Chapter 6

Question 1

Macroeconomics involves..

Answer 1

adding up the economic activity of all households and businesses to obtain the overall demand and supply in the economy

Question 2

The goals of Macroeconomics is to

Answer 2

assess overall economic performance that includes inflation, unemployment rate, growth and production

Question 3

Economic growth determines the…

Answer 3

Standard of Living in a country

Question 4

Inflation is measured by the..

Answer 4

consumer price index

Question 5

low inflation and an inflation rate of ____ is the goal

Answer 5

1-2%

Question 6

A growth rate more than ___ is considered good

Answer 6

3%

Question 7

The Framework for Macroeconomics include?

Answer 7

Macroeconomic Models,Theories of Aggregate demand and Aggregate Supply, Charts and Case Studies

Question 8

The general policies for Macroeconomics include? describe them.

Answer 8

Fiscal Policy(involves changed in gov’t spending/purchases and taxes) and Monetary Policy(involves managing the money supply and interest rates)

Question 9

Growth is measured by

Answer 9

the change in real GDP

Question 10

An unemployment rate of __% or less is considered good

Answer 10

5

Question 11

GDP (Gross Domestic Product) is the

Answer 11

value of the production of all goods and services produced in a country within a year

Question 12

GDP can be measure by?

Answer 12

1. the total amount of money that consumers, the gov’t and investors purchased within the economy minus the value of imported goods
2. The total amount of money of the final goods and services a country produces
3. market prices

Question 13

GDP is equal to the

Answer 13

total expenditure(total income)

Question 14

GDP involves who?

Answer 14

both the buyer and seller

Question 15

Gross National Product(GNP) is

Answer 15

what is produced domestically and what is produced by domestic labor and business nationally in a year

Question 16

GNP includes?

Answer 16

GDP plus Canadian income earned abroad

Question 17

Net National Product (NNP) is

Answer 17

GDP minus the value of depreciation

Question 18

Depreciation is

Answer 18

the process of which the capital(money) ages and loses value overtime

Question 19

Nominal Value is

Answer 19

the economic value of inflation before it has been adjusted, uses the current prices for products

Question 20

Real Value is

Answer 20

the economic value of inflation after it has been adjusted, uses past prices for products

Question 21

The GDP Deflator is the

Answer 21

measures the price of all goods and services included in GDP

Question 22

The opposite of Deflation is?

Answer 22

Inflation

Question 23

Demand for production can be divided into 4 main parts, describe each:

Answer 23

Consumer Spending(consumption), Business Spending(purchasing new capital goods, building factories, buildings, stores and equipment, construction) Government Spending on Goods and Services(bridges and highways), and Spending on Net Exports

Question 24

What makes up half of the demand side components of the GDP?

Answer 24

Consumption

Question 25

GDP can be measured by the following calculation..

Answer 25

GDP=Consumption+ Investment+ Government spending+ (Trade Balance)

Question 26

The gap between exports and imports is known as the...

Answer 26

Trade Balance

Question 27

When a country's exports are larger than its imports it is called a....

Answer 27

Trade Surplus

Question 28

When a country's imports exceed its exports it is called a....

Answer 28

Trade Deficit

Question 29

We measure real GDP by the following calculation:

Answer 29

Real GDP=Nominal Value/GDP DeflatorX100

Question 30

One year in economics is known as a

Answer 30

base period

Question 31

We can calculate real GDP Growth rate by the following calculation:

Answer 31

Real GDP of 2nd year- Real GDP of 1st year/ Real GDP of 1st yearX100

Question 32

A Recession is a

Answer 32

decline in GDP

Question 33

A Depression is a

Answer 33

long and deep decline in output

Question 34

A Depression happens when

Answer 34

a recession deepens and lasts longer, during economic slowdown

Question 35

The Business Cycle is

Answer 35

the economies short term movement in and out of recessions

Question 36

The highest point of the output is known as the

Answer 36

Peak

Question 37

The lowest point of the output is known as the

Answer 37

Trough

Question 38

A recession lasts from...

Answer 38

Peak to Trough

Question 39

An economic upswing lasts from...

Answer 39

Trough to Peak

Question 40

To compare the GDP's of country's with different currencies we?

Answer 40

convert using the exchange rate

Question 41

The Exchange Rate is the

Answer 41

value or price of on currency in terms of another

Question 41

GDP Per Capita can be calculated by

Answer 41

GDP/ the population

Question 42

What makes a country better off, is the country with a _____ GDP

Answer 42

higher

Question 43

Investment Expenditure refers to

Answer 43

purchases of physical plant and equipment

Question 44

A country produces durable goods, non durable goods and inventories. describe each.

Answer 44

Durable Goods- long lasting goods(ex.fridge cars) Non-Durable Goods- may not last forever (food, clothing) Inventories(goods that one business has produced but has not yet sold to consumers, still sitting in warehouses)

Question 45

The largest part of GDP is

Answer 45

services (healthcare, education)

Question 46

The Smallest Part of GDP is

Answer 46

aggregate supply

Question 47

goods at the furthest stage of production at the end of the year are known as

Answer 47

Final Goods

Question 48

all the elements that affect peoples happiness and well being is known as

Answer 48

Standard of Living

Question 49

GDP is different from Standard of Living because GDP does not include:

Answer 49

Leisure time, Environmental cleanliness, learning, inequality in society, technology and products that are available, production that is not exchanged in the market

Question 50

a sustained increase in the overall level of prices and is measured by consumer price index is known as

Answer 50

Inflation

Question 51

Government expenditure includes spending of which levels of the government

Answer 51

All three(federal, state, and local)

Question 52

intermediate goods are

Answer 52

goods that go into producing other goods, these goods are excluded in statistics

Question 53

The calculation for nominal GDP is:

Answer 53

GDP Deflator X Real GDP

Question 54

The calculation for value is:

Answer 54

Price X Quantity

Question 55

if real GDP rises so does

Answer 55

employment

Question 56

The most significant problem with a recession is that

Answer 56

firms may need to layoff/ fire some workers

Question 57

A PPP-equivalent exchange rate provides

Answer 57

a longer run measure of the exchange rate

Question 58

The rise in GDP understates

Answer 58

The actual rise in the standard of living