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Chapters 6-7
Exam 2
300
Economics
10/16/2012

Additional Economics Flashcards

 


 

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Term
an improvement in the quality of resources available
Definition
Long-term growth in production can be explained by
Term
Pakistan
Definition
Which of the following is not be considered a developed country?
Term
True
Definition
One impediment to the convergence of world economies is the vast differences in human capital.
Term
It decreases to $20 per capita
Definition
The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000.  If 50 refugees from LowTerra are arriving and they are not allowed to work, what happens with the standard of living in MiddleTerra?
Term
employment must be growing faster than the population
Definition
If per capita GDP growth exceeds labor productivity growth,
Term
GDP must increase if the same standard of living is to be maintained.
Definition
If population increases, which of the following must be true?
Term
100
Definition
The price index in the base year always equals
Term
It excludes intermediate goods as a separate entry.
Definition
Which of the following is not a problem associated with GDP as a measure of social welfare?
Term
Sandy, who is on welfare, receives $100 in food stamps.
Definition
Which of the following would not be included in the calculation of GDP?
Term
overstates, widely used
Definition
The CPI __________ inflation because it includes an item in the market basket only after the product becomes __________.
Term
It helps produce another good.
Definition
Which of the following best describes an intermediate good?
Term
the total cost of a specific market basket of consumer goods and services
Definition
The consumer price index measures changes in
Term
reduce a person's incentive to look for work
Definition
An increase in unemployment benefits is likely to do which of the following?
Term
a fixed market basket of consumer goods and services produced in the U.S. economy
Definition
The Consumer Price Index measures the cost of
Term
are actively seeking employment
Definition
People who are not currently employed, but say they want a job, are counted as unemployed only if they
Term
frictional unemployment
Definition
Sharon was being treated unfairly by her boss, so she stormed off the job and two weeks later found another position. For two weeks Sharon experienced
Term
one of every ten people in the labor force is currently unemployed
Definition
Suppose the official unemployment rate is 10 percent. We can conclude without question that
Term
demand-pull inflation is caused by movements of the aggregate demand curve; cost-push inflation is caused by movements of the aggregate supply curve
Definition
The difference between demand-pull inflation and cost-push inflation is that
Term
0.25
Definition
Suppose that when disposable income rises from $5.2 trillion to $6.0 trillion, consumption rises from $5.0 trillion to $5.6 trillion. What is the marginal propensity to save?
Term
1.0
Definition
The MPC plus the MPS equals
Term
is positive when a person spends less than her income
Definition
Saving in our simple model
Term
positive and stable
Definition
The relationship between consumption and income is
Term
increase consumption because the value of wealth has increased
Definition
A decrease in the price level will
Term
equals saving
Definition
The difference between consumption spending and disposable income
Term
the aggregate expenditure line shifts downward by $10 billion
Definition
On the aggregate expenditure graph, if autonomous investment decreases by $10 billion,
Term
4
Definition
If the marginal propensity to consume is 3/4, the simple multiplier is
Term
True
Definition
A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve.
Term
increase the level of aggregate quantity demanded
Definition
A decrease in the price level will
Term
The equilibrium level of output demanded will rise.
Definition
A decrease in the price level will have which of the following effects?
Term
planned injections into the circular flow are less than planned leakages out of the flow
Definition
Which of the following is not true at the equilibrium quantity of GDP demanded?
Term
Silicon Valley software makers
Definition
An example of industrial clustering is
Term
Definition
Term
GDP must increase if the same standard of living is to be maintained.
Definition
If population increases, which of the following must be true?
Term
False
Definition
The share of research and development funding supported by the federal government has increased over the past three decades.
Term
government policy arrived at enhancing our competitiveness with foreign industry
Definition
The term industrial policy refers to
Term
True
Definition
If on-the-job experience causes labor productivity to increase, that is the result of an improvement in human capital.
Term
True
Definition
One impediment to the convergence of world economies is the vast differences in human capital.
Term
taxes
Definition
Which of the following is a leakage from the circular flow?
Term
greater than 100
Definition
We can conclude that there has been inflation since the base year if the GDP price index in the current year is
Term
households are on the supply side of the resource market and the demand side of the product market
Definition
The simple circular flow model shows that
Term
government spending
Definition
Which of the following is an injection into the circular flow?
Term
market value of all final goods and services produced by resources located in the U.S.
Definition
Gross Domestic Product equals the
Term
enhances money's importance as a link between the present and the future
Definition
Uncertainty about inflation
Term
percentage of the labor force that does not have a job
Definition
The unemployment rate is the
Term
seasonal decreases in demand for labor
Definition
Seasonal unemployment refers to unemployment that results from
Term
a salesperson who works on commission
Definition
Which of the following people is least likely to be hurt by inflation?
Term
one of every ten people in the labor force is currently unemployed
Definition
Suppose the official unemployment rate is 10 percent. We can conclude without question that
Term
equals saving
Definition
The difference between consumption spending and disposable income
Term
shift the consumption function upward
Definition
A decrease in the price level will
Term
is the change in consumption relative to a change in disposable income
Definition
The marginal propensity to consume
Term
increase
Definition
If the U.S. price level decreases, other things equal, U.S. net exports will
Term
$14 billion
Definition
If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion, then consumption spending will rise by
Term
to maximize profit
Definition
Economists assume that the fundamental motive of investors is
Term
increase the level of aggregate quantity demanded
Definition
A decrease in the price level will
Term
That level of real GDP is the equilibrium level of real GDP demanded.
Definition
Suppose that at a particular level of real GDP, the unintended change in inventories is zero. Which of the following is true?
Term
the larger the MPC, the steeper the consumption function
Definition
Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?
Term
The equilibrium level of output demanded will rise.
Definition
A decrease in the price level will have which of the following effects?
Term
Government purchases = Net taxes
Definition
For a balanced government budget:
Term
the aggregate expenditure line shifts downward by $15 billion
Definition
On the aggregate expenditure graph, if autonomous saving increases by $15 billion,
Term
the main force behind economic growth is increases in the quality of inputs
Definition
According to Simon Kuznets,
Term
All of the answers are correct
Definition
A possible downside of industrial policy is that
Term
0 percent
Definition
If both total employment and total output always grew by 2 percent each year, what would the annual growth in labor productivity in an economy be over a decade?
Term
an improvement in the quality of resources available
Definition
Long-term growth in production can be explained by
Term
Firms switch from providing services to producing goods.
Definition
Which of the following would not slow down productivity growth?
Term
100
Definition
The price index in the base year always equals
Term
the value of leisure time is not counted in GDP
Definition
GDP is a poor measure of social well-being because
Term
It can be measured either from total spending or total expenditure.
Definition
Which of the following is true regarding Gross Domestic Product?
Term
Tom gets fired for being late so often after his alarm clock breaks, so he moves off to the wilderness.
Definition
Which of the following actions would not increase GDP?
Term
It excludes intermediate goods as a separate entry.
Definition
Which of the following is not a problem associated with GDP as a measure of social welfare?
Term
a firm buying personal computers for its secretarial staff
Definition
Which of the following is the best example of an investment as defined by economists?
Term
seasonal
Definition
The impact of __________ unemployment is removed from official unemployment figures that are reported monthly.
Term
the noninstitutionalized population over 16 in the economy who hold jobs or are looking for them
Definition
The labor force consists of all
Term
The opportunity cost of unemployment is a higher inflation rate.
Definition
Which of the following is not a cost of unemployment?
Term
causes fewer problems than unanticipated inflation
Definition
Anticipated inflation
Term
will always include some unemployment
Definition
Full employment
Term
nominal interest rate minus the inflation rate
Definition
The real interest rate can be expressed as the
Term
investment spending will not change
Definition
Suppose that autonomous investment level is $100 billion per year. If income in the economy falls,
Term
because the interest rate represents the opportunity cost of investing in capital
Definition
A firm's level of investment is tied to the interest rate
Term
saving
Definition
Which of the following is not a component of aggregate expenditure?
Term
shift the autonomous net export function upward
Definition
A decrease in the value of the U.S. dollar relative to other currencies will
Term
Savings are $150
Definition
If consumption spending is $400 and the disposable income is $550, then:
Term
real disposable income in other nations
Definition
The amount of U.S. exports purchased by the rest of the world is primarily determined by
Term
The equilibrium level of output demanded will fall.
Definition
What is the effect of an increase in the price level?
Term
decrease by $60 billion/MPS
Definition
If autonomous investment decreases by $60 billion, equilibrium real GDP demanded will
Term
real GDP on the horizontal axis and aggregate expenditure on the vertical axis
Definition
The aggregate expenditure line shows
Term
4
Definition
If the marginal propensity to consume is 3/4, the simple multiplier is
Term
the steeper the saving function
Definition
The larger the marginal propensity to save, other things constant,
Term
Unemployment will decrease
Definition
For a given price level, when real GDP is $10 million, the planned spending is $9.5 million. Which of the following is incorrect?
Term
in the 1940s
Definition
Over the last 100 years, U.S. labor productivity grew the fastest
Term
total output divided by the number of units of labor employed
Definition
Labor productivity is measured as
Term
1940s
Definition
Over the past century in the United States, the growth of labor productivity was highest in the
Term
any factor that facilitates production and exchange, such as tax laws and property rights
Definition
The rules of the game refer to
Term
False
Definition
Basic research seeks to answer specific questions or to apply scientific discoveries to the development of specific products.
Term
the ratio of a specific measure of output to a specific measure of input
Definition
Productivity is defined as
Term
consumption
Definition
The largest component of aggregate expenditure is
Term
net investment
Definition
The economy’s production possibilities depend on what happens to
Term
included in U.S. GDP because they are produced domestically
Definition
U.S. exports are
Term
False
Definition
Disposable income equals personal income minus indirect business taxes.
Term
a medical clinic's purchase of flu vaccine
Definition
Which of the following would not be an expenditure on a final good or service?
Term
It helps produce another good.
Definition
Which of the following best describes an intermediate good?
Term
demand-pull inflation is caused by movements of the aggregate demand curve; cost-push inflation is caused by movements of the aggregate supply curve
Definition
The difference between demand-pull inflation and cost-push inflation is that
Term
False
Definition
Demand-pull inflation is a sustained rise in the price level caused by a leftward shift of the aggregate demand curve.
Term
a recession in the economy
Definition
Cyclical unemployment results from
Term
black teenagers
Definition
Which of the following groups tends to have the highest unemployment rate in the United States?
Term
Stephanie, who holds a Ph.D. in history, but can only find part-time employment at a fast-food restaurant
Definition
Which of the following people would be counted in the labor force?
Term
structural
Definition
Which of the following types of unemployment is the hardest to reduce?
Term
True
Definition
The opportunity cost of investing in capital is the interest rate.
Term
marginal propensity to save
Definition
The fraction of an increase in income that is saved is referred to as the
Term
positive and stable
Definition
The relationship between consumption and income is
Term
declines to $450 billion
Definition
Imagine a macro investment demand curve that shows that, if the market interest rate is 4 percent, the quantity of investment demanded is $500 billion. Then, if the market rate rises to 5 percent, the most likely result is that the quantity of investment demanded
Term
a downward shift of the autonomous investment function
Definition
Term
decrease
Definition
If the U.S. price level increases, other things equal, U.S. net exports
Term
the marginal propensity to consume
Definition
That fraction of a change in disposable income that is consumed is called
Term
2
Definition
Term
shift upward by $40 billion
Definition
If households save $40 billion less at each level of income and the MPC = 0.8, the aggregate expenditure line will
Term
P
Definition
Which of the following is not included in the aggregate expenditure line?
Term
is defined as 1.0 divided by the marginal propensity to save
Definition
The larger the marginal propensity to save, other things constant,
Term
higher incomes and more leisure time
Definition
In the long run, changing technology on average has led to
Term
Definition
Term
employment must be growing faster than the population
Definition
If per capita GDP growth exceeds labor productivity growth,
Term
$25 per capita
Definition
The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000. What is the standard of living in MiddleTerra?
Term
less-developed countries should grow faster than advanced ones because of the ability to copy new technology
Definition
According to the convergence theory,
Term
labor
Definition
The resource whose productivity is most commonly measured is
Term
True
Definition
Education makes workers aware of the latest production techniques and more receptive to new approaches and methods.
Term
that bucket of Kentucky Fried Chicken you bought this July
Definition
Which of the following would be included in this year's GDP?
Term
product and resource market
Definition
The two basic markets in the simple circular flow model are the
Term
the value of output produced must equal the value of resource payments generated in producing that output
Definition
In double-entry GDP accounting,
Term
base-year prices
Definition
Real GDP is measured in
Term
($3.60/$3.00) ´ 100 = 120
Definition
Suppose a loaf of bread sold for $3.00 in 2008. The price of bread then increases to $3.60 in 2009. The price index for bread is
Term
True
Definition
Transfer payments are an injection into the circular flow.
Term
the real interest rate is 5 percent
Definition
If the nominal interest rate is 5 percent and there is no inflation,
Term
It results in a movement along the aggregate demand curve.
Definition
Which is true of cost-push inflation?
Term
Some unemployment exists even when the economy is healthy and growing.
Definition
Which of the following statements about unemployment is true?
Term
Your real wage fell.
Definition
Suppose you received a 3 percent increase in your nominal wage. Over the year, inflation ran about 6 percent. Which of the following is true?
Term
The economy is experiencing inflation.
Definition
Suppose the price levels in four successive years are 100, 120, 133, and 140. Which of the following is true?
Term
greater purchasing power
Definition
An increase in a person's real wage necessarily means
Term
an upward shift of the autonomous investment function
Definition
If the interest rate decreases, then there will be
Term
shift the current consumption function upward
Definition
Expectations that the price level will increase in the future will
Term
interest rates are high
Definition
Less of society's resources will be channeled into capital when
Term
investment is independent of the level of income
Definition
When economists say investment is autonomous, they mean that
Term
shift the current consumption function up
Definition
Expectations that disposable income will increase in the future will
Term
increase consumption and decrease saving at each level of income
Definition
An increase in wealth will
Term
4
Definition
If the mps is 0.25, the simple multiplier is
Term
injections exceed leakages
Definition
The economy will expand if
Term
not useful in situations where changes in aggregate expenditures cause the price level to change
Definition
The aggregate expenditure model is
Term
shift the aggregate expenditure line downward
Definition
An increase in the price level will
Term
decreases because the real value of wealth decreases
Definition
If the price level increases, other things constant, consumption spending
Term
It will shift the aggregate demand curve.
Definition
Which of the following is not true about a change in the price level?
Term
capital
Definition
Which is the resource whose quality is most often enhanced by technological change
Term
lower prices for the necessities of life
Definition
Which of the following does not contribute to an improved standard of living?
Term
False
Definition
Applied research is the search for knowledge without regard to how that knowledge will be used.
Term
Pakistan
Definition
Which of the following is not be considered a developed country?
Term
Silicon Valley software makers
Definition
An example of industrial clustering is
Term
any factor that facilitates production and exchange, such as tax laws and property rights
Definition
The rules of the game refer to
Term
-4.6 percent
Definition
If the CPI is 220 one year and 210 the next, the annual rate of inflation as measured by the CPI is approximately
Term
exports minus tariffs
Definition
Net exports is the value of
Term
Sandy, who is on welfare, receives $100 in food stamps.
Definition
Which of the following would not be included in the calculation of GDP?
Term
circular flow of output and income through different sectors of the economy
Definition
The national income accounting system measures economic activity based on the concept of the
Term
the total cost of a specific market basket of consumer goods and services
Definition
The consumer price index measures changes in
Term
not added to U.S. GDP because they are produced abroad
Definition
U.S. imports are
Term
The supply of loanable funds increases and the demand for loanable funds decreases.
Definition
Which of the following events would most likely cause the nominal interest rate to fall?
Term
rise, fall
Definition
Unemployment rates __________ during contractions and __________ during expansions.
Term
reduce a person's incentive to look for work
Definition
An increase in unemployment benefits is likely to do which of the following?
Term
295
Definition
With a total population of 1,000, in the country of Fictivia: 250 people are working, 150 are retired, 45 people are not working but they are actively looking for a job, 101 are children too young to work, 20 people dropped out of the labor force because they won the lottery. How many people are in the labor force?
Term
people overqualified for their current job are not considered unemployed
Definition
The official unemployment rate disguises the extent of the unemployment problem because
Term
those who borrow at fixed interest rates
Definition
Unanticipated inflation redistributes income across groups in society. Among the winners are
Term
increase consumption because the value of wealth has increased
Definition
A decrease in the price level will
Term
remained approximately constant as a percentage of income
Definition
Historically, consumption spending in the United States has
Term
decrease as real domestic income increases
Definition
Net exports
Term
its disposable income
Definition
The most important determinant of a household's consumption spending is
Term
imports to remain unchanged and exports to increase
Definition
An increase in incomes in other countries, other things equal, would cause U.S.
Term
cause a leftward movement along the autonomous net export function
Definition
A decrease in real disposable income will
Term
the larger the marginal propensity to consume
Definition
The smaller the marginal propensity to save, other things constant,
Term
leakages exceed injections
Definition
The economy will contract (shrink) if
Term
equilibrium real GDP demanded to increase by more than $200 billion
Definition
If the spending multiplier is greater than 1.0, a $200 billion increase in autonomous investment will cause
Term
The real value of dollar-denominated assets will rise.
Definition
A decrease in the price level will have which of the following effects?
Term
It shows the magnified change in equilibrium output demanded that arises from a change in planned aggregate spending
Definition
Which of the following best describes the multiplier?
Term
True
Definition
Movement along the aggregate expenditure curve is caused by a change in the level of income.
Term
government policy arrived at enhancing our competitiveness with foreign industry
Definition
The term industrial policy refers to
Term
True
Definition
One impediment to the convergence of world economies is the vast differences in human capital.
Term
All of the answers are correct
Definition
A possible downside of industrial policy is that
Term
True
Definition
Education makes workers aware of the latest production techniques and more receptive to new approaches and methods.
Term
Firms switch from providing services to producing goods.
Definition
Which of the following would not slow down productivity growth?
Term
It decreases to $20 per capita
Definition
The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000.  If 50 refugees from LowTerra are arriving and they are not allowed to work, what happens with the standard of living in MiddleTerra?
Term
GDP statistics understate the true volume of economic activity
Definition
Because of activity in the underground economy,
Term
9.4 percent
Definition
If the CPI is 160 one year and 175 the next, the annual rate of inflation as measured by the CPI is approximately
Term
the flow of new goods and services produced in the nation
Definition
Which of the following is the best indicator of the performance of the national economy?
Term
negative externalities
Definition
GDP is not a perfect measure of material well-being because it ignores
Term
value of all transactions in the economy during a given period
Definition
GDP does not include the
Term
($3.60/$3.00) ´ 100 = 120
Definition
Suppose a loaf of bread sold for $3.00 in 2008. The price of bread then increases to $3.60 in 2009. The price index for bread is
Term
education
Definition
In which of the following industries are workers least likely to suffer from cyclical unemployment?
Term
increases in aggregate demand or decreases in aggregate supply
Definition
Inflation can be caused by
Term
Underemployed
Definition
Mr. Bill is a chemistry professor fired from his teaching job, and now works as a sales clerk in the local grocery store. Mr. Bill is:
Term
money loses its use as a store of value
Definition
In times of rapid inflation,
Term
a downhill ski instructor who looks for work during the summer
Definition
Which of the following people would be counted as unemployed?
Term
a fixed market basket of consumer goods and services produced in the U.S. economy
Definition
The Consumer Price Index measures the cost of
Term
Chinese toys to be sold in discount department stores
Definition
Which of the following is not an example of a government purchase?
Term
True
Definition
The marginal propensity to consume measures the change in consumption divided by the change in income.
Term
shift the consumption function downward
Definition
A decrease in wealth will
Term
1.0
Definition
The MPC plus the MPS equals
Term
0.25
Definition
Suppose that when disposable income rises from $5.2 trillion to $6.0 trillion, consumption rises from $5.0 trillion to $5.6 trillion. What is the marginal propensity to save?
Term
US imports are increasing
Definition
As the US disposable income is increasing:
Term
C + I + G + (X - M)
Definition
Which of the following best describes aggregate expenditure?
Term
When planned aggregate expenditure is greater than output, real GDP demanded will fall.
Definition
Which of the following is not true?
Term
planned injections into the circular flow are less than planned leakages out of the flow
Definition
Which of the following is not true at the equilibrium quantity of GDP demanded?
Term
income level, holding the price level constant
Definition
The aggregate expenditure line shows total planned spending at each
Term
the aggregate expenditure line shifts downward by $10 billion
Definition
On the aggregate expenditure graph, if autonomous investment decreases by $10 billion,
Term
Consumption spending, investment, government purchases, and net exports
Definition
The components of planned aggregate spending are:
Term
False
Definition
The share of research and development funding supported by the federal government has increased over the past three decades.
Term
higher incomes and more leisure time
Definition
In the long run, changing technology on average has led to
Term
capital
Definition
Which is the resource whose quality is most often enhanced by technological change
Term
0 percent
Definition
If both total employment and total output always grew by 2 percent each year, what would the annual growth in labor productivity in an economy be over a decade?
Term
1940s
Definition
Over the past century in the United States, the growth of labor productivity was highest in the
Term
Pakistan
Definition
Which of the following is not be considered a developed country?
Term
the value of leisure time is not counted in GDP
Definition
GDP is a poor measure of social well-being because
Term
net investment
Definition
The economy’s production possibilities depend on what happens to
Term
circular flow of output and income through different sectors of the economy
Definition
The national income accounting system measures economic activity based on the concept of the
Term
value of all transactions in the economy during a given period
Definition
GDP does not include the
Term
It helps produce another good.
Definition
Which of the following best describes an intermediate good?
Term
newspaper journalists
Definition
An example of structural unemployment caused by a change in tastes and preferences is
Term
1970s
Definition
During which of the following decades was the U.S. inflation rate highest?
Term
borrowers
Definition
If the inflation rate is higher than expected, which of the following groups in society would be most likely to gain?
Term
the higher the nominal interest rate you will offer as a borrower and want as a lender
Definition
The higher you think the inflation rate is likely to be,
Term
drops out of the labor force because he cannot find a job
Definition
A discouraged worker is one who
Term
a general and continuing rise in the money prices of goods and services
Definition
Inflation is
Term
increases by less than the increase in disposable income
Definition
As disposable income increases, consumption spending
Term
is positive when a person spends less than her income
Definition
Saving in our simple model
Term
not influenced by disposable income
Definition
Autonomous consumption expenditures are
Term
the profitability of new investment
Definition
The non-income determinants of consumption include all of the following except one. Which is the exception?
Term
twentieth, sixth, ninth
Definition
The United States, with only one __________ of the world’s population, accounts for about one __________ of the world’s imports and one __________ of the world’s exports.
Term
all its assets minus the value of all its liabilities
Definition
A household's net wealth is the value of
Term
inventories will increase
Definition
In the income-expenditure framework, if planned aggregate expenditures are less than real GDP,
Term
letting changes in autonomous spending shift the aggregate expenditure line
Definition
We can use an aggregate expenditure line to show how an aggregate demand curve shifts by
Term
The lower the MPC, the lower the multiplier.
Definition
Which is true regarding the marginal propensity to consume and the multiplier?
Term
8
Definition
If the marginal propensity to save is 1/8, the value of the simple multiplier is
Term
stimulate U.S. exports but discourage imports, causing a rightward movement along a given aggregate demand curve
Definition
A decline in the U.S. price level, other things constant, would
Term
an increase in planned investment
Definition
Which of the following would cause a rightward shift of the aggregate demand curve?
Term
in the 1940s
Definition
Over the last 100 years, U.S. labor productivity grew the fastest
Term
the main force behind economic growth is increases in the quality of inputs
Definition
According to Simon Kuznets,
Term
an improvement in the quality of resources available
Definition
Long-term growth in production can be explained by
Term
less-developed countries should grow faster than advanced ones because of the ability to copy new technology
Definition
According to the convergence theory,
Term
False
Definition
Basic research seeks to answer specific questions or to apply scientific discoveries to the development of specific products.
Term
$25 per capita
Definition
The country of MiddleTerra has 200 people, 100 of them are working, and the real GDP is $5,000. What is the standard of living in MiddleTerra?
Term
a firm buying personal computers for its secretarial staff
Definition
Which of the following is the best example of an investment as defined by economists?
Term
the total cost of a specific market basket of consumer goods and services
Definition
The consumer price index measures changes in
Term
overstates, widely used
Definition
The CPI __________ inflation because it includes an item in the market basket only after the product becomes __________.
Term
base-year prices
Definition
Real GDP is measured in
Term
exports minus the value of imports
Definition
Net exports is the value of
Term
GDP statistics understate the true volume of economic activity
Definition
Because of activity in the underground economy,
Term
are actively seeking employment
Definition
People who are not currently employed, but say they want a job, are counted as unemployed only if they
Term
redistributes income and wealth
Definition
Unanticipated inflation is usually viewed as undesirable because it
Term
increase the quantity of loanable funds demanded
Definition
A decrease in the interest rate, other things constant, will
Term
cyclical unemployment
Definition
Which of the following is not consistent with full employment?
Term
underemployed
Definition
When workers are over-qualified for their current jobs or can find only part-time work, we say they are
Term
in the labor force divided by the adult population
Definition
The labor force participation rate is the number of people
Term
consumption and saving both increase
Definition
As disposable income increases,
Term
a change in the level of income
Definition
If investment is autonomous, which of the following is least likely to have an effect on the level of investment?
Term
regardless of whether funds must be borrowed or firms have the funds on hand
Definition
The interest rate is important to the investment decision
Term
taxes minus transfer payments
Definition
Net taxes are
Term
stock, flow
Definition
Net wealth is a __________ variable. Consumption and income are __________ variables.
Term
reduce; decrease
Definition
A drop in stock prices will __________ net wealth and __________ consumption.
Term
how much additional income is spent on consumption
Definition
What does the marginal propensity to consume tell us?
Term
The aggregate expenditure line will shift downward.
Definition
What is the effect of an increase in the price level?
Term
True
Definition
A change in consumers' expectations about the future will shift both the aggregate expenditure curve and the aggregate demand curve.
Term
aggregate demand curve outward
Definition
An increase in planned investment would shift the
Term
the spreading of ripples from a stone thrown in a pond
Definition
The simple spending multiplier is like
Term
10
Definition
If the marginal propensity to consume equals 0.9, the multiplier is
Term
Definition
Term
lower prices for the necessities of life
Definition
Which of the following does not contribute to an improved standard of living?
Term
Definition
Term
employment must be growing faster than the population
Definition
If per capita GDP growth exceeds labor productivity growth,
Term
GDP must increase if the same standard of living is to be maintained.
Definition
If population increases, which of the following must be true?
Term
False
Definition
Applied research is the search for knowledge without regard to how that knowledge will be used.
Term
True
Definition
If on-the-job experience causes labor productivity to increase, that is the result of an improvement in human capital.
Term
labor
Definition
The resource whose productivity is most commonly measured is
Term
negative externalities
Definition
GDP is not a perfect measure of material well-being because it ignores
Term
Sandy, who is on welfare, receives $100 in food stamps.
Definition
Which of the following would not be included in the calculation of GDP?
Term
It excludes intermediate goods as a separate entry.
Definition
Which of the following is not a problem associated with GDP as a measure of social welfare?
Term
households are on the supply side of the resource market and the demand side of the product market
Definition
The simple circular flow model shows that
Term
Tom gets fired for being late so often after his alarm clock breaks, so he moves off to the wilderness.
Definition
Which of the following actions would not increase GDP?
Term
product and resource market
Definition
The two basic markets in the simple circular flow model are the
Term
a recession in the economy
Definition
Cyclical unemployment results from
Term
The opportunity cost of unemployment is a higher inflation rate.
Definition
Which of the following is not a cost of unemployment?
Term
education
Definition
In which of the following industries are workers least likely to suffer from cyclical unemployment?
Term
redistributes income and wealth
Definition
Unanticipated inflation is usually viewed as undesirable because it
Term
a general and continuing rise in the money prices of goods and services
Definition
Inflation is
Term
one of every ten people in the labor force is currently unemployed
Definition
Suppose the official unemployment rate is 10 percent. We can conclude without question that
Term
taxes minus transfer payments
Definition
Net taxes are
Term
stock, flow
Definition
Net wealth is a __________ variable. Consumption and income are __________ variables.
Term
increase
Definition
If the U.S. price level decreases, other things equal, U.S. net exports will
Term
shift the current consumption function up
Definition
Expectations that disposable income will increase in the future will
Term
regardless of whether funds must be borrowed or firms have the funds on hand
Definition
The interest rate is important to the investment decision
Term
interest rates are high
Definition
Less of society's resources will be channeled into capital when
Term
anything that causes an upward shift in the saving function
Definition
Which of the following would cause a leftward shift of the aggregate demand curve?
Term
5
Definition
If the marginal propensity to consume is 4/5, the value of the simple multiplier is
Term
the flatter the saving function
Definition
The smaller the marginal propensity to save, other things constant,
Term
consumption plus planned investment
Definition
In an economy without a government and without international transactions, aggregate expenditure at each level of income is equal to
Term
the marginal propensity to consume
Definition
That fraction of a change in disposable income that is consumed is called
Term
the aggregate expenditure line shifts downward by $10 billion
Definition
On the aggregate expenditure graph, if autonomous investment decreases by $10 billion,
Term
Definition