Macro Final

Question 1

Structural deficit and cyclical deficit.

Answer 1

Actual Deficit

Question 2

The difference between expenditures and receipts.

Answer 2

Nominal deficit.

Question 3

The nominal deficit adjusted for inflation

Answer 3

Real deficit.

Question 4

A view of fiscal policy that the government budget should always be balanced except in wartime.

Answer 4

Sound finance

Question 5

Deficits do not affect the level of output because people increase savings to pay future taxes and to repay the deficit

Answer 5

Ricardian Equivalence Theorem.

Question 6

Held that governments should make spending and taxing decisions on the basis of their effort on the economy, not on the basis of som moralistic principle that budgets should be balanced.

Answer 6

Functional finance

Question 7

The offsetting of a change in government expenditures by a change in private expenditures in the opposite direction.

Answer 7

Crowding out

Question 8

Changes in government spending and taxes that increase the cyclical fluctuations in the economy instead of reducing them.

Answer 8

Pro cyclical fiscal Policy

Question 9

Those who are willing and able to work.

Answer 9

Labor force

Question 10

u = U/L (100%)

Answer 10

Unemployment rate.

Question 11

Unemployment leads to _

Answer 11

Deflation

Question 12

Measures the labor force as a percentage of the total population.

Answer 12

Labor Force Participation rate

Question 13

The number of people who are working as a percentage of people available to work.

Answer 13

Employment Population Rate

Question 14

States that 1% point raise in the unemployment rate will be associated with a 2% full in output from its trend and vice versa.

Answer 14

Okun’s rule of thumb.

Question 15

When the prices of assets rise more than their real value

Answer 15

Asset price inflation

Question 16

A number that summarizes what happens to a weighted composite of a selection of goods over time.

Answer 16

Price index

Question 17

An index of the price level of aggregate output relative to a base year.

Answer 17

GDP Deflator

Question 18

Measures average change in the selling prices received by a domestic producer.

Answer 18

Producer price index

Question 19

Measures the prices of a fixed basket of consumer goods, weighted according to each component’s share of an average consumer’s expenditures.

Answer 19

Consumer price index

Question 20

W;hen inflation hits triple digits

Answer 20

Hyperinflation

Question 21

Expectations they the economists’ models predict.

Answer 21

Rational expectations

Question 22

Expectations based on the past.

Answer 22

Adaptive expectations.

Question 23

Expectations that a trend will continue

Answer 23

Extrapolative expectations.

Question 24

The connection between money and inflation

Answer 24

Quantity theory

Question 25

MV=PQ

Answer 25

The equation of exchange.
M=Quantity of money
V=Velocity of money
P=Price level
Q=Real output

Question 26

The number of times per year, on average, a dollar gets spend on goods and services.

Answer 26

Velocity of money

Question 27

A downward sloping curve showing the relationship between inflation and unemployment when expectations of inflation are constant.

Answer 27

Short run Phillips curve

Question 28

A combination of high and accelerating inflation and high unemployment

Answer 28

Stagflation

Question 29

Is a vertical curve that the unemployment rate consistent with potential output

Answer 29

The long run Phillips curve