Macro Quiz 2

Question 1

GDP

Answer 1

Total output or total income or total spending in entire economy

Question 2

GDP per capita

Answer 2

Average income per person

Question 3

Recession

Answer 3

Significant decline in GDP or economic activity

Question 4

Depression

Answer 4

A large recession

Question 5

Unemployment

Answer 5

Those wanting a job and don’t want one

Question 6

Labor Force

Answer 6

All employed and unemployed workers

Question 7

Discouraged workers

Answer 7

People who want to work but give up trying because of poor labor market

Question 8

Cyclical Unemployment

Answer 8

Unemployment related to the business cycle

Question 9

What is an example of cyclical unemployment?

Answer 9

Recession

Question 10

Structural Unemployment

Answer 10

Mismatch of what employers are looking for and what employees have

Question 11

What is an example of structural unemployment?

Answer 11

Manufacturing jobs

Question 12

Frictional Unemployment

Answer 12

Includes people that are just entering the workforce or people who leave their jobs and look for better ones

Question 13

What does C stand for in C + G + (I-E) + i Equation?

Answer 13

Consumer spending

Question 14

What does G stand for in C + G + (I-E) + i Equation?

Answer 14

Government Spending

Question 15

What does (I-E) stand for in C + G + (I-E) + i Equation?

Answer 15

Net Exports

Question 16

What does i stand for in C + G + (I-E) + i Equation?

Answer 16

Investment

Question 17

Output

Answer 17

All goods and services in the economy

Question 18

What are the 5 shortcomings of GDP?

Answer 18

Does not explain technological change
Does not show inequality
Does not show time cost
Does not include pollution as a result of activity
-Just because we produce more, does not mean people are better off

Question 19

What is an example of GDP not accounting for technological change?

Answer 19

Free apps

Question 20

What is an example of GDP not accounting for inequality?

Answer 20

Many people can be in poverty despite a high GDP

Question 21

What is an example of GDP not accounting for time cost?

Answer 21

I cleaned the dishes but that value is not included

Question 22

What is an example of the GDP shortcoming of when we produce more does not mean we are better off?

Answer 22

Hurricanes result in many new homes

Question 23

Inflation

Answer 23

When prices increase

Question 24

Inflation Rate

Answer 24

the percent change in prices

Question 25

What are 3 reasons that Aggregate Demand is downward sloping?

Answer 25

Interest rate effect International effect Money wealth effect

Question 25

Interest Rate Effect

Answer 25

If price increases, then the value of the dollar decreases because people cannot buy as much

Question 25

International effect

Answer 25

If price increases in the United States, exports decrease because goods are more expensive relative to other countries. Therefore, imports increase.

Question 26

Recessionary Gap

Answer 26

When actual output is below potential output

Question 27

Inflationary Gap

Answer 27

When actual output is above potential output

Question 28

What is an example of a countercyclical policy?

Answer 28

Reducing government spending and raising taxes during a boom

Question 29

What does marginal propensity to consume stand for?

Answer 29

MPC

Question 30

Marginal propensity to consume

Answer 30

How much of each dollar is spent | - As income increases, MPC decreases

Question 31

Multiplier effect

Answer 31

Change in government spending leads to a change in output

Question 32

What 4 things affect Aggregate Demand?

Answer 32

Consumer Spending Investment Government Spending Net Exports

Question 33

What happens to government spending when there is an increase in price level?

Answer 33

The government will reduce spending to control price level during the boom

Question 34

What are 3 ways GDP per capita fails as a measure of well being?

Answer 34

Does not show economic inequality Does not show social inequality Does not account for pollution

Question 35

Why doesn't GDP per capita show economic inequality?

Answer 35

Can still be a large number of people in poverty even if GDP per capita is high

Question 36

Why doesn't GDP per capita show social inequality?

Answer 36

African Americans are often discriminated in United States despite high GDP per capita

Question 37

Why doesn't GDP per capita account for pollution?

Answer 37

In China the air is really polluted regardless of GDP per capita

Question 38

Growth

Answer 38

Increases in output and income

Question 39

As a result, what does growth increase?

Answer 39

Standard of living

Question 40

When growth increases income, what 2 positive things happen?

Answer 40

Can afford more things | Results in higher life expectancy

Question 41

What are the 5 sources of growth?

Answer 41

``` Growth compatible institutions Investment and Accumulated Capital Available Resources Technological Development Entrepreneurship ```

Question 42

What are 2 examples of growth compatible institutions?

Answer 42

Markets | Private Ownership

Question 43

Growth Compatible Institutions

Answer 43

When people gain from growth, they are more likely to work harder

Question 44

Investment and Accumulated Capital

Answer 44

Taking savings and putting them towards something in the hopes of getting a greater return

Question 45

What is an example of Investment and Accumulated Capital?

Answer 45

Stock Market

Question 46

Available Resources

Answer 46

The more resources you have, the more you can produce

Question 47

Technological Development

Answer 47

When technology develops, it allows resources to be used more efficiently

Question 48

Entrepreneurship

Answer 48

Ability to get things done

Question 49

What is an example of Entrepreneurship?

Answer 49

Starting a business

Question 50

Institutions

Answer 50

Formal and informal patterns, rules and regulations of behavior

Question 51

What are 4 examples of institutions?

Answer 51

Investing Technological Advancements Markets Entrepreneurship

Question 52

Human Capital

Answer 52

People ability to perform or produce something

Question 53

Physical Capital

Answer 53

Consists of land, buildings, equipment or machines

Question 54

What does physical capital enable?

Answer 54

Enables production process

Question 55

Social Capital

Answer 55

The need of others to produce a good