MACROECONOMICS

competition

In every economy people vie for the economy's rationing device, a process called

macroeconomics

The study of an economy's price level is explicitly a part of

what should be

In all cases, normative economics deals with

Opportunity cost

cost is the value of the most highly valued forfeited alternative when a choice is made.

Entrepreneurship

the talent for organizing the use of land, labor and capital, among other things.

the less likely an individual will go to college.

The higher the opportunity cost of attending college

The entire economy

In all cases, macroeconomics deals with

direct

In general, there is a ______________ relationship between the number of hours spent studying for a test and the grade earned on the test.

Ceteris paribus

"all other things constant" or "nothing else changes."

inversely related

If variable X rises as result of variable Y falling, then X and Y are

positive economics.

The absence of value judgments is the essence of

A person with a high opportunity cost of time

It usually takes less time to buy a six-pack of Pepsi, a loaf of bread, and a bag of potato chips at a small convenience store (such as 7-Eleven) than at a large, full-service grocery store. Which of the following persons is most likely to buy these items at a convenience store?

Labor

The physical and mental talents people bring to production processes comprise the resource called

Positive

Attempts to determine "what is" are part of __________ economics.

"science of scarcity”

In the textbook, economics is defined as

what of available goods and resources

A rationing device is a method used to resolve who gets

inverse relationship

If variable X rises as a result of variable Y falling, then X and Y have an

Limitations of GDP as a measure of economic welfare

Some economists argue that GDP overstates overall economic welfare because it does not include the impact of bads such as pollution.

personal consumption

Largest component of GDP (expenditure approach)

indirect business tax

Sales tax is what type of tax?

Net Exports

It measures the net demand for a country’s goods and services from the rest of the world. A positive value indicates a trade surplus; a negative value indicates a trade deficit.

Net Exports = Exports – Imports

Net Exports Formula

Easterlin paradox

The research of economists Stevenson and Wolfers tends to support the

Easterlin paradox

As income rises, happiness increases only up to a point—beyond basic needs, more money doesn't guarantee more happiness over time.

Contraction

In which phase of the business cycle does a recession occur?

lower GDP

Increases in import spending _____________________, ceteris paribus.

base-year dollars

Real GDP is always measured in

the capital consumption allowance

To derive net domestic product (NDP) from gross domestic product (GDP), we must subtract ________________ from GDP.

NDP = GDP – Capital Consumption Allowance (Depreciation)

NDP Formula

Net Domestic Product (NDP)

is the total value of all goods and services produced within a country after accounting for depreciation (the wear and tear on capital goods like machines and buildings).

Intermediate Good

A good used in the production of a final good or service.
Not counted in GDP separately to avoid double counting.

Gross Domestic Product (GDP)

is the total market value of allfinal goods and services produced annually within a country's borders.

compensation of employees.

The largest component of national income in the United States is

federal, state, and local governments

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

consumption

The sum of durable goods, nondurable goods, and services equals

Consumption, Investment, Government Spending, Net Exports

GDP (Gross Domestic Product) is made up of four main components

GDP = C + I + G + (X – M)

GDP Formula

exports minus imports

Net exports equals

It overstates GDP due to double counting.

What happens if intermediate and final goods are both counted in GDP?

recurrent swings (up and down) in Real GDP.

A business cycle refers to the

70

Consumption expenditures in the U.S. usually account for approximately __________ percent of GDP.

Yes

Can a country consume beyond its PPF?

Productive efficiency

implies that it is impossible to obtain gains in one area without losses in another.

constant opportunity costs

A PPF is a straight line as a result of

outward and inward

Production Possibilities Frontiers (PPFs) can shift both _________

outward

An ________ shift of the PPF represents economic growth or an increase in resources or technological improvements.

inward

An ________ shift can occur due to events like natural disasters, wars, a decline in the labor force, or destruction of capital, which reduce an economy's productive capacity.

the right of

In a Production Possibilities Frontier (PPF) graph, points that lie beyond to _______ the curve represent combinations of goods that are currently unattainable given the existing resources and technology.

inward

A decrease in the quantity of resources available causes the production possibilities frontier (PPF) to shift ________.

reallocation, shift

A movement from one point to another along a given PPF represents a __________ in resource allocation, while a change in resource quantity causes the PPF to __________.

Productive efficiency

An economy is producing the maximum possible output from its available resources and technology, meaning it cannot produce more of one good without reducing the production of another.

reducing

Productive efficiency implies that all resources are fully and efficiently utilized, so producing more of one good requires __________ the production of another.

Productive efficiency implies that

it is impossible to obtain gains in one area without losses in another.

shifts the PPF outward.

An increase in the quantity of resources available

92

what is the opportunity cost here?

difference between 92 and 81 opportunity cost and what she choose

why 11?

maximum output with given resources and technology

An economy is productive-efficient if it produces

a productive efficient point to another productive efficient point

The movement from point A to point B is a movement from

the implementation of a new law that interferes with productive efficiency

Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point directly to the left of it. Assuming that the PPF has not shifted, this could be due to

attainable and productive inefficient

Points that lie inside (or below) the PPF are

shifting outward (away from the origin)

In the production possibilities framework, economic growth is depicted by the PPF

productive-efficient

If the economy is producing at a point on its production possibilities frontier (PPF), the economy is

remains constant

As more fax machines are produced, the opportunity cost of producing them

Adam Smith

The concept that economic growth can do more than just give us more goods and services goes back to ________

Adam Smith

In macroeconomics, _________ is regarded as the father of modern economics and one of the earliest and most influential thinkers in economic theory, although he is primarily associated with classical economics, which predates the formal division into macro and microeconomics.

Absolute real growth

ow much the whole economy is growing.

Per-capita real growth

how much the economy is growing per person (more relevant to average income and standard of living).

Doubling time (in years) = 70 ÷ annual growth rate (%)

Rule of 70

17.5

If the annual growth rate in Real GDP is 4 percent, then it will take ____ years for the economy to double in size.

11.6

If the annual growth rate in Real GDP is 6 percent, then it will take ____ years for the economy to double in size.

human capital

refers to education, training and experience.

3.5

An economy doubles in size every 20 years if it maintains a steady annual growth rate of about __________ percent

Per-capita Real GDP= Real GDP​/ Population

Per-capita Real GDP formula

Per-capita GDP = (Total Real GDP in dollars) ÷ (Total population)

Per-capita GDP = (Total Real GDP in dollars) ÷ (Total population)

per-capita Real GDP

Per-capita real economic growth refers to an increase from one period to the next in

Real GDP

Absolute real economic growth is an increase in __________ from one period to the next.

Real GDP

"Absolute real economic growth" is defined as an increase in __________ from one period to the next.

$40,000

Real GDP in a small country is worth $8 billion. The population of the country is 200,000. What is per capita Real GDP?

$24,000

Real GDP in a small country is worth $40 billion. The population of the country is 1.666,000. What is the country's approximate per capita Real GDP?

religion

Two Harvard economists, Robert Barro and Rachel McCleary, have researched the role that ________________ plays in economic growth.

the resources labor and capital

Neoclassical growth theory emphasized how __________ contribute to growth.

ideas

According to new growth theory, discovering and implementing new __________ is what causes economic growth.

property

__________ rights refer to the range of laws, rules, and regulations that define rights for the use and transfer of resources.

39

An economy growing at a steady rate of 1.8 percent per year doubles in size approximately every __________ years.

quantity demanded

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

law of demand

A demand curve is the graphical representation of the

equilibrium price

A surplus will occur in a market when the price of the product is greater than the

Neutral good

emand does not change with income.

Normal good

demand changes with income.

price and quantity supplied.

A vertical supply curve represents an independent relationship between _____ and __________

vertical supply curve

Supply is fixed — price changes do not affect the quantity supplied because it's perfectly inelastic.

price; inversely

The law of demand states that ____________and quantity demanded are _____________ related, ceteris paribus

inversely related, ceteris paribus

The law of demand states that price and quantity demanded are

A minimum wage law (that sets the minimum wage above the equilibrium wage) can be expected to reduce the number of unskilled workers employed and/or reduce the number of hours worked by unskilled workers.

a tie-in sale

Yves is an excellent barber. However, all customers who come to him for a haircut must buy a bottle of shampoo. This type of arrangement is known as

result in a shortage of the good

A price ceiling set below the equilibrium price will

minimum wage

If the _________ is set above the equilibrium wage, then there will be fewer labor hours purchased by employers than at the equilibrium wage. This leads to reduced employment opportunities for unskilled workers, as businesses may hire fewer employees or cut hours to manage costs.

downward

Because discouraged workers are not considered unemployed, the unemployment rate may be biased ______

unemployed

If Carlos is waiting to be called back to his job from which he has been temporarily laid off, the Bureau of Labor Statistics will classify him as _______

unemployed

A seamstress who quits her job in Houston and moves to New York where additional seamstresses are needed is said to be frictionally _______