Over time the U.S. economy has had
fluctuations in growth and unemployment
full employment without serious inflation
continuous growth in output per person
steadily increasing unemployment
Economics is best defined as the study of how
to clarify resources used to produce final goods and services
resources are apportioned to satisfy human wants
modern businesses have grown and prospered
technology can be used to change scarce resources into free resources
pure capitalism has become the best system for satisfying basic human wants
Economists generally classify economic resources into the following three categories
men, money, and machines
savings, spending, and investment
land, labor, and capital
physical, human, and technological
employed, unemployed, and free
Society's pool of knowledge concerning the industrial arts is called
labor
land
capital
opportunity cost
technology
The purpose of an economic model is to
be a complex, exact replica of reality
demonstrate which values and beliefs are best for the economy
make predictions about the real world
manage the economy like an automatic pilot
set the prices in a price system
When Adam Smith described the invisible hand, he was talking about
The price system
central planning
the division of labor
disguised unemployment
For this economy to produce 5 million units of consumer goods and 3 million units of defense goods,
resources must be used inefficiently
the production possibilities curve must be pushed outward
unemployment must grow
income inequality must increase
society's resources must shrink
The U.S economy may be best characterized as an example of
Market socialism
opportunistic imperialism
militaristic capitalism
pure capitalism
Mixed capitalism
A market demand curve
Shifts as the price falls
slopes outward from left to right
is unaffected by changes in consumers' tastes and incomes
measures the rate of growth of per-capita output
shows the amount buyers would like to purchase at various prices
A decrease in demand
Results from a decrease in supply
means that the demand curve has shifted to the left
increases the quantity sold in the market
reflects an increasing consumer preference for the item
causes the equilibrium price to rise
In general, supply curves slope outward to the right because
increases in the price of a commodity lead to right outward shifts of the supply curve
rising prices motivate producers to offer more units for sale
technology progresses over time, increasing the ability of firms to produce more at existing prices
of increases in input prices as production is increased
empirical studies almost always show that the is the case
For a maket to exhibit excess demand
supply must exceed demand
the equilibrium price must be too high to clear the market
the actual price must be below the equilibrium price
the demand curve must slope outward
the market must be growing
The equilibrium price is
more than $12 per pound
$12 per pound
$9 per pound
$7 per pound
less than $7 per pound
In a free market, actual price will
remain unchanged as equilibrium price changes
move toward equilibrium price
cause demand and supply curves to shift direction
always exceed equilibrium price
be very difficult to calculate
If farmers currently produce 800 bushels
the actual price is $2
the market is in equilibrium
actual price is below equilibrium price and will tend to rise
Only increases in demand would encourage the rise above 80 units
The market exhibits to surplus
Gross domestic product:
equals the total wages paid in a year
is a measure of government output
equals the total value of final goods and services produced in a year
is the sum of all goods, both final and intermediate
is an obsolete economic indicator of inflation
When measuring GDP, we double count if we include the value of:
Government expenditures
Intermediate goods
Nonmarket transactions
nonproductive transactions
net exports
GDP expressed in constant dollars is called:
capital accumulation
the net national product
permanent income
real GDP
a price index
To deflate, one must:
multiply the price ratio by 100
divide the current dollar values by the price index
subtract the constant dollar values from current dollar values
add the price index in the current year to the price index in the base year
find the difference between the values of two different sets of goods in a given year
(Data) According to the data in the table, from 2002 to 2003, GDP in constant dollars rose by:
6.5 percent
5.7 percent
4.8 percent
3.1 percent
1.7 percent
The best example of consumer nondurable counted in this year's GDP is a:
Hair cut
Refrigerator
Pizza
Concert
Used car
(Data) GDP is:
A. $1240 billion
$1250 billion
$1340 billion
$1640 billion
$2590 billion
In this economy
the stock of capital goods fell during the year
the government balanced its budget
value-added exceeded the income
output exceeded GDP
imports exceeded exports
The level of real national output purchased at each price level is called:
A market basket
An aggregate demand curve
A derived demand curve
A consumption of possibilities curve
If the money supply is fixed, increases in the price level reduce:
Interest rate
Imports
The rate of inflation
Total real output purchased
The average money cost of each transaction
When the economy is at equilibrium in the horizontal range of the short run aggregate supply curve,:
There is little upward pressure on prices because of widespread unemployment
The aggregate demand curve must be horizontal as well
Economic conditions similar to those experienced during world war II prevail
Real output is equal to potential output
A change in aggregate demand causes price levels to fall
People temporarily out of work because they are changing jobs or looking for their first jobs are examples of
frictional unemployment
structural unemployment
cyclical unemployment
inflationary unemployment
residual unemployment
People actively looking for work who cannot find jobs because of an insufficiency of aggregate demand are examples of:
Frictional unemployment
Structural unemployment
Cyclical unemployment
Inflationary unemployment
Residual unemployment
During a period when total spending is too high relative to potential output, the economy experiences:
Excessive unemployment
Failing average prices
A glut
A great crash
Inflation
The phase of the business cycle in which output is highest relative to its potential level is the:
Peak
Trough
Recession
Expansion
Trend
In general, a business cycle goes through its phases in the following sequence:
Trough, peak, expansion, recession
Recession, trough, expansion, peak
Trough, recession, expansion, peak
Trough, expansion, recession, peak
Expansion, recession, trough, peak
If Carolyn's consumption rises by $5,000 as her income from $26,000 to $32,000 per year, her marginal propensity to consume is
0.16
19
0.83
1.20
impossible to determine from the data
The average propensity to consume equals the
Change in personal consumption expenditures divided by the current level of consumption expenditures
amount spent on consumption divided by the amount of disposable income
change in personal consumption expenditures divided by the amount of disposable income
personal consumption expenditures divided by personal saving
sum of personal consumption expenditures and disposable income divided by two
An MPS of .32 implies that the MPC is
1.32
0.74
0.68
0.36
impossible to calculate unless the change in income is specified
If the interest rate is 7%, the number of projects undertaken would be
1
2
3
4
5
The relationship between household spending and disposable income is known as the
investment function
multiplier
gross domestic product
consumption function
saving function
If disposable income raises by $100 billion and personal consumption expenditure rises by $60 billion, what is the marginal propensity to consume?
0.60
0.40
1.60
1.66
2.50
If disposable income is $1,800 billion, the average propensity to consume is
.8
.84
.92
1.0
1.08
If disposable income is $1,900 billion, saving is
$16 billion
$20 billion
$144 billion
$160 billion
$180 billion
If the multiplier is 3, a $1 billion decrease in government spending will
lower equilibrium GDP by 1/3
Lower equilibrium GDP by 3
Raise equilibrium GDP by 1/3
raise equilibrium GDP by 3
leave equilibrium GDP unchanged but change intended spending by 1/3
One reason not to wait for wage rates and other input prices to fall and shift the short-run aggregate supply curve to the right in an economy experiencing a recessionary gap is that
such attention will result in inflation
unemployment would fall too fast for a complex adjustment
a government budget deficit would be created
it would take too long because wages and prices tend to be sticky
falling prices would reduce exports
Aggregate demand shifts to the right when
government spending is reduced
tax rates are reduced
equilibrium GDP is reduced
total intended spending is reduced
the inflator gap is reduced
When the equilibrium level of out put in an economy is above its potential output
the government should raise its spending
there is an inflationary gap
the long-run aggregate supply curve is horizontal
unemployment rates are high
wages and prices must rapidly falling
In an economy experiencing a high unemployment rate, appropriate fiscal policy would attempt to
wait for wages and other input prices to fall
discourage firms from investing
increase personal tax rates
reduce welfare payments to households
shift the aggregate demand curve to the right
When inflation constitutes a major economic problem, government policy may attempt to
shift the aggregate demand curve to the left
shift the aggregate supply curve to the ;eft
encourage and augment spending
raise the equilibrium price level
raise the minimum wage to reduce the effective price level
Government anti-inflationary fiscal policy
is intended to shift the short-run aggregate supply curve to the left
typically leads to an increase in total real output and a rise in the price level
leads to reduction in total real output when the short-run aggregate supply curve is positively sloped
shifts the aggregate demand curve to the right
is undertaken when the economy is in the horizontal
the value of money
rises during periods of inflation
is inversely related to the price level
is unaffected by creeping inflation
has remained relatively constant in the United States over the past 25 years
falls as real income rises
means demand is falling and supply is rising
increases the value of the money supply
rarely affects the distribution of income or wealth
is generally highest when there is plenty of excess capacity and unemployed resources
is a general upward movement in the average level of prices
In the base year, a price index has a value of
-1
zero
1/100
100x100
100
hurts people living on fixed incomes
inevitably tends to die out
has been the experience of this country since its founding
does not tend to redistribute income
inevitably leads to deflation
During periods of high inflation, investors tend to buy real estate, art, and commodities like gold because
during inflation there are the only items that are not in short supply
such items tend to grow in value at a rate higher than the inflation rate
real estate and commodities are very cheap during periods of inflation
banks and other lenders are very eager to support such investments
the purchasing power of money trises during inflationary periods
Demand-side inflation is most likely to occur when the economy
has substantial excess capacity
is approaching or operating at full employment
has an aggregate demand curve shifting to the left
has a horizontal aggregate supply curve
has labor productivity rising faster than wages
Demand-side and supply-side inflations differ in that, in one case,
total real output rises, and in other, it falls
the price level rises, and in other, it falls
borrowers benefit and, in other, savers benefit
businesses benefit, and in other, householders benefit,
inflation is temporary, and in other, inflation is permanent
In part, supply-side inflation
is at the heart of demand-side inflation
is an example of too little money chasing too may goods
is an outgrow of a perfectly competitive market structure
results from significant price increases of important resources
occurs when labor productivity rises faster than wage rates
Currency in the United States is
convertible into gold at fixed rates
fiat money
issued by commercial banks based on their deposits
another name for checking deposits and NOW accounts
any interest bearing government note
bruh
All of them
Fiat money is any money that
exist in the form of coin or currency
is issued by the Federal Reserve
has a greater face value than its purchasing power
is money because the government says so and the people accept it
earns interest when deposited in banks
Assets a government says are money and are accepted by the public as money are called
near money
funny money
sophisticated money
nominal money
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