Macroeconomics Chapter 6 Questions Flashcards
What does macroeconomics primarily focus on?
The behavior of the economy as a whole.
What is the difference between macroeconomics and microeconomics?
Macroeconomics focuses on the behavior of the economy as a whole.
What do macroeconomists primarily assess in an economy?
Real GDP, unemployment, and inflation.
What is GDP per person?
Total economic output divided by the population.
What is inflation?
An increase in the overall level of prices.
What is deflation?
A fall in the overall level of prices.
Why is price stability preferred?
It ensures prices do not fluctuate wildly.
What do short-run economic fluctuations and long-run economic growth make up in macroeconomics?
The business cycle.
What is a recession?
A period of economic downturn when output and employment are falling.
What is an expansion in economic terms?
A period of economic upturn when output and employment are rising.
What is the business cycle?
The periods of recessions and expansions in the economy.
What does fiscal policy involve?
The use of taxes and government spending to change spending levels.
What did John Maynard Keynes believe about government responsibility?
Managing the economy is a government responsibility.
What happened during the Great Depression?
Policy makers let the slump run its course.
What does a trade deficit indicate?
A country imports more than it exports.
What is a trade surplus?
The value of goods and services sold exceeds bought from foreigners.
How did Canada perform in trade in 2019?
Imported more than it exported.
What indicates a depressed economy according to Keynesian economics?
Inadequate spending.
What are the main causes of inflation in the long run?
Changes in the money supply.
What is a major consequence of inflation?
Cash loses value.
What is the role of macroeconomists in relation to economic stability?
They aim to smooth out the business cycle.
What is the pain of deflation?
Cash holding grows less attractive compared to investments.
What is one use of monetary policy?
To change interest rates to affect spending levels.
What do economic indicators show in the overall trend?
A strong upward trend despite fluctuations.
What occurs at a business-cycle peak?
The economy turns from expansion to recession.
What occurs at a business-cycle trough?
The economy begins to recover from a recession.
What aspect of economic health do macroeconomists particularly focus on?
Real GDP and inflation rates.
Why do policymakers strive to reduce the severity of business cycles?
To stabilize employment and economic growth.
What does a country with high investment spending relative to savings typically run?
Trade deficit.
