Chapter 5: Macroeconomics

Question 0

What is total value of all final goods and services produced within a country over some period of time?

Answer 0

GDP

Question 1

What is study of economy as a whole?

Answer 1

Macroeconomics

Question 2

What are two ways GDP can be calculated?

Answer 2

Expenditure approach and income approach

Question 3

What is formula for GDP?

Answer 3

C+I+G+(X - M)

Question 4

What is largest component of total expenditures?

Answer 4

Personal consumption expenditures or household spending, up to 70% of output

Question 5

What is difference between nominal and real GDP?

Answer 5

Nominal reflects current market value of goods and services, unadjusted for price changes. Real is nominal GDP adjusted for changes in price levels and reflects changes in actual physical output

Question 6

What is measured by percentage change in real output (usually total real GDP) for a country?

Answer 6

Economic growth

Question 7

What is growth of GDP determined by?

Answer 7

Growth of labour force and productivity gains which represent growth in output per unit of labour

Question 8

What are economy wide fluctuations in economic activity?

Answer 8

Business cycles

Question 9

What is general rise in prices for goods and services?

Answer 9

Inflation

Question 10

What marks end of contraction phase and beginning of recovery back to expansion?

Answer 10

Trough

Question 11

What reports the output produced by industrial sector of economy, namely output produced by manufacturing, mining and utilities companies?

Answer 11

Industrial production

Question 12

What signals a change in economic activity after output has already changed?

Answer 12

Lagging indicators

Question 13

What is example of lagging indicator?

Answer 13

Employment rate

Question 14

What reveals current economic conditions but do not have predictive value?

Answer 14

Coincident indicators

Question 15

What is example of coincident indicator?

Answer 15

Industrial production and personal income statistics

Question 16

What usually signal changes in economy in the future?

Answer 16

Leading indicators

Question 17

What is example of leading indicator?

Answer 17

Interest rate spread, money supply and broad stock indices

Question 18

Which view that if supply of money is large, more funds chase number of goods and push prices higher, leading to inflation?

Answer 18

Monetarist view

Question 19

Which view is that inflation is driven by costs of production?

Answer 19

Resource slack view

Question 20

What is constructed by determining weight or relative importance of each good and service in a typical households spending, referred to as basket of goods, in a particular base year and then measuring overall price change from year to year?

Answer 20

Consumer price index

Question 21

What measures average selling price of goods in economy received by producers?

Answer 21

Producer price index

Question 22

What excludes the effects of temporary volatility in commodity including food and energy prices?

Answer 22

Core inflation

Question 23

What is defined as current dollar GDP divided by constant dollar GDP?

Answer 23

Implicit GDP deflator

Question 24

What is a persistent and pronounced decrease in prices across most goods and services in an economy?

Answer 24

Deflation

Question 25

What is little or no economic growth paired with inflation?

Answer 25

Stagflation

Question 26

What involves price increases so large that people find it difficult to purchase goods and services?

Answer 26

Hyperinflation

Question 27

Does inflation tend to benefit borrowers or lenders?

Answer 27

Borrowers

Question 28

Which camp believes that fiscal policy can have powerful effects on aggregate demand, output and employment when there is substantial spare capacity in an economy?

Answer 28

Keynesians

Question 29

Which camp believes that fiscal policy has only a temporary effect on aggregate demand and that monetary policy is a more effective tool for affecting economic activity?

Answer 29

Monetarists

Question 30

What refers to central bank activities that are directed toward influencing money supply and credit in an economy?

Answer 30

Monetary policy

Question 31

What involves the purchase and sad of government notes and bonds?

Answer 31

Open market operations

Question 32

What are three tools for monetary policy?

Answer 32

Open market operations Changes in official interest rate Changes in reserve requirements for commercial banks

Question 33

What is proportion of deposits that must be held by a bank rather than be lent to borrowers?

Answer 33

Reserve requirement

Question 34

What is a situation which interest rates cannot be reduced any further to stimulate demand?

Answer 34

Liquidity trap where short term interest rate is zero

Question 35

What involves the use of government spending and tax policies to influence level of aggregate demand in an economy and this the level of economic activity?

Answer 35

Fiscal policy

Question 36

What is length of time required before policy makers realize that a problem exists?

Answer 36

Recognition lag

Question 37

What is length of time between problem recognition and implementation?

Answer 37

Action lag

Question 38

What is time required before policy changes begin to have an effect on economic growth?

Answer 38

Impact lag

Question 39

What happens when government borrows from limited pool of savings and competes with private sector for funds?

Answer 39

Crowding out