Principles of Macroeconomics Midterm 1 Exam Chapter 1-3, 8, 9 Hubbard and O’Brian

Principles of Macroeconomics Midterm 1 Exam Chapter 1-
3, 8, 9 Hubbard and O’Brian


Consumerzpricezindexz(CPI)z-zCORRECTzANSWER-
Anzaveragezofzthezpriceszofzthezgoodszandzserviceszpurchasedzbyztheztypicalzurbanzfamilyzofzfour.



Cyclicalzunemploymentz-zCORRECTzANSWER-Unemploymentzcausedzbyzazbusinesszcyclezrecession.



Deflationz-zCORRECTzANSWER-Azdeclinezinzthezpricezlevel.



Discouragedzworkersz-zCORRECTzANSWER-
Peoplezwhozarezavailablezforzworkzbutzhaveznotzlookedzforzazjobzduringzthezpreviouszfourzweekszbecausezt
heyzbelieveznozjobszarezavailablezforzthem.



Efficiencyzwagez-zCORRECTzANSWER-Azhigher-than-
marketzwagezthatzazfirmzpaysztozincreasezworkerzproductivity.



Frictionalzunemploymentz-zCORRECTzANSWER-Short-
termzunemploymentzthatzariseszfromzthezprocesszofzmatchingzworkerszwithzjobs.



Inflationzratez-zCORRECTzANSWER-Thezpercentagezincreasezinzthezpricezlevelzfromzonezyearztoztheznext.



Laborzforcez-zCORRECTzANSWER-Thezsumzofzemployedzandzunemployedzworkerszinzthezeconomy.



Laborzforcezparticipationzratez-zCORRECTzANSWER-Thezpercentagezofzthezworking-
agezpopulationzinzthezlaborzforce.



Menuzcostsz-zCORRECTzANSWER-Thezcostsztozfirmszofzchangingzprices.

,Naturalzratezofzunemploymentz-zCORRECTzANSWER-
Theznormalzratezofzunemployment,zconsistingzofzfrictionalzunemploymentzpluszstructuralzunemployment.



Nominalzinterestzratez-zCORRECTzANSWER-Thezstatedzinterestzratezonzazloan.



Pricezlevelz-zCORRECTzANSWER-Azmeasurezofzthezaveragezpriceszofzgoodszandzserviceszinzthezeconomy.



Producerzpricezindexz(PPI)z-zCORRECTzANSWER-
Anzaveragezofzthezpriceszreceivedzbyzproducerszofzgoodszandzserviceszatzallzstageszofzthezproductionzproce
ss.



Realzinterestzratez-zCORRECTzANSWER-Theznominalzinterestzratezminuszthezinflationzrate.



Structuralzunemploymentz-zCORRECTzANSWER-
Unemploymentzthatzariseszfromzazpersistentzmismatchzbetweenzthezskillszandzattributeszofzworkerszandzt
hezrequirementszofzjobs.



Unemploymentzratez-zCORRECTzANSWER-Thezpercentagezofzthezlaborzforcezthatziszunemployed.



Unemploymentzratez-zCORRECTzANSWER-#zofzunemployed/laborzforcezxz100



Laborzforcezparticipatezratez-zCORRECTzANSWER-laborzforce/working-agezpopulationzx100



employment-populationzratioz-zCORRECTzANSWER-employedz/zworkingzagezpopulation



Employedz-zCORRECTzANSWER-
someonezwhozcurrentlyzhaszazjobzorzwhozisztemporarilyzawayzfromzhiszorzherzjob



Marketz-zCORRECTzANSWER-
azgroupzofzbuyerszandzsellerszofzazgoodzorzservicezandzthezinstitutionzorzarrangementzbyzwhichztheyzcomez
togetherztoztrade

, ThreezEconomiczIdeasz-zCORRECTzANSWER-1.zPeoplezarezrational

2.zPeoplezrespondztozeconomiczincentives

3.zOptimalzdecisionszarezmadezatzthezmargin



Economistsz-zCORRECTzANSWER-
assumezthatzconsumerszandzfirmszusezallzavailablezinformationzasztheyzactztozachieveztheirzgoals.zRational
zindividualszweighzthezbenefitszandzcostszofzeachzaction,zandztheyzchoosezanzactionzonlyzifzthezbenefitszou

tweighzthezcosts.



Marginalz-zCORRECTzANSWER-additionalzorzextra



OptimalzDecisionz-zCORRECTzANSWER-
continuezanyzactivityzupztozthezpointzwherezthezmarginalzbenefitzequalszthezmarginalzcost



MarginalzAnalysisz-zCORRECTzANSWER-
analysiszthatzinvolveszcomparingzmarginalzbenefitszandzmarginalzcosts



EconomiczProblemz-zCORRECTzANSWER-
Societyzhaszazlimitedzamountzofzeconomiczresourceszandzsozcanzproducezonlyzazlimitedzamountzofzgoodsz
andzservices.



Trade-offz-zCORRECTzANSWER-
producingzmorezofzonezgoodzorzservicezmeanszproducingzlesszofzanotherzgoodzorzservice.

Theyzforcezsocietyztozmakezchoiceszwhenzansweringzthezthreezfundamentalzquestions.



OpportunityzCostz-zCORRECTzANSWER-Thezhighest-
valuedzalternativezthatzmustzbezgivenzupztozengagezinzanzactivity.



ThreezFundamentalzQuestionsz-zCORRECTzANSWER-1.zWhatzgoodszandzserviceszwillzbezproduced?

2.zHowzwillzthezgoodszandzserviceszbezproduced?

3.zWhozwillzreceivezthezgoodszandzserviceszproduced?