Economic 3

Total Flash Cards » 68
 
1. 

thestudy of aggregate economic behavior is referred to as

 

macroeconomics

 
2. 

alternating periods of growth and contraction

 

business cycles

 
3. 

which of the following is a basic measure of macroeconomic performance

 

output growth unemploymentinflation

 
4. 

which is of the following is a downturn in the business cycle

 

higher unemployment rates

 
5. 

which of the following is true during the expansionary phase of the business cycle

 

real GDP increases

 
6. 

as the economy falls from the peak to the trough of the business cycle

 

cyclical unemployment should increase and real GDP should decline

 
7. 

the total value of goods and services produced within a nations boarders measured in constant prices refers to the

 

real GDP

 
8. 

a decline in an economy's level of output can lead to

 

a lower standard of loving

 
9. 

a decline in the real gdp for at least two consecutive quarters is referred to as

 

recession

 
10. 

which of the following is likely if an economy is in a recession or headed for 1"?

 

a decrease in consumer confidencea decrease in the rate of inflationan increase in unemployment

 
11. 

if the population of a country is 1000000 people its labor force consists of 800000 and 80000 people are unemployed the unemployment rate is

 

unemployment rate
unemployment rate= number of unemployed /size of labor force =80000/80000 = 10%

 
12. 

a stock person who is laid off by a department store because retail stores across the country have decreased is_______________unemployed.

 

cyclically


 
13. 

full employment in the U.S. economy means

 

the total employment rate has been reduced to zero

 
14. 

inflation is defined as

 

an increase in the average level of prices

 
15. 

inflation functions as a redistribution mechanism because people

 

have different abilities and incomes

 
16. 

real income

 

is real income adjusted for inflationis the amount of money income measured in constant dollars
reflects the purchasing power of money

 
17. 

the consumer price index

 

a measure of changes in the average price of consumer goods

 
18. 

which of the following are internal market forces

 

innovation
population spending behavior

 
19. 

external shocks to the economy

 

disruptions in trade
war, natural disasters

 
20. 

which of the following are policy levers

 

government regulation, tax policy, availability of money

 
21. 

which of the following concepts is consistent with classical theory

 

self adjustment of the economy\flexible priceslack of goverment intervention

 
22. 

the classical view of the economy is built on the concept

 

flexible wages and pricesself adjustment

 
23. 

says law sates that

 

supply creates its own demand

 
24. 

according to Keynes

 

small disturbances in prices or output were likely to be magnified by the market
government intervention in the economy is necessary at times
the economy is fairly unstable

 
25. 

any influences on macro outcomes must be transmitted through

 

aggregate supply and demand

 
26. 

the various quantities of output that all market participants are willing and able to buy at alternative levels in a given time period

 

aggregate demand

 
27. 

which of the following is not a reason for the downward slope of the aggregate demand curve

 

the income effect

 
28. 

the aggregate supply curve is upward sloping because

 

a higher price means wider profit margins and more incentive to produce

 
29. 

in macro equilibrium

 

buyers and sellers intentions are compatible

 
30. 

even if the economy is in macro equilibrium it is possible that the equilibrium

 

output is not optimal

 
31. 

which of the following is likely to occur if the U.S. government significantly increases spending o military weapons

 

aggregate demand will increase or shift to the right

 
32. 

if an economy is experiencing a recession the keynesian approach to achieving full employment is to

 

employ expansionary fiscal policy including tax cuts and more government spending

 
33. 

Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should

 

cut taxes and or increase government spending

 
34. 

which of the following ia an example of fiscal policy

 

a change in the government spending on goods and services;a change in taxes that affects consumer spending;a change in taxes that affects investment spending

 
35. 

monetary policy involves

 

the use of money and interest rates to influence the macro economy

 
36. 

a supply side policy approach to achieve both lower prices and full employment would be to

 

decrease marginal tax rates and reduce government regulation

 
37. 

fiscal policy involves

 

the use of government spending and taxes

 
38. 

inflation occurs when

 

aggregate demand increases faster than output

 
39. 

the four components of aggregate demand are

 

consumption,investment, government spending, and net exports

 
40. 

the largest component of aggregate demand for the U.S. economy is

 

consumption

 
41. 

expenditures on new plant and equipment plus changes inventories is known as

 

investment

 
42. 

net exports are

 

negative if american exports less goods that they import

 
43. 

which of the following will occur if aggregate demand is below full employment gdp

 

recession

 
44. 

the marginal propensity to consume

 

the percentage of disposable income spent on consumption

 
45. 

the multiplier is equal to

 

1/1-MPC

 
46. 

if consumers spend 80 cents out of every dollar received

 

multiplier =1/1-.80 =1/.2 =5

 
47. 

assume an MPC of .75. the change in total spending for the economy as a result of $20 billion new government spending injection would be

 

multiplier=1/1-.75 =4total change in spending= 4x 20 billion =80 billion

 
48. 

when we compare the total impact o aggregate demand of a 100 billion increase in government expenditures and a 100 billion decrease in taxes we find that the

 

increase on governt expenditures will have a greater total impact on aggregate demand

 
49. 

fiscal restraint

 

is used to reduce inflationary pressures results in leftward shift of aggregate demand includes tx hikes and spending cuts

 
50. 

m1

 

includes the most liquid forms of money;the narrowest definition of money supply;largely consists of transactions-account balances

 
51. 

one of the main functions of the bank is

 

creating money

 
52. 

if the banking system has a required reserve ratio of 25% then the money multiplier is

 

money multiplier=1/.25 = 4

 
53. 

when money serves as a mechanism for transforming current income into future purchases it is functioning as a

 

store of value

 
54. 

which of the following defines the money multip[lier

 

1/R

 
55. 

the term fractional reserve refers to

 

reserves being a fraction of total deposits

 
56. 

a firms variable cost

 

the level of output

 
57. 

which of the following are constraints on the ability of the banking system to create new money

 

willing borrowers;willing lenders;government regulation

 
58. 

the alternate measures of the money supply such as m1 m2 etc are all intended to reflect

 

variations in liquidity and accessibility of assets;whether deposits are domestic or international;how often depositors use the accounts

 
59. 

in the case of wide spread unemployment in the economy fiscal policy would call for the government running s=a budget

 

deficit

 
60. 

the policy tools

 

fiscal tax cuts changes in government spendingmonetary open market operations reserve requirements discount ratessupply side tax incentives for investment and saving deregulation education and training immigration trade policy

 
61. 

automatic stabilizer

 

federal expenditure or revenue item that automatically responds counter cyclically to changes in national income , unemployment benefits income taxes

 
62. 

fiscal year

 

the 12th month period used for accounting purposes : begins October 1 for federal government

 
63. 

stagflation

 

when the economy suffers from both inflation and unemployment at the same time

 
64. 

modern Keynesian's acknowledge that monetary policy might help

 

increases in the money supply may lower interest rates and give investment spending a boost

 
65. 

monetarists

 

believe the only response to a recession is patience

 
66. 

supply siders

 

-emphasize the need to improve production incentives.-urge cuts in marginal tax rates on investment and labor-find ways to reduce government regulation

 
67. 

four obstacles to policy success

 

goal conflicts ;measurement problems;design problems;implementation problems

 
68. 

in designing policy policy makers must depend on economic forecasts that is

 

informed guesses about what the economy will look like in the future