MACROECONOMICS FINAL REVIEW
QUESTIONS & UPDATED PASSED
ANSWERS LATEST VERSION
Economics - CORRECT ANSWER the study of how people, institutions, and society
make economic choices under conditions of scarcity.
Macroeconomics - CORRECT ANSWER the parts of economics concerned with the
economy as a whole; with such major aggregates as the household, business, and
government sectors; and with measure of the total economy.
Circular Flow Model - CORRECT ANSWER the flow of resources from household to
firms and of products from firms to households. These flows are accompanied by
reverse flows of money firms to households and from households to firms.
Opportunity Cost - CORRECT ANSWER the value of the good, service or time forgone
to obtain something else.
Law of Demand - CORRECT ANSWER the principle that, other things equal, an
increase in a products price will reduce the quantity of it demanded, and conversely for
a decrease in price.
Demand Curve - CORRECT ANSWER a curve illustrating the inverse relationship
between the price of a product and the quantity of it demanded, other things equal.
Supply Curve - CORRECT ANSWER a curve illustrating the direct relationship between
the price of a product and the quantity of it supplied, other things equal.
Market Equilibrium - CORRECT ANSWER is set by the interaction of supply and
demand. Equilibrium price is the price at which the quantity demanded by consumers
and the quantity that firms are willing to supply of a good or service are the same.
Change in Demand - CORRECT ANSWER a change in the quantity demanded of a
good or service at every price; a shift of the demand curve to the left or right.
Change in Quanitity Demand - CORRECT ANSWER a change in the quantity
demanded due to an increase or decrease in the price of the product under
consideration; a movement from one point to another on a fixed demand curve.
GDP - CORRECT ANSWER is the total market value of all final goods and services
produced in the economy in one year. (GDP= C+Ig+G+Xn)
, GDP=C+Ig+G+Xn - CORRECT ANSWER (c) Personal Consumption Expeditures (Ig)
Gross Private Domestic Investment (G) Government Purchases (Xn) Net Exports
Total Market Value - CORRECT ANSWER The unit of measure for real domestic
output or real GDP is the market value or $
Final Goods and Services - CORRECT ANSWER Final goods are bought and used by
the final consumer
Produced in One Year - CORRECT ANSWER GDP is a measure of what is produced
or made in one year.
Arguments for/against growth - CORRECT ANSWER Against: increase in the supplies
of labor, entrepreneurial ability, energy and resources being depleted, ecological space,
farmland being lost to urbanization. For: Growth lessens the burden of scarcity, will
result in rising real wages, incomes, and standards of living, and create more jobs,
decrease unemployment, Expand real GDP, per capita, over time.
Nominal GDP Calculations - CORRECT ANSWER based on prices that prevailed when
the output was produced; measure in terms of the price level at the time of
measurement (i.e., GDP that is unadjusted for inflation). Unit of Outputs (5) X
Price($10)= $50 Real GDP ($10)X5= $50 {units of output X initial Price}
Real GDP - CORRECT ANSWER GDP that has been deflated or inflated to reflect
changes in the price level; price level in a base period. (i.e., GDP that is adjusted for
inflation)
Business Cycle - CORRECT ANSWER recurring increases and decreases in the level
of economic activity over periods of time.
Recession - CORRECT ANSWER a period of declining GDP, accompanied by lower
income and higher unemployment.
Structural Unemployment - CORRECT ANSWER associated with the mismatch
between jobs and the skills or locations of those unemployed.
Frictional Unemployment - CORRECT ANSWER "between jobs" associated with
people searching for jobs or waiting to take jobs in the near future
Cyclical Unemployment - CORRECT ANSWER begins with the recessionary phase of
the business cycle; caused by a decline in total spending.
Discouraged Workers - CORRECT ANSWER are people of legal employment age who
are not actively seeking employment or who does not find employment after long-term
unemployment.
QUESTIONS & UPDATED PASSED
ANSWERS LATEST VERSION
Economics - CORRECT ANSWER the study of how people, institutions, and society
make economic choices under conditions of scarcity.
Macroeconomics - CORRECT ANSWER the parts of economics concerned with the
economy as a whole; with such major aggregates as the household, business, and
government sectors; and with measure of the total economy.
Circular Flow Model - CORRECT ANSWER the flow of resources from household to
firms and of products from firms to households. These flows are accompanied by
reverse flows of money firms to households and from households to firms.
Opportunity Cost - CORRECT ANSWER the value of the good, service or time forgone
to obtain something else.
Law of Demand - CORRECT ANSWER the principle that, other things equal, an
increase in a products price will reduce the quantity of it demanded, and conversely for
a decrease in price.
Demand Curve - CORRECT ANSWER a curve illustrating the inverse relationship
between the price of a product and the quantity of it demanded, other things equal.
Supply Curve - CORRECT ANSWER a curve illustrating the direct relationship between
the price of a product and the quantity of it supplied, other things equal.
Market Equilibrium - CORRECT ANSWER is set by the interaction of supply and
demand. Equilibrium price is the price at which the quantity demanded by consumers
and the quantity that firms are willing to supply of a good or service are the same.
Change in Demand - CORRECT ANSWER a change in the quantity demanded of a
good or service at every price; a shift of the demand curve to the left or right.
Change in Quanitity Demand - CORRECT ANSWER a change in the quantity
demanded due to an increase or decrease in the price of the product under
consideration; a movement from one point to another on a fixed demand curve.
GDP - CORRECT ANSWER is the total market value of all final goods and services
produced in the economy in one year. (GDP= C+Ig+G+Xn)
, GDP=C+Ig+G+Xn - CORRECT ANSWER (c) Personal Consumption Expeditures (Ig)
Gross Private Domestic Investment (G) Government Purchases (Xn) Net Exports
Total Market Value - CORRECT ANSWER The unit of measure for real domestic
output or real GDP is the market value or $
Final Goods and Services - CORRECT ANSWER Final goods are bought and used by
the final consumer
Produced in One Year - CORRECT ANSWER GDP is a measure of what is produced
or made in one year.
Arguments for/against growth - CORRECT ANSWER Against: increase in the supplies
of labor, entrepreneurial ability, energy and resources being depleted, ecological space,
farmland being lost to urbanization. For: Growth lessens the burden of scarcity, will
result in rising real wages, incomes, and standards of living, and create more jobs,
decrease unemployment, Expand real GDP, per capita, over time.
Nominal GDP Calculations - CORRECT ANSWER based on prices that prevailed when
the output was produced; measure in terms of the price level at the time of
measurement (i.e., GDP that is unadjusted for inflation). Unit of Outputs (5) X
Price($10)= $50 Real GDP ($10)X5= $50 {units of output X initial Price}
Real GDP - CORRECT ANSWER GDP that has been deflated or inflated to reflect
changes in the price level; price level in a base period. (i.e., GDP that is adjusted for
inflation)
Business Cycle - CORRECT ANSWER recurring increases and decreases in the level
of economic activity over periods of time.
Recession - CORRECT ANSWER a period of declining GDP, accompanied by lower
income and higher unemployment.
Structural Unemployment - CORRECT ANSWER associated with the mismatch
between jobs and the skills or locations of those unemployed.
Frictional Unemployment - CORRECT ANSWER "between jobs" associated with
people searching for jobs or waiting to take jobs in the near future
Cyclical Unemployment - CORRECT ANSWER begins with the recessionary phase of
the business cycle; caused by a decline in total spending.
Discouraged Workers - CORRECT ANSWER are people of legal employment age who
are not actively seeking employment or who does not find employment after long-term
unemployment.
