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A key insight into macroeconomics is that in the short run the combined effect of individual decisions is
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very different from what any one individual intended
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An economic expansion in the United States is typically associated with
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a falling unemployment rate
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Economics generally believe that a country should specialize in the production of a good or service if
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the country can produce the product while forgoing fewer alternative products than any other country
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Of the following statements, which reflect(s) a normative view:
I The United States should increase the minimum wage to $10 an hour
II There is a federal minimum wage in the United States
III The federal minimum wage in the United States is less than $10 per hour
I The United States should increase the minimum wage to $10 an hour
II There is a federal minimum wage in the United States
III The federal minimum wage in the United States is less than $10 per hour
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Statement I reflects a normative view
Positive views are found in II and III
Positive views are found in II and III
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In a simple circular flow diagram, total income and total expenditures in an economy are
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Always equal because every transaction has a buyer and a seller
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The production possibility frontier represents
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the maximum combination of goods and services available with fixed resources and technology
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The main difference between a tariff and a quota is
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A tariff generates tax revenue for the government, while a quote generates rents to the license-holders
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If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to _____, domestic consumption to ______, and domestic production to _____
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rise, fall, rise
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when a domestic country export goods to and imports goods from a foreign country, in the short run:
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domestic producers in the exporting industry may be better off
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GDP is
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the total value of all final goods and services produced in the economy in a year
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The values of all the following goods is included in the calculation of GDP except:
the value of Bridgestone tires purchased by Ford Motor Co
the value of Michelin tires purchased by Canadian car collectors
the value of Firestone tires sold at your local garage
the value of Goodyear tires purchased by the United States Secret Service
the value of Bridgestone tires purchased by Ford Motor Co
the value of Michelin tires purchased by Canadian car collectors
the value of Firestone tires sold at your local garage
the value of Goodyear tires purchased by the United States Secret Service
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the value of Bridgestone tires purchased by Ford Motor Co
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GDP
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C + I + G + (Imports- Exports)
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Real GDP is
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the value of production of all final goods and services adjusted for price changes
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If nominal GDP of 2012 is higher than nominal GDP of 2011 we can state that
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production or prices or both are higher in 2012 than in 2011
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The aggregate price level is
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the overall level of prices in the economy
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price index formula
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Present Year/Base year x 100
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The major difference between the CPI and the producer price index is that
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the producer price index is based on the cost of a basket typically purchased by producers, while the CPI is based on the cost of a basket typically purchased by consumers
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When the consumer price index rises, the typical family
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has to spend more dollars to maintain the same standard of living
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A news reporter states that the CPI in 2011 was 126. You conclude that a typical market basket in 2011 would have cost
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26 more than the same market basket of goods purchased in the base year
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Inflation rate change
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Later year - earlier year
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the term inflation is used to describe a situation in which
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there is a sustained increase in the overall level of prices in the economy
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During a recession
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unemployment increases and the growth rate of real GDP decreases
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Jim has a part-time job and would prefer to have a full-time job but has been unable to find fulll-time work. Jim is classified as
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an underemployed worker
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unemployment rate
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those that are unemployed/ those that are in the work force (employed and actively unemployed)
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Labor force participation
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Those that are in the workforce (unemployed + employed)/ Total population that are older than 16
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the employment population rate
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employed/ total population that are older than 16
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frictionally unemployed
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...
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structurally unemployed
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...
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cyclically unemployed
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...
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the natural rate of unemployment
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is composed of only structural and frictional unemployment
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real wage
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the wage one is paid adjusted for inflation
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shoe leather cost
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when hyperinflation forces one to visit the bank so frequently to keep cash holdings to a minimum
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menu ost
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the price that one faces when one has to change the prices to keep up with the agregate price elvel
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Unanticipated inflation does all of the following
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create uncertainty for the future
reduce the value of money
reduce the value of debt
reduce the value of money
reduce the value of debt
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The process of brining don inflation that is embedded in expectation is called
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disinflation
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