Macro Hourly 1

Cindy Nguyen
Quiz by Cindy Nguyen, updated more than 1 year ago
Cindy Nguyen
Created by Cindy Nguyen almost 3 years ago
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Description

This is a review of the lessons and notes from Naples ECO 102 course to help me prepare for my first exam for her.

Resource summary

Question 1

Question
Microeconomics is the study of [blank_start]individual[blank_end] behavior, as consumers, workers, employers, the company, as competitors while macroeconomics is study of [blank_start]aggregate[blank_end] outcomes of individual choices.
Answer
  • individual
  • aggregate

Question 2

Question
What is aggregate output and income? What is the abbreviation and symbol we use for it?
Answer
  • Gross Domestic Product
  • GDP
  • Y
  • U
  • Inflation

Question 3

Question
What is the abbreviation for unemployment? [blank_start]U[blank_end]
Answer
  • U

Question 4

Question
The abbreviation P stands for price level and Pdot (dot above the P) stands for the inflation rate or the rate of change of price level.
Answer
  • True
  • False

Question 5

Question
What the does abbreviation e stand for?
Answer
  • Employment
  • Exchange rate
  • Embargo

Question 6

Question
What does the abbreviation i stand for?
Answer
  • Investment
  • Interest rate
  • Inflation

Question 7

Question
For demand: - Embargo [blank_start]reduces[blank_end] our imports and exports - War [blank_start]provides[blank_end] demand for munitions, supplies for soldiers - High tariff (tax on imported goods) means [blank_start]lower[blank_end] IM, higher domestic demand, lower U - Retaliation by foreigners imposing tariffs on our exports means [blank_start]lower[blank_end] domestic demand, higher U - Higher minimum wage, more disposable income for workers, [blank_start]higher[blank_end] demand for goods, lower U
Answer
  • reduces
  • improves
  • helps
  • does not affect
  • provides
  • erases
  • decreases
  • does not affect
  • lower
  • higher
  • normal
  • lower
  • higher
  • higher
  • lower

Question 8

Question
For supply: - Change in technology considered [blank_start]beneficial[blank_end] for demand for labor (supply of jobs) - Labor-saving change in technique (obsolete skills) will [blank_start]reduce[blank_end] employment - High taxes send companies out of business - Weather conditions affect supply - High business taxes mean fire workers – if this affects costs - Technological change cuts costs, [blank_start]raises[blank_end] output and N (employment) - Labor-saving change in technique [blank_start]raises[blank_end] U - Higher minimum wage, higher costs, [blank_start]higher[blank_end] U - Runaway shops – company moves abroad, [blank_start]higher[blank_end] U here
Answer
  • beneficial
  • unbeneficial
  • reduce
  • improve
  • raises
  • lowers
  • raises
  • lowers
  • higher
  • lower
  • higher
  • lower

Question 9

Question
What is epistemology?
Answer
  • science that studies how do we think, how do we learn, how we distinguish knowledge from belief
  • theory of knowledge, theory of learning
  • how we know that what we know is true or real

Question 10

Question
What is the blank page approach?
Answer
  • Absorbing the truth without previous ideas, notions, etc
  • Seeing the information and making judgements based on what we already know, learned, and built upon
  • Processing information to understand what makes sense

Question 11

Question
How characteristics of information help us decide what's true?
Answer
  • Simplest explanations
  • Powerful general principles
  • Consistent
  • Complex
  • Inconsistent

Question 12

Question
Positivism approach is using the scientific method and normative science (asking a question and determining how to solve it).
Answer
  • True
  • False

Question 13

Question
A paradigm is a system of thinking, a conceptual framework, a mindset, a worldview, school of thought. It shapes what you see and how you understand it.
Answer
  • True
  • False

Question 14

Question
Perfect Competition (Classical Macro) 1) Price-takers, passively respond to market price, no market power to set the market W or P 2) [blank_start]Homogeneous[blank_end] product, workers 3) No [blank_start]barriers[blank_end] to exit or entry 4) [blank_start]Large[blank_end] number of companies/consumers/workers 5) [blank_start]Perfect[blank_end] information, perfect foresight
Answer
  • Homogeneous
  • barriers
  • Large
  • Perfect

Question 15

Question
Imperfect Competition (Keynes' Macro) 1) Price-makers, significant market power; 4-firm ratios of 20-30% of market enough for significant market power 2) Product [blank_start]differentiation[blank_end] is a conscious marketing strategy 3) Significant market barriers to [blank_start]entry[blank_end] 4) Many industries, only a [blank_start]few[blank_end] large firms 5) Uncertain – information is costly and not necessarily reliable; future [blank_start]cannot[blank_end] be known
Answer
  • differentiation
  • entry
  • few
  • cannot

Question 16

Question
PPF stands for [blank_start]Production[blank_end] Possibility Frontier. It refers to the [blank_start]supply[blank_end] side of the economy. A hidden assumption is that there is [blank_start]full[blank_end] resource utilization. To figure out PPF, we need to know resources (land, labor, capital), technology, and institutional context.
Answer
  • Production
  • supply
  • full

Question 17

Question
Real Capital ([blank_start]K[blank_end]) is the produced means of production such as equipment, physical plant (land, factory, buildings, etc.), and inventories (raw materials, or semi-finished products or materials).
Answer
  • K

Question 18

Question
For using PPF and graphing the changes in it: - Move along: [blank_start]Change[blank_end] in people’s choices (preferences), Companies choose to [blank_start]reallocate[blank_end] resources, increase in one and decrease in another - Shift in or out (left or right): based on the “givens”: resources, technology, institutions; either symmetric or asymmetric - Operate under the PPF: under utilization of the resources, [blank_start]below[blank_end] the curve, not reaching full potential
Answer
  • reallocate
  • Change
  • below

Question 19

Question
What is the formula for percent change? ([blank_start]final[blank_end]/[blank_start]initial[blank_end] -1) * [blank_start]100[blank_end]
Answer
  • final
  • initial
  • 100

Question 20

Question
What is the formula for finding Real Variable? ([blank_start]Nominal[blank_end] Variable/P index)*[blank_start]100[blank_end]
Answer
  • Nominal
  • 100

Question 21

Question
adjustable-rate mortgages – usually permit a 2 %-point increase in i in any year. ARMs are not a perfect protection against inflation.
Answer
  • True
  • False

Question 22

Question
Direct lending is through the bond market. Borrowers sell bonds, lenders buy bonds, and that cuts out the banking intermediaries. That’s why this is called [blank_start]disintermediation[blank_end]. Bond issuer decides on Face value, term value of bond. Bond-holders find that the Pb ([blank_start]price[blank_end] of the bond on the market) tends to [blank_start]fall[blank_end] when inflation heats up because higher inflation means higher nominal i. Formula for determining face value of bonds are Pb (1+i) = Pfv.
Answer
  • disintermediation
  • price
  • fall

Question 23

Question
Inflation is the [blank_start]increase[blank_end] of prices and assets. Deflation is the opposite and it [blank_start]increases[blank_end] the burden of debt. Both are bad to have.
Answer
  • increase
  • increases

Question 24

Question
To count as unemployed, you have to be [blank_start]available[blank_end] to work full-time, not employed, and [blank_start]actively[blank_end] seeking employment. “[blank_start]Workforce[blank_end]” means those who are employed. “[blank_start]Labor[blank_end] force” means those who are potentially employed, but includes currently unemployed. If you are a [blank_start]discouraged[blank_end] worker (given up looking for a job) you are not in the labor force. If you are a full-time [blank_start]student[blank_end] you are not in the labor force. Homemakers are considered [blank_start]available[blank_end] to work full-time and [blank_start]prison[blank_end] population is not available to work.
Answer
  • available
  • actively
  • Workforce
  • Labor
  • discouraged
  • student
  • available
  • prison

Question 25

Question
Business cycles last 2-11 years. Expansion (of output) is about 3x length of recession/contraction (of output). Recession is defined as 2 sequential quarters of decline in output. Peak is the high point of output. Trough is the low point for output.
Answer
  • Peak
  • Recession
  • Trough
  • Expansion

Question 26

Question
Layoffs are considered [blank_start]cyclical[blank_end] U – workers are laid off and await recall. Their job will be there again when the economy picks up. Depressions—they last 11-26 years, but spaced 40-60 years apart. Hit hard the advanced capitalist countries, especially the [blank_start]upstart[blank_end] country. Seasonal U – we know there are recurring patterns of [blank_start]higher[blank_end] U in the summer and in January/February after the holiday sales boom.
Answer
  • cyclical
  • upstart
  • higher

Question 27

Question
[blank_start]Cyclical[blank_end] unemployment is when people are laid off (company plans to rehire you when economy turns up). It’s a cyclical downturn. Frictional U – search for a new job by worker and employer takes [blank_start]time[blank_end], not a frictionless world. Especially true for new entrants, some jobs become vacant when people retire, quit, are fired. Has to do with job turnover, and LF turnover. Structural U – when there’s a [blank_start]mismatch[blank_end] between the workers looking and the jobs available. Mismatched skills, mismatched locations.
Answer
  • Cyclical
  • time
  • mismatch

Question 28

Question
What is the formula for finding incidence unemployment rate? U rate = [blank_start]incidence[blank_end] rate * [blank_start]duration[blank_end]
Answer
  • incidence
  • duration

Question 29

Question
Label the circular flow diagram.
Answer
  • Businesses
  • Households (HH)
  • Product Market
  • Resource (factor) Market
  • Goods, services
  • Consumer spending
  • Wages, salaries, rent, profit (pi symbol
  • Labor/land (k)

Question 30

Question
Demand is [blank_start]downward[blank_end]-sloping because of preferences and affordability. Substitution effect: as an item becomes [blank_start]cheaper[blank_end], it becomes worth it to buy more of that item, less of a substitute. Income effect: as an item becomes cheaper, you can afford to buy [blank_start]more[blank_end] of it.
Answer
  • downward
  • cheaper
  • more

Question 31

Question
Supply is [blank_start]upward[blank_end]-sloping because of [blank_start]congestion[blank_end], as you try to supply more and hire more resources, you only have so much room in your workplace.
Answer
  • upward
  • congestion

Question 32

Question
Diminishing marginal utility of goods, or rising marginal disutility of saving, the less you are consuming and more you are saving, the harder it is to give up more present consumption and save unless without a good [blank_start]incentive[blank_end].
Answer
  • incentive

Question 33

Question
What are some leakages for households and businesses (firms) in the circular flow diagram?
Answer
  • Indirect business taxes
  • CCA (Capital consumption allowance)
  • Undistributed profits (retained earni
  • Imports
  • Taxes
  • Savings

Question 34

Question
What are some injections for businesses (firms) in the circular flow diagram?
Answer
  • Investment
  • Government expeditures
  • Exports

Question 35

Question
There are three approaches for GDP accounting. [blank_start]Product[blank_end] Approach is GDP = C + I + G + (EX-IM) = C + I + G + NX. [blank_start]Income[blank_end] approach is GDI = [W’s + distributed profits + interest + rent] + [CCA + retained profits] + indirect business taxes (e.g., payroll taxes) = GDP. [blank_start]Value[blank_end]-added Approach is value added at any stage of production = Value of that output minus the value of direct produced inputs at that stage of production.
Answer
  • Product
  • Income
  • Value

Question 36

Question
Perfect Competition, embraces [blank_start]laissez-faire[blank_end], or the government letting the economy alone. From that perspective, the invisible hand of the market process works because the economy is an egalitarian and fair playing field. Small Mom & Pop grocery stores. Imperfect Competition believes there are large corporations with significant market power, but they are still technologically constrained, just like smaller firms. They think there are natural [blank_start]limits[blank_end] on firms’ size. Imperfect Competition agrees with PC that consumers are unconstrained rational individuals freely making [blank_start]choices[blank_end]. Strategic Competition believes that large corporations rather than individuals are [blank_start]unconstrained[blank_end], companies seem to be able to expand without constraint into larger and larger conglomerates. Therefore more extensive government [blank_start]intervention[blank_end] on the supply side as well as demand side is necessary. Also, consumers’ households are constrained by the need to earn a living, since most have no independent means of support.
Answer
  • laissez-faire
  • limits
  • choices
  • unconstrained
  • intervention

Question 37

Question
Additional HIDDEN assumptions we need to make explicit, to differentiation PC/IC from Strategic Competition and Keynes: PC/IC side 6) Owner/Operator (“the firm”) 7) Diminishing returns: Given fixed K stock (factory, equipment, plant), more employees are hired, workplace gets [blank_start]congested[blank_end], and productivity (output/hour) [blank_start]declines[blank_end] . 8) Companies [blank_start]maximize[blank_end] (short-run) profits 9) Companies pay for, people sell their labor-services or work on the labor market 10) Atomistic Rational individuals [blank_start]maximize[blank_end] their well-being (utility) subject to constraints of initial endowments 11) WORLDVIEW: INDIVIDUAL, and CHOICE PREVAILS
Answer
  • congested
  • declines
  • maximize
  • maximize

Question 38

Question
Additional HIDDEN assumptions we need to make explicit, to differentiation PC/IC from Strategic Competition and Keynes: Strategic Comp version 6) [blank_start]Separation[blank_end] between ownership and management, so potential conflict of interest between owners and managers (or different objective functions, i.e., goals); it matters for differentiating financial from real investment 7) Constant returns: There is typically [blank_start]excess[blank_end] capacity (unutilized equipment). Manager has choices – shifts, overtime. Given an optimal staffing ratio for equipment. For K/L, you expand output by expanding the hours each piece of equipment is used. 8) Strategic companies seek [blank_start]long[blank_end]-run profitability, willing to sacrifice short-run profits for long-run gain. Investment reflects such long-run strategic planning, not a short-run profit-maximization algorithm; matters for real investment, and for business failures 9) people sell their time and potential on the labor market, companies hire and pay for a resume, for workers’ potential. Actual labor-services are performed at work. It’s management’s job is to make sure there is the appropriate level of work intensity and quality of work performance 10) Choices are made by [blank_start]households[blank_end] of a given class, which have needs, are socially constrained and motivated, and depend on the internal dynamics of household itself 11) HOUSEHOLDS/CLASSES in social context, and NEEDS PREVAIL “With so much to choose from you’d think you’d have a choice”
Answer
  • Separation
  • excess
  • long
  • households

Question 39

Question
Stocks vs. Flows - What are stocks?
Answer
  • total wealth or savings inherited from the past
  • a stock/share in a company
  • short-term wealth or saving, from a quarter or past year

Question 40

Question
Stock vs. Flow - What are flows?
Answer
  • total wealth or savings are inherited from the past
  • short-term, can be decided today, from a given year

Question 41

Question
A flow of [blank_start]saving[blank_end] (per year) is amount of money a household puts aside in a given year for repaying debt or increasing wealth while a stock of [blank_start]saving[blank_end] is past accumulation of saving. A flow of [blank_start]investment[blank_end] is the amount of money businesses put into increasing/replacing worn out plant, equipment, and inventories while a stock of [blank_start]capital[blank_end] is amount of plant, equipment, and inventories accumulated from the past.
Answer
  • saving
  • saving
  • investment
  • capital

Question 42

Question
Keynes’ Theory of Investment – different from Neoclassical. I is the most volatile part of GDP. The [blank_start]timing[blank_end] of investment is just as important as the incentive to invest. Driven by competitive process in your industry, companies need to I to stay alive as a going concern, the decision question is timing (less about if, more about how much and when).
Answer
  • timing

Question 43

Question
Classical theory of saving: you’re only willing to save more if you’re paid a [blank_start]higher[blank_end] interest rate – theory of time preferences. Keynes: In fact, households save because they have [blank_start]needs[blank_end] as households, not individuals; we are mortal, we have a life-cycle (raise a family, buy a house, send kids to college, retire). It smooths the income received, despite the fact that prime age to work is 22-60. Life-Cycle Hypothesis – people need to [blank_start]save[blank_end] over their life for big-ticket items like cars, homes, college education, or for when you won’t have income coming in – retirement. Permanent-Income Hypothesis – people’s [blank_start]expenditures[blank_end] depend on their average or usual income, not temporary rises or falls. Substitution effect: [blank_start]higher[blank_end] price of something leads to change in quantity you choose. Income effect: [blank_start]higher[blank_end] P of something means you can “afford” a different amount.
Answer
  • higher
  • needs
  • save
  • expenditures
  • higher
  • higher

Question 44

Question
The Saving Function: S = Sa + mpsY(d). Sa is [blank_start]autonomous[blank_end] saving, mps is marginal propensity to save. mps is the [blank_start]slope[blank_end] of the saving function where (change of S/change of Y).
Answer
  • autonomous
  • slope

Question 45

Question
The Consumption function can be derived from the saving function. C = Ca + mpcY. Ca is autonomous [blank_start]consumption[blank_end]. Ca = -Sa. mpc is marginal propensity to consume (1-[blank_start]mps[blank_end]) and Y is income.
Answer
  • consumption
  • mps

Question 46

Question
The Aggregate Expenditure (AE) function is AE = C+I+G+NX(EX-IM). It can also be written as AE = [blank_start]A[blank_end] +mpcY where mpcY is induced AE.
Answer
  • A

Question 47

Question
So Production = demand So y = GDI = GDP = AE Or [blank_start]Ys[blank_end] = AE Slope of Ys = [blank_start]1[blank_end]
Answer
  • 1
  • Ys

Question 48

Question
PC/IC has [blank_start]Diminishing[blank_end] Returns in L market, full K [blank_start]utilization[blank_end] and [blank_start]Short[blank_end]-run profit maximization. While Strategic has [blank_start]Constant[blank_end] returns, [blank_start]excess[blank_end] capacity and Strategic choices for [blank_start]long[blank_end]-run/sustainable profitability. Diminishing returns are as the company highers more people there is an increase in labor hours while the MPL (marginal product of labor) is diminishing. MPL is change of output/change of labor hours so APL (average product of labor = total output/total labor-hours) is also diminishing. That means there will be rising costs.
Answer
  • Diminishing
  • utilization
  • Short
  • Constant
  • excess
  • long

Question 49

Question
Equilibrium will be where both conditions are met, where the two lines [blank_start]cross[blank_end]. There is no further tendency to [blank_start]move[blank_end].
Answer
  • move
  • cross

Question 50

Question
The Income Tautology formula is Y = C + S + T, or Y = C + S.
Answer
  • True
  • False

Question 51

Question
Equilibrium GDP is Y = A*MULT. MULT formula is MULT = 1/(1-mpc) = 1/(mps).
Answer
  • True
  • False

Question 52

Question
Real interest formula is ireal = (inominal – (inflation rate))
Answer
  • True
  • False

Question 53

Question
I = I(E, i, confidence) Keynes’s Investment function S = ΔNW = Δ (Assets – Liabilities) Keynesian Saving – anything that adds to net worth
Answer
  • True
  • False

Question 54

Question
What affects GDP?
Answer
  • Final products produced
  • Products produced before
  • Final output
  • Final output when it was first produced/sold

Question 55

Question
What is the value added-approach?
Answer
  • Total expenditures at each stage of the production process are added up to calculate total value produced.
  • The value of output plus the value of inputs equals total value created.
  • The value of output minus the value of intermediate goods is added up across all sectors.
  • Sum up the value created in each sector over all sectors.

Question 56

Question
What is autonomous saving?
Answer
  • What you spend when your income is 0.
  • What you automatically save after each paychecl
  • What the bank automatically deposits into your saving
  • A fixed amount saved each time

Question 57

Question
If there is dissaving, then what can be said about the relationship of consumer spending to personal income?
Answer
  • Consumer spending > personal income
  • Consumer spending < personal income
  • Consumer spending = personal income

Question 58

Question
What is the definition of equilibrium in macroeconomics?
Answer
  • A situation in which equilibrium price has brought quantity supplied equal to quantity demanded in all markets.
  • A situation from which there is no tendency to move.
  • Full employment and stable prices.
  • Full employment alone.

Question 59

Question
Why does an initial increase in aggregate expenditure of $l0 million lead to an increase in national income of more than $l0 million? Explain the economic process behind the multiplier as if to someone who never had the course.
Answer
  • Because the mpc is greater than one.
  • Those employed because of the increased demand in turn increase their total consumer spending, which leads to higher national output and income, and further consumer spending.
  • Because the mpc is a fraction so MULT = 1/(1-mpc) is greater than one.
  • When aggregate expenditure increases by $l0 million, national income will also only increase by $l0 million, because AE always equals Y.

Question 60

Question
To realize a targeted real interest rate, bond-buyers who will become bond-holders have to [blank_start]lower[blank_end] their offer price to buy bonds, to realize a higher (nominal) interest rate, to cover inflation. The bond market falls when there is [blank_start]inflation[blank_end]. Higher inflation rate, higher nominal interest rate expected in bond market to cover inflation, reduced prices of bonds in the marketplace. Bond-holders [blank_start]hate[blank_end] this. It means their portfolio of bonds falls in value when there is [blank_start]inflation[blank_end].
Answer
  • lower
  • raise
  • inflation
  • deflation
  • hate
  • love
  • inflation
  • deflation

Question 61

Question
There is a conflict of interest between industry and finance over inflation: borrowers (industry, most households) do not mind a little [blank_start]inflation[blank_end], since it reduces the real carrying costs of debt. Lenders (finance, especially bond-holders), [blank_start]hate[blank_end] inflation for reducing their real interest earnings or even forcing them to choose between capital loss and illiquidity on bonds.
Answer
  • hate
  • love
  • inflation
  • deflation
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