econ 2020 exam 2

Suppose that Brazil achieved its potential GDP in 2023. This implies that in 2023, Brazil

only had frictional and structural unemployment.

According to the Keynesian macroeconomic model, _______was responsible for starting the Great Depression, and according to the monetarist ______ was responsible for the Great Depression.

too little private spending; decreases in the quantity of money

The two fundamental causes of unemployment at full employment are

job search and job rationing.

Employing an additional 1 billion hours of labor increases real GDP by $12 billion. Employing another 1 billion hours beyond the first 1 billion increases real GDP by $11 billion. Hence, we can conclude from this information that as employment increases, real GDP

increases at a decreasing rate.

If real GDP grows at a faster rate than does population, then the standard of living, 

improves.

A key reason why some nations show little or no growth is

lack of incentives to undertake actions toward growth.

The Classical macroeconomic model proposes that _____ and the new growth theory proposes that ________.

markets work efficiently to produce the best macroeconomic outcomes; the desire for profits drives increases in real GDP per person

Economic growth is a (n)________ of production possibilities, as measured by the increase in ________ over time; and sustained increases in the standard of living depend on ______.

sustained expansion; real GDP; increases in labor productivity

An important condition required for economic growth is ___which requires_____.

economic freedom; the rule of law and the ability to enforce the laws

_________decreases a firm's capital stock and ________ increases its capital stock.

depreciation; investment

Suppose Ghana wants to measure how much the standard of living has changed over the last decade. Which piece of data should Ghana use?

real GDP per person

In the loanable funds market, demanders of funds are ________ and suppliers of funds are ________.

firms and the government if it has a budget deficit; households and the government if it has a budget surplus

The crowding-out effect describes how a government budget ________ ________ the real interest rate and thereby ________ equilibrium investment.

deficit; raises; decreases

An example of physical capital is _____, and an example of financial capital is______.

Federal Express’s purchase of trucks; purchases of stocks and bonds

Over the business cycle, factors such as the quantity of capital, human capital and technology

grow but do not fluctuate as much as the quantity of labor employed.

If the price level decreases from 210.0 to 205.0, the quantity of real GDP supplied______, and the potential GDP________.

will decrease; stay the same

The Ricardo-Barro effect refers to how ________ in response to a government budget ________.

saving supply changes; deficit

Following the COVID-19 pandemic the global economy was in a recession. As a result, according to the Aggregate Supply-Aggregate demand model, in the United States, the following was likely to happen: _________; if the aggregate supply curve didn't shift, then aggregate demand would ________, real GDP would ________, and the price level would ________.

a decrease in exports; decrease; decrease; decrease

Potential GDP

neither increases or decreases as the price level changes.

Which of the following does NOT affect potential GDP?

the quantity of money

The economy of Graceland is at equilibrium with a real GDP of $2,000, and a price level of 200. Then, because of the spread of COVID-19, firms' expected profit declined and firms in Graceland decreased spending by $300. Given that the _____ effect works, the decrease in the investment spending will decrease the overall aggregate demand by _______, and the equilibrium real GDP will decrease by ______, and the equilibrium price level will_____.

multiplier; more than $300; more than $300; decrease

In the AS-Ad model, inflation arises from a persistent increase in the ____at a faster pace than a persistent increase in ______, and economic growth arises from a persistent increase in____.

aggregate demand; potential GDP; potential GDP