Macroeconomics (Mankiw) Final Exam
And All Actual Detailed Answers 2026.
accelerator model - Answer the model according to which investment depends on change in
output
accommodating policy - Answer a policy that yields to the effect of a shock and thereby
prevents the shock from being disruptive; for example, a policy that raises aggregate demand in
response to an adverse supply shock, sustaining the effect of the shock on prices and keeping
out put at its natural level
accounting profit - Answer the amount of revenue remaining for the owners of a firm after
all the factors of production except capital have been compensated
acyclical - Answer moving in no consistent direction over the business cycle
adaptive expectations - Answer an approach that assumes that people form their
expectation of a variable based on recently observed values of the variable
adverse selection - Answer an unfavorable sorting of individuals by their own choices; for
example, in efficiency-wage theory, when a wage cut induces good workers to quit and bad
workers to remain at a firm
aggregate - Answer total for the whole economy
aggregate demand curve - Answer the negative relationship between the price level and the
aggregate quantity of output demanded that arises from the interaction between the goods
market and the money market
aggregate-demand externality - Answer the macroeconomic impact of one firm's price
adjustment on the demand for all other firms' products
aggregate supply curve - Answer the relationship between the price level and the aggregate
quantity of output firms produce
animal spirits - Answer exogenous and perhaps self-fulfilling waves of optimism and
pessimism about the state of the economy that, according to some economists, influence the
level of investment
,appreciation - Answer a rise in the value of a currency relative to other currencies in the
market for foreign exchange
arbitrage - Answer the act of buying an item in one market and selling it at a higher price in
another market in order to profit from the price differential between the two marekts
automatic stabilizer - Answer a policy that reduces the amplitude of economic fluctuations
without regular and deliberate changes in economic policy; for example, an income tax system
that automatically reduces taxes when income falls
average propensity to consume (APC) - Answer the ratio of consumption to income
balance sheet - Answer an accounting statement that shows assets and liabilities
balanced budget - Answer a budget in which receipts equal expenditures
balanced trade - Answer a situation in which the value of imports equals the value of
exports, so net exports equal zero
Baumol-Tobin model - Answer a model of money demand positing that people choose
optimal money holdings by comparing the opportunity cost of the forgone interest from holding
money and the benefit of making less trips to the bank
bond - Answer a document representing an interest-bearing debt of the issuer, usually a
corporation or the government
borrowing constraint - Answer a restriction on the amount a person can borrow from
financial institutions, limiting that person's ability to spend his or her future income today; also
called a liquidity constraint
budget constraint - Answer the limit that income places on expenditure
budget deficit - Answer a shortfall of receipts from expenditure
budget surplus - Answer an excess of receipts over expenditure
business cycle - Answer economy-wide fluctuations in output, income, and employment
, business fixed investment - Answer equipment and structures that businesses buy fro use in
future production
capital - Answer 1. the stock of equipment and structures used in production. 2. the funds to
finance the accumulation of equipment and structures
capital budgeting - Answer an accounting procedure that measures both assets and liabilities
central bank - Answer the institution responsible for the conduct of monetary policy, such as
the Fed in the U.S.
classical dichotomy - Answer the theoretical separation of real and nominal variables in the
classical model, which implies that nominal variables do not influence real variables
classical model - Answer a model of the economy derived from the ideas of the classical, or
pre-Keynesian, economists; a model based on the assumptions that wages and prices adjust to
clear markets and that monetary policy does not influence real variables
closed economy - Answer an economy that does not engage in international trade
commodity money - Answer money that is intrinsically useful and would be valued even if it
did not serve as money
competition - Answer a situation in which there are many individuals or firms, so that the
actions of any one of them do not influence market prices
constant returns to scale - Answer a property of a production function whereby a
proportionate increase in all factors of production leads to an increase in output of the same
proportion
consumer price index (CPI) - Answer a measure of the overall prices that shows the cost of a
fixed basket of consumer goods relative to the cost of the same basket in a base year
consumption - Answer goods and services purchased by consumers
consumption function - Answer a relationship showing the determinants of consumption; for
example, a relationship between consumption and disposable income, C= C(Y-T)
And All Actual Detailed Answers 2026.
accelerator model - Answer the model according to which investment depends on change in
output
accommodating policy - Answer a policy that yields to the effect of a shock and thereby
prevents the shock from being disruptive; for example, a policy that raises aggregate demand in
response to an adverse supply shock, sustaining the effect of the shock on prices and keeping
out put at its natural level
accounting profit - Answer the amount of revenue remaining for the owners of a firm after
all the factors of production except capital have been compensated
acyclical - Answer moving in no consistent direction over the business cycle
adaptive expectations - Answer an approach that assumes that people form their
expectation of a variable based on recently observed values of the variable
adverse selection - Answer an unfavorable sorting of individuals by their own choices; for
example, in efficiency-wage theory, when a wage cut induces good workers to quit and bad
workers to remain at a firm
aggregate - Answer total for the whole economy
aggregate demand curve - Answer the negative relationship between the price level and the
aggregate quantity of output demanded that arises from the interaction between the goods
market and the money market
aggregate-demand externality - Answer the macroeconomic impact of one firm's price
adjustment on the demand for all other firms' products
aggregate supply curve - Answer the relationship between the price level and the aggregate
quantity of output firms produce
animal spirits - Answer exogenous and perhaps self-fulfilling waves of optimism and
pessimism about the state of the economy that, according to some economists, influence the
level of investment
,appreciation - Answer a rise in the value of a currency relative to other currencies in the
market for foreign exchange
arbitrage - Answer the act of buying an item in one market and selling it at a higher price in
another market in order to profit from the price differential between the two marekts
automatic stabilizer - Answer a policy that reduces the amplitude of economic fluctuations
without regular and deliberate changes in economic policy; for example, an income tax system
that automatically reduces taxes when income falls
average propensity to consume (APC) - Answer the ratio of consumption to income
balance sheet - Answer an accounting statement that shows assets and liabilities
balanced budget - Answer a budget in which receipts equal expenditures
balanced trade - Answer a situation in which the value of imports equals the value of
exports, so net exports equal zero
Baumol-Tobin model - Answer a model of money demand positing that people choose
optimal money holdings by comparing the opportunity cost of the forgone interest from holding
money and the benefit of making less trips to the bank
bond - Answer a document representing an interest-bearing debt of the issuer, usually a
corporation or the government
borrowing constraint - Answer a restriction on the amount a person can borrow from
financial institutions, limiting that person's ability to spend his or her future income today; also
called a liquidity constraint
budget constraint - Answer the limit that income places on expenditure
budget deficit - Answer a shortfall of receipts from expenditure
budget surplus - Answer an excess of receipts over expenditure
business cycle - Answer economy-wide fluctuations in output, income, and employment
, business fixed investment - Answer equipment and structures that businesses buy fro use in
future production
capital - Answer 1. the stock of equipment and structures used in production. 2. the funds to
finance the accumulation of equipment and structures
capital budgeting - Answer an accounting procedure that measures both assets and liabilities
central bank - Answer the institution responsible for the conduct of monetary policy, such as
the Fed in the U.S.
classical dichotomy - Answer the theoretical separation of real and nominal variables in the
classical model, which implies that nominal variables do not influence real variables
classical model - Answer a model of the economy derived from the ideas of the classical, or
pre-Keynesian, economists; a model based on the assumptions that wages and prices adjust to
clear markets and that monetary policy does not influence real variables
closed economy - Answer an economy that does not engage in international trade
commodity money - Answer money that is intrinsically useful and would be valued even if it
did not serve as money
competition - Answer a situation in which there are many individuals or firms, so that the
actions of any one of them do not influence market prices
constant returns to scale - Answer a property of a production function whereby a
proportionate increase in all factors of production leads to an increase in output of the same
proportion
consumer price index (CPI) - Answer a measure of the overall prices that shows the cost of a
fixed basket of consumer goods relative to the cost of the same basket in a base year
consumption - Answer goods and services purchased by consumers
consumption function - Answer a relationship showing the determinants of consumption; for
example, a relationship between consumption and disposable income, C= C(Y-T)
