Macro Economics

Macroeconomics is mostly focused on

The economy as a whole

The two topics of primary concern in macroeconomics are

Short run fluctuations and employment and long run economic growth

The business cycle depicts

Short run fluctuations in output and employment

The term recession describes what

Output and living standards decline

Which of the following is most closely related to recessions?

Negative real growth in output

Most accurate statement about advanced economies

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

Real GDP measures

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

If the price of all goods and services Rose but the quantity produced remained unchanged what would happen to the nominal in real GDP

Nominal GDP would rise but the real GDP would be unchanged

Real GDP is preferred to nominal GDP as a measure of economic performance because

Nominal GDP uses current prices and thus may over or understate true changes in output

Harry’s pepperoni pizza parlor produce 10,000 large pepperoni pizzas last year the sold for $10 each. This year Harry’s again produce 10,000 large pepperoni pizzas but sold them for $12 each. Based on this information we can conclude to Harry’s production of large pizzas

Increase nominal GDP from last year, but real GDP was unaffected

Why are higher rates of unemployment of concern economist?

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

Unemployment describes the condition where

A person cannot get a job but is willing to work and is actively seeking work

Higher rates of unemployment are linked with

Higher crime rates as the unemployed seek to replace lost income

Inflation is defined as

An increase in the overall level of prices

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 the main focus for those measuring macroeconomic health are

Real GDP, inflation, and unemployment

Modern economic growth refers to countries that have experienced an increase in

Real output per person

What is used to measure standard of living across countries

GDP per person

Savings are generated whenever

Current income exceeds current spending

When economists refer to investmentthey are describing a situation where

Resources are devoted to increasing future output

Which of the following wouldn’t economist considered to be an investment

Boeing building a new factory

For an economy to increase investment it must

Increase savings

If an economy wants to increase its current level of investment and must

Sacrifice current consumption

Increase present savings

Comes at the expense of reduced current consumption

Banks and other financial institutions

Promote economic growth by helping to direct household savings two businesses that want to invest

A nations gross domestic product

Is the dollar value of all final output produced within the borders of the nation during a specific period of time

National income accountant can avoid multiple counting by

Only counting final goods

Net exports are

Exports less imports

Net exports are negative when

And nations imports exceed its exports

Economist define investment to include

Any increase in business inventories

Government purchases include government spending on

Government consumption of goods and public capital goods

In calculating the GDP, national income accountants

Add increases in inventories or subtract decreases and inventories

Nominal GDP is

The sum of all monetary transactions involving final goods and services that occur in the economy in a year

Real GDP refers to

GDP data that have been adjusted for changes in the price level

Real GDP measures

Current output at base your prices

A price index is

A comparison of the current price of the market basket to a fixed point of reference

If nominal GDP rises

Real GDP may either rise or fall

Economic growth is best defined as

Either real GDP or real GDP per capita

Which of the following is not a supply factor of an economic growth

Aggregate expenditures of households, businesses, and government

Recurring up swings and down swings in an economy is real GDP overtime are called

Business cycles

The phase of the business cycle in which real GDP declines is called

A recession

The phase of the business cycle in which real GDP is the minimum is called

The Trough

Inflation means that

Prices on average are rising, although some particular prices maybe falling

Demand pull inflation

Occurs when a total spending exceeds the economy’s ability to provide output at the existing price level

Demand pull inflation

Occurs when a total spending in the economy is excessive

Cost pull inflation may be caused by

A negative supply shock

Cost push inflation

Reduces real output

For determinants of the supply factors are

Increase in natural resources, increase in quantity and quality of human resources, increase in capital goods, improvements in technology

The demand factor is

To achieve higher production potential households and businesses and government must expand their purchase of goods and services

The efficiency factor is

And economy must achieve economic efficiency as well as full employment to reach its full production potential

Frictional unemployment is

Between jobs

Structural unemployment is

Workers that need new job skills or returning

Cyclical unemployment is

Unemployment that is caused by a decline in total spending

Demand pull inflation

Too much spending chasing too few goods

Cost push inflation

Explains rising prices in terms of factors that raise per unit production costs

Cost push inflation

Explains rising prices in terms of factors that raise per unit production costs