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# Macroeconomics Theory and Practice

Is interested in understanding global phenomena such as economic growth, economic cycles, unemployment, inflation and international trade, among others.

## inflation

What do you call the hours (not rendered) beyond government mandated 40 hour work week

• Overtime
• None of the choices
• Undertime
• Leisure time

When the average level of prices declines, this is called _________.

• None of the other choices
• Deflation
• Hyperinflation
• Inflation

Production is a function of the economy's use of capital, K, labor, L, and a productivity index, A.

• Growth accounting equation
• Constant returns and elasticities equation
• None of the above
• Elasticity and Income share equation

What are the steps in solving macroeconomic equilibrium model solution method?

• Combine the given equations and solve for AD (aggregate demand).
• It is the method of advanced economics.
• Simplify the equation.
• State the assumed equilibrium condition: Y = AD
• Substitute the derived equation for AD from step 1 into the right-hand side of the equilibrium condition.
• The simplifying assumptions underlying the model become more obvious.

Accurately explains history

• What makes a good Economic Model

Counter cyclical

• Direction of movement in forecasting business cycle

______________ is the characteristic of money or currency where it can be used as a medium of exchange for any good or service.

• None of the above
• Opportunity cost
• Barter

The test of a proposition or theory using actual observations or numbers is

• Scientific Study
• Comparative Study
• Empirical Study
• None of the choices

GNP

• Concepts that measure nation’s aggregate output.

The price of one currency in terms of another currency.

• Exchange rate
• GNP
• GDP
• None of the choices

__________is the measure of the average level of prices for some specified bundle of goods and services, relative to the prices in a specified base year

• Pushed Prices
• Price Index
• None of the other choices

Nominal Interest Rate

• Types of Interest Rate related to Inflation

Price Stability

• Macroeconomic Goals

When the average level of prices increases over time the economy is said to be experiencing _______________.

• Inflation
• None of the other choices
• Deflation
• Hyperinflation

If price is above the equilibrium price, what causes it to return to the equilibrium level? If it is below equilibrium, what forces it up?

• To reduce their inventories producers must lower their prices
• The shortage can be eliminated only by allowing the market price to rise to the equilibrium level
• All of the other choices
• The increase in price will motivate firms to produce more while also reducing the quantity demanded until the market returns to equilibrium.

The GDP Deflator is described as a variable-weight price index (also referred to as a Paasche price index)

• True
• False

Incentive to invest resources in developing specialized tools

• Reasons for Specialization

Floating means that exchange rate is steady or constant in day to day basis according to the market.

• True
• False

_____________ unemployment arising from frictional, structural, and seasonal unemployment, further as described as the unemployment rate that coexists with macroeconomic stability.

• Unemployment Rate
• Labor Force Rate
• None of the other choices
• Natural Rate of Unemployment

A market is in ______________ when the quantity demand is equal to quantity supplied at the market price.

• Surplus
• Scarcity
• None of the choices
• Equilibrium

Peak

_________ cannot be used in empirical analysis.

• None of the above
• Income Shares
• Elasticities
• Profits

Deflation Rate = Price Index Year 2 - Price Index Year 1 /Price Index Year 1 * 100

• True
• False

___________ is referred to as the ceteris paribus assumption

• Given that everything else remains unchanged
• Given that everything else is flexible
• Given that everything can be changed

___________, as more scarce resources are used to increase production of one good or service, production of another good or service falls by larger and larger amount.

• Increase Opportunity Cost
• Production Cost
• Economic Cost
• None of the choices

The slope of a curve can be determined from a graph by dividing the vertical change in the Y variable or rise by the horizontal change in the X variable or run.

• True
• False

Percentage increase in the average level of prices.

• Macroeconomics
• Inflation Rate
• Microeconomics
• Deflation Rate

___________ by definition equal to the change in the capital stock plus depreciation.

• All of the other choices
• Depreciation
• Investments
• Capital

_______ is the point at which a contractionary phase ends and an expansionary phase begins.

• Expansion
• Trough
• Contraction
• Peak

Nominal GDP= Current year Quantities x Base year Prices

• True
• False

Neoclassical growth model pioneered by Denison

• True
• False

Okun’s law

• Behavior of economic variables

_____ is measured by comparing the amount of goods and services produced with the factors (e.g., capital and labor) used in production.

• GDP
• Multifactor Productivity
• None of the above
• Production

_______ - an economic indicator that changes before the economy has changed. Examples include new orders for capital goods, building permits, unemployment insurance claims, and stock prices.

• Lagging Indicator
• Economic Indicator
• None of the choices

The _______ is a graphic representation of the market demand schedule and the Law of Demand

• Demand schedule
• Market
• Supply curve
• Demand curve

Unemployment Rate (percent) = Unemployed/Total Labor Force * 100

• True
• False

The inverse relationship between inflation and unemployment is illustrated using the _______.

• None of the choices
• Philip's curve
• Demand curve
• Okun's Law

Condition that savings is equal to investment

• Real GDP
• Total Real Output
• None of the choices

Labor is a service that is supplied by individuals and demanded by firms.

• True
• False

Low Unemployment

• Concepts that measure nation’s aggregate output.

Inflation = Increase in average level of prices

• True
• False

Percent Change in (Q/L) = (Percent Change in Q) - (Percent Change in P).

• True
• False

Analysis of the behavior of individual decision-making units (individuals, households, firms).

• Deflation Rate
• Inflation Rate
• Macroeconomics
• Microeconomics

Economists use the term "business cycle" to refer to:

• None of the above
• The amount of time businesses take to recover their fixed costs.
• The growth of small businesses into major corporations and then their eventual decline.
• Fluctuations in real GDP growth over time.

Compute for the employment rate (in percentage)

• 3.1%
• None of the other choices
• 3.2%
• 31%

The _____ suggested that standards of living of the poor and wealthy countries should converge on each other.

• None of the above
• The neoclassical growth model
• Endogenous growth theory,

Y = A * f(K, L ) is the formula used to measure _____.

• GDP
• Multi factor
• None of the above
• Productivity

What are the two different ways that the quantity of purchases of a good can change?

• Change in Quantity Demanded
• Black markets
• Change in Demand
• Technology
• Deterioration of product quality
• Market price below the equilibrium level
• The quantity demanded is greater than the quantity supplied
• The prices of other products from the same resources or production process
• Prices of inputs to the production process (labor, raw materials, cost of capital)
• Market shortages will occur

Aggregate demand is equal to consumption plus investment plus government spending plus net exports as shown in equation. where,

• None of the above

Ceteris paribus, means

• None of the choices
• Other things being equal
• Keep It Simple Stupid.
• Cut away all the complicating details

____________ is a condition of constant rates of growth in economic measures. With no technological change and is represented by identical constant growth rates in the labor force, total output, and the level of capital.

• None of the above
• Elasticity
• Growth

Percentage of Change = ending value- starting value /starting value x 100.

• True
• False

___________ = (Number Unemployed / Labor Force) * 100

• None of the other choices
• Labor Force Rate
• Participation Rate
• Unemployment Rate

If there is no technical progress, the output per capita will be on its growth level.

• True
• False

Opportunity cost.

• Transaction costs

Indivisibility is when some goods can be broken into small tradable quantities.

• True
• False

___________ Unemployment is associated with a stable labor force in a dynamic economy

• Cynical
• Structural
• Seasonal
• Frictional

Frictional Unemployment - stable labor force in an unstable economy. Unemployment that results from a decline in aggregate economic activity.

• True
• False

When the government increases money supply faster than the economy is growing you generally end up with deflation.

• True
• False

_________ is a very small increase of decrease in the quantity of some variable.

• None of the choices
• Marginal cost
• Marginal change
• Marginal analysis

Percentage increase in the average level of prices is called ___________.

• All of the other choices
• CPI
• Inflation rate
• Deflation rate

____________ a graph that indicates all possible combinations of two goods or services that can be produced within an economy given the full and efficient use of all available resources.

• Cost curve
• Production Possibilities curve
• Demand curve
• None of the choices

Political Science is the study of mankind in the ordinary business of life.

• True
• False

Quantity of goods and services that can be purchased with a given amount of money.

• Price Stability
• None of the above
• Producer Price Index

Production Costs = opportunity costs of resources required (e.g., cash costs) to change prices.

• True
• False

___________ = Labor Force / Civilian Non institutional Population * 100

• Unemployment Rate
• Labor Force Rate
• None of the other choices
• Participation Rate

_______- an economic indicator that changes after the overall economy has changed. Examples include investment spending, the unemployment rate, and interest rates.

• Economic Indicator
• Lagging Indicator
• None of the choices

___________ as the price of a good or service increases the quantity you would be willing and able

• None of the choices
• Law of Demand
• Law of Supply
• Change in Demand

_____ - government deficits do not affect the overall level of demand in an economy. Taxpayers expect that any increase in the deficit now must be repaid later and increase their savings in anticipation.

• Twin Deficits
• None of the above
• Crowding out
• Ricardian Equivalence

The Purchasing Power Parity exchange rate will often differ from the actual exchange rate.

• True
• False

__________ Unemployment is associated with business cycles and, more particularly, with temporary downturns in the economy

• Frictional
• Cynical
• Seasonal
• Structural

Transfer Payment - a payment made for which no goods or services are provided in return. Transfer payments are excluded from _______.

• GNP
• None of the choices
• PPP
• GDP

Determine what it would cost to purchase the quantities of goods and services in the market basket in some year identified as the base year.

• True
• False

When the amount that the quantity supplied exceeds the quantity demanded when the market price is above the equilibrium price

• Shortage
• Surplus
• Relative
• Competitive Free Market

__________as the price of a good or services increases, the quantity you would be willing and able to purchase during some period of time declines.

• None of the choices
• Law of Demand
• Law of Demand & Supply
• Law of Supply

Real GDP - value of total output corrected for any changes in prices. Also referred to as "constant-dollar" GDP.

• True
• False

An empirical study is a test of a hypothesis or theory using actual data

• True
• False

____________ is the change in the quantity of total output resulting from a unit change in a variable input, keeping all other inputs unchanged.

• None of the choices
• Growth accounting
• Marginal Product
• Technological

A shift of the demand curve in response to a change in one of the variables assumed to be held constant under the ceteris paribus assumption (e.g., income), holding the good's price constant.

• Inferior Good
• Price floor
• Change in Demand
• Normal Good

Microeconomic demand and supply curves depend on differences in ________ prices

• Relative
• Shortage
• Competitive Free Market
• Surplus

Real Interest Rate

• Types of Interest Rate related to Inflation

The principle of Occam's Razor -cut away all the complicating details that do not significantly contribute to the reliability or validity of a model.

• True
• False

Hyperinflation is generally caused by governments printing money to finance large fiscal deficits caused by wars, revolutions, the establishment of new states, or exorbitant social programs.

• True
• False

According to __________, that if more of the time is spent in one activity then you must invest your resources to develop specialized tools or machines to aid me in my task.

• Smith
• Ricardo
• None of the choices
• David

The best available economic measure of quantity is _________.

• Total GDP
• Total Output
• Total Population
• Real GDP

__________ is also referred to as a direct relationship. As the value of X increases, the value of Y increases.

• Positive
• None of the choices
• Negative
• Neutral

Goods and services those are scarce. There is an opportunity cost involved in their use or consumption.

• Services
• Economic Goods and Services
• Free Goods
• Goods

The market value of final goods and services produced by labor and property supplied by the residents of a nation during a specific period, usually 1 year.

• Real Interest Rate
• Nominal Gross Domestic Product (GDP)
• Nominal Interest Rate
• Nominal Gross National Product (GNP)

Comparing growth rates across countries is not a problem despite differences in currencies because growth rates are _____ of the units of measurement.

• None of the above
• Independent
• Dependent
• Different

It is comparative advantage or opportunity cost and not absolute advantage that yields an incentive for specialization and trade.

• True
• False

Employed Persons - persons 16 years and over who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week.

• True
• False

Expenditure approach categories are;

• Services
• All of the other choices
• Nondurable goods
• Durable goods

A severe recession in both scale and duration is called _____.

• Depression
• None of the choices
• Fluctuation
• Inflation

In Demand Curve Shifts, a change in any of these will cause the demand to curve shift to the right or left, when the demand curve is shifting to the right. The rightward shift is called ___________________.

• Positive Goods
• None of the choices
• Increase in demand
• Decrease in demand

The key theoretical advances that ___________ made were that changes in money supply and peoples' expectations can lead to any possible combination of unemployment and inflation.

• Okun
• All of the other choices
• Phelps/Friedman
• Philips

____________consists of transactions that are not documented for various reasons.

• Redtape
• None of the choices
• Illegal transactions
• Underground economy

The Ceteris Paribus assumption is of critical importance.

• True
• False

Things that are available in sufficient amounts to satisfy all possible needs. There is no opportunity cost involved in their use or consumption.

• Goods
• Services
• Economic Goods and Services
• Free Goods

___________is the quantity of goods and services that can be purchased with a given amount of money; the value of money

• None of the above
• Pushed Prices
• Price Index

_________ is the amount of labor supplied by individuals at a given real wage rate.

• Real wage
• Labor Demand Curve
• None of the other choices
• Labor Supply Curve

Independent variable can be seen in the _______________ of the equation.

• None of the choices
• Left
• Right
• Center

_______ is declining economic growth and growing unemployment.

• Contraction
• Trough
• Expansion
• Peak

Opportunity cost is:

• None of the other choices
• The price an individual pays for making a mistake
• The amount of money lost by one individual in an exchange process so that another individual might gain.

______ Latin term that used in economics means all other non-price factors that affect the amount we consume or produce do not change.

• Price floor
• Equilibrium
• Price Ceiling
• Ceteris Paribus

__________________ - the market value of final goods and services (i.e., sold to final consumers) produced by a nation during a specific period, usually 1 year.

• Total Output
• Nominal Gross Domestic Product (GDP)
• Nominal Gross National Product (GNP)
• None of the choices

A _______ is the opposite situation of a price ceiling.

• Price floor
• Price Ceiling
• Ceteris Paribus
• Equilibrium

When the amount that the quantity demanded exceeds the quantity supplied when the market price is below the equilibrium price.

• Relative
• Shortage
• Competitive Free Market
• Surplus

A recession that is major both in scale and duration.

• Deflation
• Depression
• Deterioration
• None of the choices

___________ is nominal wage corrected for the average level of prices.

• Labor Supply Curve
• Labor Demand Curve
• Real wage
• None of the other choices

In methods of measuring aggregate output, ___________ is the amount of spending by the final purchasers of output.

• Consumption
• Expenditures
• Income
• All of the other choices

Percentage decline in the average level of prices.

• Macroeconomics
• Microeconomics
• Deflation Rate
• Inflation Rate

_____ an increase in government debt is accompanied by an increase in the foreign trade deficit (imports exceeds exports)

• Twin Deficits
• Ricardian Equivalence
• Crowding out
• None of the above

Trough

Real GDP =Value of output based on prices of some base period ("constant" dollar output) eliminates effect of inflation.

• True
• False

What are the Three (3) Macroeconomic Goals?

• A low rate of unemployment
• Externalities
• Market Power
• Price stability
• Economic growth

_________ is the real value of the quantity of goods and services consumed by the average person, typically measured as average real GDP per person, per worker, or per family.

• None of the above
• Production
• Standard Living
• Growth

Accurately describes historical outcomes, and It must make reasonable predictions about the results of future observations.

• Occam's Razor
• Good Economic Model
• Law of Parsimony
• None of the choices

The unemployment rate is negatively related to changes in the growth rate of real GDP. Moreover, output fluctuates more than unemployment over the business cycle.

• Okun's law
• Philips curve
• All of the other choices
• Phelps/Friedman theory

In exchange rates,_____ means that they fluctuate day to day according to the market.

• None of the choices
• Floating
• Fixed
• PPP

Neoclassical growth theory explains that output is a function of growth in factor inputs especially on capital, labor and technological progress.

• True
• False

__________ proposes that the microeconomic labor-supply demand model is not oneof simply workers, but the supply and demand of efficient workers

• None of the other choices
• union contracts
• Efficiency wage theory
• Minimum Wage Laws

The short-term fluctuations in economic activity we see are called business cycles.

• True
• False

___________if a person can produce a good or service with lower opportunity cost than can another

• person.
• None of the choices

The market value of final goods and services (i.e., sold to final consumers) produced by a nation during a specific period, usually 1 year.

• Nominal Gross National Product (GNP)
• Nominal Interest Rate
• Nominal Gross Domestic Product (GDP)
• Real Interest Rate

In law of demand and supply:Why is the price of gasoline usually higher than the summer and Christmas vacation than in ordinary months?

• Because most families are in their vacation go to places & drive for relaxation
• Because of low supply and low prices in the world market
• None of the other choices
• Because the demand is high and supply is high.

Real GDP - value of total output corrected for any changes in prices. Also referred to as "constant-dollar" GDP. Real GDP is reported quarterly by the Bureau of Economic Analysis

• True
• False

Economic growth is

• An index of the average price level of all goods and services included in gross domestic product (GDP).
• None of the choices
• The change in the physical output of an economy, typically measured as the change in Real GDP.
• Recurrent, systematic fluctuations in the level of business activity.

The disposable income (net pay after taxes) a household receives can be disposed of in one of two ways: consumption or savings. where,

• None of the choices
• (YD=C/S)
• (YD=C-S)
• (YD=C+S)

Natural Rate of Unemployment - consistent with frictional, structural, and seasonal unemployment.

• True
• False

GDP Per Capita

• Macroeconomics/Microeconomics
• Average price of level of goods and services included in GDP
• Total GDP/Total Population
• Total Population/Total GDP

The following are the categories of government policies designed for long term economic growth except,

• Policy on national security
• Policies that promote savings
• Policies that stimulate capital accumulation.
• Policies to raise the rate of productivity growth

Real GDP may not be a perfect indicator of our well-being because it ignores some of the unmeasured benefits and costs of our behavior that we discussed in the earlier chapter on GDP accounting. But it is the best indicator that has been consistently measured over time.

• True
• False

___________ is also known as the Implicit GDP Deflator or Implicit Price

• Price Index
• None of the other choices
• Deflator.
• GDP Deflator
• GDP Inflator

______________ is a movement along a fixed supply curve in response to a change in the price of that good, ceteris paribus (everything else unchanged).

• Change on Quantity Supplied
• Change on Quantity Demanded
• None of the choices
• Change in Demand

__________is the price at which the quantity demanded is equal to the quantity supplied. Other things being unchanged, there is no tendency for this price to change.

• None of the choices
• Price Ceiling
• Price Floor
• Equilibrium Price

• Key items to describe different production capabilities

Is the number of unemployed individuals divided by the total of those employed and unemployed total labor force.

• Unemployment Rate
• Interest Rate
• Deflation Rate
• Inflation Rate

Contraction

_______ the unemployment rate is negatively related to changes in the growth rate of real GDP. Moreover, output fluctuates more than unemployment over the business cycle.

• Demand curve
• Okun's Law
• Philip's curve
• None of the above

In exchange rates,_____ means that they stay at the same value as set by the government.

• None of the above
• PPP
• Fixed
• Floating

____________ is when we specialize and both benefit after the exchange

• Opportunity cost
• Negative sum game
• None of the choices
• Positive sum game

_____- government deficit spending reduces private investment spending

• Twin Deficits
• None of the above
• Crowding out
• Ricardian Equivalence

A country should specialize in a good in which it has comparative advantage.

• True
• False

______________ - average output per hour of labor (e.g., total real GDP divided by the total number of labor-hours worked)

• Non Renewable Natural Resources
• Productivity
• GDP Per Capita
• None of the choices

GDP Deflator = Nominal (current-dollar) GDP /Real (constant-dollar) GDP * 100

• True
• False

Last year you were paid Php 470 per day as office employee. This year you received a Php 25 per hour raise. By what percentage did your rate increased?

• 18.8%
• 5.31%
• 5.05%
• None of the other choices

Net Domestic Product (NDP) = C + In + G + NX = GDP - depreciation

• True
• False

Law of Demand Ceterus Paribus

• Everything else change
• Everything else moved
• None of the choices
• Everything else unchanged

What is the value of total output (nominal GDP) corrected for any changes in prices.

• Nominal Gross Domestic Product (GDP)
• Nominal Gross National Product (GNP)
• Real GDP
• None of the choices

Analysis of the behavior of an economy as a whole is ___________.

• Macroeconomics
• Economics
• All of the other choices
• Microecomomics

Gross National Product (GNP) = C + Ig + G + NX

• True
• False

The _____ test would involve entering economic growth rates for selected countries in a spreadsheet and statistically comparing growth rates for those two groups of years.

• None of the above
• Empirical
• Analytical
• Statistical

____________ is the change in production that occurs when all resources are proportionately increased (increased by the same percentage).

• Returns to Scale
• None of the above
• Growth accounting
• Technological Change

Structural Unemployment - unemployment that results from the normal seasonal change in aggregate economic activity.

• True
• False

The fundamental method of exchange is ____________.

• Opportunity Cost
• None of the above
• Transaction Cost
• Barter

We can represent a single person's decision about how many items to purchase over a year in a table called a _______.

• Demand schedule
• Supply curve
• Market
• Demand curve

__________ a variable that depends on the value of the independent variable(s) can be seen in the left side of the equation.

• Y
• Dependent variable
• None of the above
• Independent variable

Percent Change in (P x Q) = (Percent Change in P) + (Percent Change in Q)

• True
• False

Makes reasonable predictions about the future

• Macroeconomic Goals

Growth models focus on the long-run trend in output, more commonly called potential or full-employment output, rather than the short-run booms and busts in which an economy cycles around its long-term trend.

• True
• False

The empirical test would involve entering economic growth rates for selected countries in a spreadsheet and statistically comparing growth rates for those two groups of years.

• True
• False

A period of decline in total output, income, employment, and trade, usually lasting from six months to a year.

• Goods
• Recession
• Depression

Intangible but useful activities that are valued by people.

• Services
• Goods
• Free Goods
• Economic Goods and Services

___________ is a legal requirement that maintains the market price below the equilibrium price.

• Price Ceiling
• Equilibrium Price
• None of the choices
• Price Floor

____________ cannot be used in empirical analysis.

• Income Shares
• Elasticities
• None of the choices
• Profits

What kind of resources in which examples are petroleum, natural gas, coal, and nonfuelminerals extracted from the ground is included in GDP in the products produced from them

• None of the choices
• Natural Resources
• Renewable Natural Resources
• Non Renewable Natural Resources

Economics is not an exact science.

• True
• False

GDP Deflator = All final goods and services included. Quantities variable. Imports excluded.

• True
• False

During economic contractions, when output is falling, the inflation rate also declines.

• True
• False

_____- recurring patterns of economic expansion, then contraction, then expansion again.

• None of the above

Tangible things that satisfy people's wants and desires.

• Goods
• Recession
• Depression

Employed persons + Unemployed persons = Natural Rate of Unemployment

• True
• False

___________ is a term used to denote a very high rate of inflation.

• Deflation
• None of the choices
• Hyperinflation
• Inflation

__________is the amount that the quantity supplied exceeds the quantity demanded when the market price is above the equilibrium price.

• None of the choices
• Surplus
• Shortage
• Constant

Negotiation cost

• Transaction costs

___________ a legal requirement that maintains the market price above the equilibrium price.

• Equilibrium Price
• Price Floor
• None of the above
• Price Ceiling

Macroeconomics is analysis of the behavior of an economy as a nation.

• True
• False

Nominal GDP =Value of output measured at actual prices (current dollar output). Does not correct for inflation

• True
• False

__________ is an advantage of a person who can produce a good or service with fewer resources than another person.

• Comparative
• None of the choices
• Specialized
• Absolute

If a person produces more than a person can be presumed to consume more so is wealthier or richer.

• True
• False

A market is in _______ when the quantity demanded is equal to quantity supplied at the market price.

• Equilibrium
• Price floor
• Ceteris Paribus
• Price Ceiling

Which of the following statements are positive in nature and which are normative?

• Universal health care will improve worker productivity.
• All of the other choices
• A tax cut will increase the inflation rate.
• A reduction in the unemployment rate will improve the President's reelection chances.

Reduced time wasted shifting between tasks

• Transaction costs

Aggregate real GDP is of limited use because it does reveal whether the residents of a given country are better or worse off.

• True
• False

_________ = Total employed + total unemployed.

• Unemployment Rate
• None of the other choices
• Labor Force
• Not in Labor Force

A primary measure of the health and welfare of an economy is the growth rate of real GDP, or total physical output of the economy

• True
• False

A growth rate is simply the amount of increase or decrease divided by the starting level.

• True
• False

A line showing X and Y pair is referred as ____________.

• Curve
• Slope
• None of the choices
• Origin

The selected goods and services is called the food basket.

• True
• False

Population & wealth, Savings & wealth, Rich & Poor and Convergence, Consumption & the Golden Rule

• All of the other choices
• Endogenous growth
• Solow

Contribution of increase in labor to the growth in output is the most important.

• True
• False

Demand-Pull Inflation - caused by an increase in aggregate demand for goods and services.

• True
• False

_____ applied the concept of declining returns when he conjectured in 1798 (An Essay on the Principle of Population) that the world population would eventually outgrow the capability to produce food.

• Paul Romer
• None of the choices
• Thomas Malthus
• Robert Solow

Recurrent, systematic fluctuations in the level of business activity, often characterized by changes in growth rate of real GDP.

• Goods
• Recession
• Depression

• Key items to describe different production capabilities

____________________ is measured by the money (dollar) value of all final goods and services produced byan economy during a given period of time, usually a year.

• Nominal Gross Domestic Product (GDP)
• None of the choices
• Total output
• Nominal Gross National Product (GNP)

Exchange rates can be fixed or floating.

• True
• False

In comparing growth of countries as to levels of output or income across countries we run into the problem of differences in currencies

• True
• False

The market interest rate that is paid by borrowers to lenders.

• Nominal Gross Domestic Product (GDP)
• Nominal Gross National Product (GNP)
• Real Interest Rate
• Nominal Interest Rate

Direction of Movement

• Direction of movement in forecasting business cycle

Based on the percentage you got above. If the average inflation rate last year was 8%, are you better or worse off?

• Worse off

Endogenous growth theory, first developed by _____

• Paul Romer
• Thomas Malthus
• Robert Lucas
• Robert Solow

Timing

__________- persons in the labor who are working but are not working all the hours they are willing and able to.

• Underemployment
• Discouraged workers
• Full employment
• None of the other choices

The overall goal of government economic policy is to promote economic _____.

• Stability
• Growth
• None of the above
• Change

Increase skill from repetition

• Reasons for Specialization

Unfortunately the unemployment rate is not a perfect indicator of economic activity or inactivity because ___________________.

• All of the other choices
• Survey accuracy.
• Discouraged workers
• Underemployed workers

Pro- cyclical

• Direction of movement in forecasting business cycle

________ represent a cost to not only individuals but also the macroeconomy or reduce overall economic efficiency in that they represent an unnecessary cost of transforming resources into final goods and services.

• Economic costs
• None of the other choices
• Energy costs

Real GDP= Current year Quantities x Current year Prices

• True
• False

Disposable income to national income formula where,

• (YD=Y+TR/TA)
• (YD=Y+TR-TA)
• (YD=Y+TR+TA)
• None of the choices

Under Implications of the model, a change in the government deficit can affect the following variables, what are these three variables

• It is the method of advanced economics.
• Net exports
• Savings
• Mathematical techniques are not limited in the dimensions of analysis in the way graphs are.
• Investments
• The simplifying assumptions underlying the model become more obvious.

Transportation cost

• Transaction costs

The point where the curve crosses the vertical axis is referred as ____________.

• Intercept
• Direct
• Inverse
• None of the above

What approach that measures total economic activity by adding the amount spent by allultimate or final consumers of products and service?

• Income approach
• Expenditure approach
• None of the choices

_____ is a function of the economy's use of capital, K, labor, L, and a multifactor productivity index, A.

• GDP
• Aggregate Demand
• None of the above
• Production

_______ is the point at which an expansionary phase ends and a contractionary phase begins.

• Expansion
• Trough
• Peak
• Contraction

Seasonal Unemployment - stable labor force in a dynamic economy with mismatch between skills of labor and skills demanded.

• True
• False

_____________________- the market value of final goods and services produced by labor and property supplied by the residents of a nation during a specific period, usually 1 year.

• Nominal Gross Domestic Product (GDP)
• None of the choices
• Nominal Gross National Product (GNP)
• Total Output

Net Investment (In) = Gross Investment (Ig) - Depreciation

• True
• False

___________ is the increase in total cost from the production or consumption of one additional unit of a good or service.

• None of the other choices
• Marginal Change
• Marginal Cost
• Marginal Benefit

__________- percentage rate of increase in the price index per period.

• CPI
• Inflation Rate
• Deflation Rate
• None of the other choices

• Philips curve
• All of the other choices
• Okun's law
• Phelps/Friedman theory

When many suppliers and many consumers (competitive) engaged in trade without interference from government (free).

• Shortage
• Competitive Free Market
• Relative
• Surplus

The production possibilities curve is often referred to as a ___________.

• Concave
• Linear
• Frontier
• None of the choices

Common characteristics in each of the relationship of two variables is that the change in independent variable X produces a change in dependent variable Y and represented in a math equation.

• True
• False

_________ is the level of output at which the labor market is at its natural rate of unemployment.

• Full Employment Output
• None of the other choices
• Unemployment Rate
• Labor Force Rate

____________ is the real value of the quantity of goods and services consumed by the average person, typically measured as average real GDP per person, per worker, or per family.

• None of the above
• Production
• Growth
• Standard Living

Economic growth is the change in aggregate real GDP or average real GDP per person over time.

• True
• False

The _______ is one of the central issues in macroeconomic theory and provides the starting point for understanding the complex relationships between the various measures of macroeconomic performance and the role of government economic policy.

• Contractionary Phase
• None of the choices
• Expansionary Phase

• Reasons for Specialization

GDP

• Concepts that measure nation’s aggregate output.

One of the Macroeconomic objectives is to develop better laws and government policies to maximize welfare of the society.

• True
• False

Consumer Price Index (CPI) includes

• Exports
• Imports
• The prices received for the output of domestic industries.
• Domestic producers of commodities

_____- Aggregate Output (or National Income), Y = Aggregate Demand, AD

• Undesired Inventory Draw
• Assumed Equilibrium Condition:
• Undesired Inventory Accumulation
• None of the above

Investment is equal to the change in the capital stock plus depreciation.

• True
• False

___________is the amount that the quantity demanded exceeds the quantity supplied when the market price is below the equilibrium price.

• None of the choices
• Shortage
• Surplus
• Constant

__________ is described as a fixed-weight price index (also referred to as a Laspeyres price index), which measures the cost of a fixed basket of goods relative to a base period

• None of the other choices
• Inflation Rate
• GDP Deflator
• CPI or Consumer Price Index

_________ is the change in production that occurs when all resources are proportionately increased (increased by the same percentage).

• None of the above
• Technological Change
• Growth accounting
• Returns to Scale

___________ is the amount of labor demanded by firms at a given real wage rate.

• Labor Supply Curve
• Real wage
• None of the other choices
• Labor Demand Curve

Price Index = current-year total cost of market basket of goods and services / base-year total cost of market basket of goods and services

• True
• False

Exchange Rate refers to the quantity of currency in circulation.

• True
• False

Analysis of the behavior of an economy as a whole.

• Deflation Rate
• Inflation Rate
• Microeconomics
• Macroeconomics

Complementary and Conflicting Goals

• What makes a good Economic Model

When the price of resources in the production process increases, firms try to pass on these increases to the product price this is called ________.

• None of the other choices
• Pushed Prices
• Price Index

_________ is the change in the quantity of total output resulting from a unit change in a variable input, keeping all other inputs unchanged.

• Growth accounting
• Marginal Product
• None of the choices
• Technological

_____- a symptom of disequilibrium where aggregate output < aggregate demand

• Undesired Inventory Draw
• None of the above
• Undesired Inventory Accumulation
• Assumed Equilibrium Condition:

An increase in income leads to an increase in demand (the demand curve shifts to the right).

• Normal Good
• Change in Demand
• Inferior Good
• Price floor

The curve slopes upward and to the right of the origin and also referred to as a direct relationship is called ___________.

• Equilibrium
• Negative Slope
• None of the other choices
• Positive Slope

____________________the amount by which the value of a firm's finished products exceeds the value of goods and services the firm purchases

• Sales
• None of the choices
• Gross

During an economic recovery phase where real GDP is _____ it is quite possible for the unemployment rate to increase through changes in frictional and structural unemployment.

• Growing
• Fluctuating
• Stable
• None of the above

A _______is a collection of suppliers and consumers engaged in trade.

• Supply curve
• Demand curve
• Demand schedule
• Market

_____- a symptom of disequilibrium where aggregate output > aggregate demand

• Undesired Inventory Accumulation
• Assumed Equilibrium Condition:
• Undesired Inventory Draw
• None of the choices

__________ is when many suppliers and many consumers engaged in trade without interference from government.

• Competitive Free Market
• None of the choices
• Competitive Strategies for Market
• Competitive Flea Market

An increase in income leads to a decrease in demand (the demand curve shifts to the left).

• Change in Demand
• Price floor
• Normal Good
• Inferior Good

Compute the opportunity cost , where 10 mobile phones is to 5 Simcards.

• _________ simcard.
• None of the choices
• 1 mobile phone
• 10/5
• 1/2
• 3/4

Equilibrium in the labor market occurs where the aggregate quantity of labor supplied equals the aggregate quantity of labor demanded

• True
• False

Recession is

• Is the result of low rate of unemployment only
• A period when percentage decline in the average level of prices.
• None of the choices
• A period of decline in total output, income, employment, and trade, usually lasting from six months to a year.

A legal requirement that maintains the market price below the equilibrium price.

• Price floor
• Price Ceiling
• Equilibrium
• Ceteris Paribus

___________ relates to the effect that a small or unit change one variable has on another variable.

• Elasticity
• None of the above
• Marginal analysis
• Marginal Change

Money is a common medium of exchange and represents the general purchasing power.

• True
• False

Solution: always use the previous year as the base year. Individual year deflators are "chained" (multiplied) together to produce the GDP deflator.

• True
• False

_____ simply means that if the labor force grows at 2% per year and capital grows at 2% per year (the capital-labor ratio in this steady state model is constant) then output also grows at 2% per year.

• Constant returns to scale
• PPP
• Government deficits
• None of the choices

Understanding measures of Elasticity is critically important in Microeconomics, references to Elasticities are infrequent in Macroeconomics

• True
• False

True or False: NX = X - M or Net Exports= Exports - Imports

• True
• False

_______ increasing economic growth and price inflation.

• Trough
• Peak
• Expansion
• Contraction

Participation Rate (percent) = Total Labor Force/Civilian Population * 100

• True
• False

Economic Growth

• What makes a good Economic Model

Cartesian coordinate system is not the usual graphical representation.

• True
• False

The __________ is a graphic representation of the market supply schedule and the Law of Supply

• Demand curve
• Market
• Supply curve
• Demand schedule

__________as the shift of the supply curve in response to a change in one of the variables assumed to be held constant under the ceteris paribus assumption (e.g., technology), holding the good's price constant.

• Change in Supply
• Change in Demand
• Change in Quantity Demanded
• None of the choices

Phillip’s law

• Behavior of economic variables

Production is a function of the economy's use of capital, K, labor, L, and a multifactor productivity index, A.

• None of the above
• Y
• A+f+K+L
• A+f/K+L
• A * f(K, L )

Another problem with the unemployment rate as a measure of overall labor activity is that the employed may not be working as much as they would like

• True
• False

_________ represents a combination of percentage change and marginal analysis.

• Marginal analysis
• Marginal Change
• Elasticity
• None of the above

Consumer Price Index=Only goods and services purchased by households included Quantities fixed (the market basket) Imports (of consumer goods) included.

• True
• False

In general, countries that have a larger investments in capital goods are wealthier and have economic growth rate.

• True
• False

_______- key economic statistics that provide information about business cycles and trends in overall economic performance.

• Economic Indicator
• None of the choices
• Lagging Indicator

What theory goes beyond explaining specialization by individuals to justify why macroeconomics also specialize and engage in trade ?

• Big Bang Theory
• Theory of Evolution
• Ricardo’s Theory
• Game Theory

Business cycle refers to the physical output of the economy or _____.

• Real GDP
• Fluctuations in firms' stock prices over time.
• None of the choices
• Changes in the unemployment rate caused by the hiring and firing of employees

Expansion