macro ch.6

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The two topics of primary concern in macroeconomics are:

short-run fluctuations in output and employment and long-run economic growth.

The term "recession" describes a situation where:

output and living standards decline.

When economists refer to "investment," they are describing a situation where:

resources are devoted to increasing future output.

Which of the following statements is most accurate about advanced economies?

Economies experience a positive growth trend over the long run but experience significant variability in the short run.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

nominal GDP would rise, but real GDP would be unchanged.

Why are high rates of unemployment of concern to economists?

There is lost output that could have been produced if the unemployed had been working.

Why are economists concerned about inflation?

Inflation lowers the standard of living for people whose income does not increase as fast as the price level.

The three statistics that are the main focus for those measuring macroeconomic health are:

real GDP, inflation, and unemployment.

Before the period of modern economic growth:

rates of population growth virtually matched rates of output growth.

Which of the following is used to measure directly the average standard of living across countries?

GDP per person

Savings are generated whenever:

current income exceeds current spending.

Shocks to the economy occur:

when expectations are unmet.

Real GDP measures the:

value of final goods and services produced within the borders of a country, corrected for price changes.

For an economy to increase investment, it must:

increase saving

Banks and other financial institutions:

promote economic growth by helping to direct household saving to businesses that want to invest.

Which of the following is an example of a demand shock?

Consumers become worried about job loss and buy fewer goods and services than expected.

Supply shocks:

occur when sellers face unexpected changes in the availability and/or prices of key inputs.

When demand shocks lead to recessions, it is mainly due to:

price inflexibility.

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