Macroeconomics Chapter 6 Questions

Question 1

What does macroeconomics primarily focus on?

Answer 1

The behavior of the economy as a whole.

Question 2

What is the difference between macroeconomics and microeconomics?

Answer 2

Macroeconomics focuses on the behavior of the economy as a whole.

Question 3

What do macroeconomists primarily assess in an economy?

Answer 3

Real GDP, unemployment, and inflation.

Question 4

What is GDP per person?

Answer 4

Total economic output divided by the population.

Question 5

What is inflation?

Answer 5

An increase in the overall level of prices.

Question 6

What is deflation?

Answer 6

A fall in the overall level of prices.

Question 7

Why is price stability preferred?

Answer 7

It ensures prices do not fluctuate wildly.

Question 8

What do short-run economic fluctuations and long-run economic growth make up in macroeconomics?

Answer 8

The business cycle.

Question 9

What is a recession?

Answer 9

A period of economic downturn when output and employment are falling.

Question 10

What is an expansion in economic terms?

Answer 10

A period of economic upturn when output and employment are rising.

Question 11

What is the business cycle?

Answer 11

The periods of recessions and expansions in the economy.

Question 12

What does fiscal policy involve?

Answer 12

The use of taxes and government spending to change spending levels.

Question 13

What did John Maynard Keynes believe about government responsibility?

Answer 13

Managing the economy is a government responsibility.

Question 14

What happened during the Great Depression?

Answer 14

Policy makers let the slump run its course.

Question 15

What does a trade deficit indicate?

Answer 15

A country imports more than it exports.

Question 16

What is a trade surplus?

Answer 16

The value of goods and services sold exceeds bought from foreigners.

Question 17

How did Canada perform in trade in 2019?

Answer 17

Imported more than it exported.

Question 18

What indicates a depressed economy according to Keynesian economics?

Answer 18

Inadequate spending.

Question 19

What are the main causes of inflation in the long run?

Answer 19

Changes in the money supply.

Question 20

What is a major consequence of inflation?

Answer 20

Cash loses value.

Question 21

What is the role of macroeconomists in relation to economic stability?

Answer 21

They aim to smooth out the business cycle.

Question 22

What is the pain of deflation?

Answer 22

Cash holding grows less attractive compared to investments.

Question 23

What is one use of monetary policy?

Answer 23

To change interest rates to affect spending levels.

Question 24

What do economic indicators show in the overall trend?

Answer 24

A strong upward trend despite fluctuations.

Question 25

What occurs at a business-cycle peak?

Answer 25

The economy turns from expansion to recession.

Question 26

What occurs at a business-cycle trough?

Answer 26

The economy begins to recover from a recession.

Question 27

What aspect of economic health do macroeconomists particularly focus on?

Answer 27

Real GDP and inflation rates.

Question 28

Why do policymakers strive to reduce the severity of business cycles?

Answer 28

To stabilize employment and economic growth.

Question 29

What does a country with high investment spending relative to savings typically run?

Answer 29

Trade deficit.