Macro Class studyguide

With respect to a PPF for goods X and Y, productive efficiency implies that in order to produce more of good X there will be a reduction in production of good Y.

True

The effect of a decrease in interest rates upon economic growth is an example of positive economics.

True

The slope of a (nonlinear) curve varies from one point to another.

True

Personal income is equal to consumption plus saving.

False

In the simple Keynesian model, the aggregate supply curve has a horizontal segment at levels of output below the level of natural Real GDP and a vertical segment at the level of natural Real GDP.

True

To an economist, an increase in demand means the same thing as an increase in quantity demanded.

False

Production possibilities frontiers (PPFs) can shift outward, but they do not shift inward.

False

The interest rate effect, the real balance effect, and the international trade effect all begin with a change in the price level.

True

Many economists argue that the labor market may take a long time for wages to adjust to new equilibrium level.

True

Discouraged workers are not counted as unemployed because they are working.

False

Natural disasters (such as the 2011 earthquake and tsunami in Japan) are examples of an adverse supply shock, which result in the SRAS curve shifting leftward.

True

All economists agree that the economy is self-regulating.

False

When wage rates rise the short-run aggregate supply curve shifts to the right.

False

Compensation of employees is the largest component of GDP when using the expenditure approach to calculate GDP.

False

Countries with a large GDP must also have a large per-capita GDP.

False

The market demand curve for a given product may be downward sloping even if no person in that market has a downward sloping demand curve.

True

"Full employment" is said to exist when the actual unemployment rate is zero.

False

If a business firm in Country A produces a good but does not sell it in that same year, that good will not be counted in Country A’s GDP.

False

To an economist, the terms factor and output are synonyms

False

GDP includes some nonmarket goods.

True

According to the classical economists, which of the following statements is false?

 

There is a direct relationship between the amount business firms invest and the interest rate.

An "increase in the quantity demanded" means that

 

price has declined and consumers therefore want to purchase more of the good.

The physical production possibilities frontier illustrates the different combinations of goods that society can produce given

the constraints of finite resources and the current state of technology.

Changes in which of the following will not cause the SRAS curve to shift?

 

the price level

Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The opportunity cost of producing the good on the vertical axis

 

is greater along curve I.

Starting from short-run equilibrium, the following occurs: labor productivity rises and individuals expect higher (future) incomes. What is the effect on the price level and Real GDP in the short run?

 

Real GDP rises and the effect on the price level cannot be determined.

If there is an increase in the amount of good B foregone as every additional unit of good A is produced, the PPF between goods A and B would

 

be a bowed-outward curve.

If an economy is operating __________ its institutional production possibilities frontier, it is producing __________ output than it would be at full employment.

 

below; less

Refer to Exhibit 6-1. Prices rose by approximately __________ percent from Year 1 to Year 5.

10.6

The primary economic reason why people cannot have everything they want is because

 

scarcity exists.

The institutional production possibilities frontier illustrates the different combinations of goods that society can obtain given

 

the constraints of finite resources and the current state of technology and institutional constraints.

A combination of Andrea's grades is a point on a PPF for two courses she is currently taking. Suppose that her PPF shifts inward. Which of the following situations are impossible given the new PPF?

 

Both of her grades to rise

Variables A and B are directly related. If we plot A on the horizontal axis and B on the vertical axis, the line that connects combinations of A and B plotted in a two-variable diagram would be

 

upward-sloping (left to right).

If GDP in year 1 is the same dollar amount as the GDP in year 2, does it follow that Real GDP in year 1 is the same as Real GDP in year 2?

 

No, since prices may not be the same in the two years.

Which of the following goods is an intermediate good?

 

lettuce that a restaurant buys to put on sandwiches

Foreign real national income rises. This raises U.S. ___________ which ________ aggregate demand (AD). The AD curve shifts ___________ as a result.

 

net exports; raises; rightward

Refer to Table 7-2. GDP in 1990 is

 

$51.

In a recessionary gap, the implications of downward wage inflexibility are that there will be

 

no rightward shifts of SRAS, allowing for the possibility of persistent high unemployment.

The employment rate equals the number of

 

employed persons divided by the civilian non-institutional population.

Refer to Figure 3-9. X is produced using input Z. If the price of Z rises, an economist would expect a movement in the market for X from

 

F to E.

Which of the following will not shift a supply curve?

 

A change in the good's own price

Refer to Figure 10-5. If investment increases, it follows that the TE curve 

 

will shift upward, possibly passing through point 2.

Refer to Figure 2-6.  Which graph depicts the result of an increase in the unemployment rate?

 

The result of an increase in the unemployment rate is not depicted by any of the graphs shown here.

Assume that Jose, Kaitlyn, Leah, and Maria are the only buyers in this market.

​
Refer to Table 3-3. Fill in blanks (A) and (B) respectively with the market quantity demanded at each given price.

 

135; 122

Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP?

 

Yes, since the country with a relatively large GDP could also have a relatively large population.

The need to make choices is most closely related to the economic concept of

 

opportunity cost.

Government purchases consist of the total dollar amount(s) spent on goods and services by the

 

federal, state, and local governments.

According to Say's law, in a money economy a reduction in consumption spending causes a __________ shift of the saving curve and therefore a __________ in the interest rate.

 

 

rightward; fall

If the natural unemployment rate is 5.5 percent, then the economy is at long-run equilibrium when the actual unemployment rate is

5.5 percent.

If income rises from $10,000 to $10,600 and consumption rises from $9,100 to $9,622, the marginal propensity to save (MPS) is

0.87