macroecon_Exam 1

Question 1

Choices are necessary bc we live in a world of ….

Answer 1

Scarcity

Question 2

Explain when Scarcity occurs

Answer 2

When unlimited wants to exceed limited resources

Question 3

Explain the 3 Key Economic Ideas

Answer 3

People are Rational
People Respond to Incentives
Optimal decisions are made at the margin

Question 4

Explain the 3 Problems every society must solve

Answer 4

What goods/services must be produced?How will those goods/services be produced?Who will receive the goods/services produced?

Question 5

3 types of economies

Answer 5

Centrally Planned MarketMixed

Question 6

Summarize a Centrally planned economy

Answer 6

Govt decide what to produce, how, and who gets it

Question 7

Summarize a Market economy

Answer 7

Households/firms decide what to produce, how, and who gets it

Question 8

Summarize a Mixed economy

Answer 8

Features of both market and centrally planned economies, most developed countries

Question 9

Important features of economic models

Answer 9

Assumptions/SimplificationsTestabilityEconomic Variables

Question 10

Explain Positive Analysis

Answer 10

Study of “what is”, can be tested

Question 11

Explain Normative Analysis

Answer 11

Study of “what ought to be”, judgmental/opinionated

Question 12

Microeconomics is the study of…

Answer 12

How households make choices, interact in markets, how govt attempts to influence those choices

Question 13

Macroeconomics is study of…

Answer 13

Economy as a whole, including inflation, unemployment, and economic growth

Question 14

Paraphrase Economic growth

Answer 14

A phase of the business cycle when GDP is increasing

Question 15

Paraphrase what a Business cycle is

Answer 15

Alternating periods of economic expansion and recessuon

Question 16

Expansion/Economic Growth

Answer 16

Rising real GDP, from a trough to next peak

Question 17

Recession/Contraction

Answer 17

Falling RGDP, from peak to next trough, real GDP has to been declining for at least 6 months

Question 18

Explain a Recovery

Answer 18

Early part of expansion, immediately after trough

Question 19

Summarize a Depression

Answer 19

Deep and long recession

Question 20

GDP calculated by the____ should be approximately the same as the the GDP calculated by the_____ + explain why

Answer 20

Spending approach, income approach, bc every expenditure will end up as somebody’s income

Question 21

Interpret Real GDP

Answer 21

Value of final goods and services evaluated at base-year prices

Question 22

Interpret Nominal GDP

Answer 22

Value of final goods and services evaluated at current-year prices