how many workers will it hire?
900 cars and 4500 workers
Which of the following transactions are counted in GDP?
Kerry buys a new sweater to wear this winter
If real GDP grows at 7 percent per year, then real GDP will double in approximately _ years.
10
Place the phases of the business cycle in order, starting with the highest level of GDP:
Peak,Recession, Trough, Expansion
Most economists agree that the immediate cause of the large majority of cyclical changes in the levels of real output and employment is unexpected changes in _
The level of total spending
9 million full time employees, 1 million actively seeking work but are currently unemployed, 2 million discouraged workers who have given up looking for work and are currently unemployed. What is the economy’s unemployment rate?
10 percent
The unemployment rate that is consistent with full emplyment is
The natural rate of unemployment
A country’s current unemployment rate is 11 percent. Economists estimate that its natural rate of unemployment is 6 percent. About how large is this economy’s negative GDP gap?
10 percent
Cost-Push inflation occurs in the presence of _
Rising per-unit production costs
Economists agree that _ inflation reduces real output
Cost-push
Suppose that the CPI was 110 last year and is 108 this year. What is this called
Deflation
Frictional and structural unemployment is inevitable in dynamic economy
True
Unemployment due to economic downturn and low demand is called
Cyclical unemployment
Full employment is when every worker is employed
False
If the MPS rises, then the MPC will?
Fall
Irving owns a chain of movie theaters. He is considering whether he should build a new theater downtown. The expected rate of return is 15 percent per year. He can borrow money at a 12 percent interest rate to finance the project. Should Irving proceed with this project?
Yes
Which of the following scenarios will shift the investment demand curve right?
The expected return on capital increases
If a $50 billion initial increase in spending leads to a $250 billion change in real GDP, how big is the multiplier?
5.0.
Larger MPCs imply larger multipliers
True
If total spending is just sufficient to purchase an economy’s output, then the economy is in:
Equilibrium
If the multiplier is 5 and investment increases by $3 billion, equilibrium real GDP will increase by:
$15 billion
Cost-of-living adjustment clauses (COLAs):
Tie wage increases to changes in the price level
During periods of hyperinflation
People tend to hold goods rather than money
Which of the following will reduce and shift the aggregate demand curve?
Interest rates rise.
Which of the following will increase and shift the aggregate supply curve?
A new networking technology increases productivity all over the economy
state and explain the tools of monetary policy
Actions that the Federal Reserve System takes
– To change interest rates and the money supply
– It is aimed at affecting the economy
what is arbitrage
arbitrage is the practice of taking advantage of a difference in prices in two or more markets – striking a combination of matching deals to capitalize on the difference, the profit being the difference between the market prices at which the unit is traded
what is a tariff?
Tax on imported goods
Why do governments impose tariffs
to raise revenue, protect domestic industries, or exert political leverage over another country
State and explain the basic equation of exchange of monetarism
the equation of exchange, which is expressed as MV = PQ. Here M is the supply of money, and V is the velocity of turnover of money
Demand pull inflation
Demand Pull Inflation, too much money chasing too few goods, demand outweighs supply
What is the major cause of macroeconomic instability, as viewed by monetarists?
he monetarists believe that the most significant cause of macroeconomic instability has been inappropriate monetary policy
Cost push inflation
the input increases
Demand pull
continues as long as the excess spending continues
cost push
ends in a recession- but it is self limiting
core inflation
represents the long run trend in the price level
