Review Questions Exam 2- Macro-Econ

A macroeconomist would concentrate on

the unemployment rate in Germany

Gross Domestic Product is calculated by adding together

money value of final goods and services.

Suppose that in 2011 you paid $150,000 for a house that was built in 2005 and sold that year for $210,000. The amount this transaction would add to the GDP in 2011 is

$0

According to economists, one of the signs of an unhealthy economy is a

declining real GDP.

If the labor force grows faster than the number employed, the

unemployment rate will rise

Inflation often bestows unearned income on

homeowners

A productivity decrease would be illustrated bya shift in the production function

downward

The difference between disposable income and consumption spending is

personal saving

The numerical value of the MPC is typically

less than 1

An increase in the U.S. price level will

Shift the expenditure schedule downward

Using the standard 45-degree line diagram, how does a decrease in net exports effect the expenditure schedule?

It shifts the expenditure schedule downward

When the expenditure schedule is too high, the result is an

inflationary gap

The only factor that can cause movement along the aggregate supply curve is the

price level

What is the main difference between microeconomics and macroeconomics?

• Microeconomics focuses on individual markets and decisions, while macroeconomics examines the economy as a whole, including issues like GDP, inflation, and unemployment.

Define aggregation in the context of macroeconomics.

Aggregation is the process of combining individual economic factors into a single, comprehensive measure, such as GDP.

How do simple supply and demand interactions affect the macro economy?

Supply and demand influence price levels and resource allocation across the economy, impacting inflation and overall economic stability.

What are some key concerns of macroeconomists?

Unemployment, inflation, economic growth, and stability are primary concerns.

What is GDP, and what are its primary uses?

Gross Domestic Product (GDP) measures the total value of all goods and services produced within a country. It's used to gauge economic performance and compare economic health between countries.

What are the main goals of macroeconomic policy?

Achieving economic growth, low unemployment, and stable prices.

Explain the difference between actual and potential GDP.

Actual GDP is the current output level of the economy, while potential GDP represents the maximum possible output without causing inflation.

What is the production function?

The production function shows the relationship between inputs (like labor and capital) and the output they produce.

How is unemployment measured?

Unemployment is typically measured by the unemployment rate, which is the percentage of the labor force actively seeking work but unable to find it.

What is inflation, and how do you calculate the inflation rate?

Inflation is the rate at which prices increase over time. The inflation rate can be calculated as: Inflation Rate=CPIold​CPInew​

CPIold​​

×100

Explain the difference between real and nominal values.

Real values are adjusted for inflation, reflecting purchasing power, while nominal values are unadjusted and reflect current market prices.