macroeconomics midterm 1

Question 1

what is the equation for the GDP deflator?

Answer 1

(nominal GDP/the real GDP)*100

Question 2

what is the GDP expenditure approach?

Answer 2

consumption + inverstments + public expenditure + net exports

Question 3

an increase in discouraged workers cause the labor force to what?

Answer 3

decreaase

Question 4

what is the law of diminishing returns?

Answer 4

higher saving rate allows more capital to be accumulated but the benefits become smaller over time, growth slows down.

Question 5

what is the catch-up effect?

Answer 5

it is easier for a country to grow fast if it starts out relatively poor

Question 6

what is the law of demand?

Answer 6

when the price of a good rises, the quantity demanded of that good falls.

Question 7

the demand curve has what kind of slope?

Answer 7

downward slope

Question 8

what is the market demand?

Answer 8

the sum of all individual demands for a good or service

Question 9

with an increase in demand, the demand curve shifts to what direction?

Answer 9

to the right

Question 10

a decrease in demand causes the demand curve to shift to what direction?

Answer 10

to the left

Question 11

four reasons the demand curve shifts other than a price change?

Answer 11

income changes

expectations

tastes

prices of related goods

Question 12

what is the relationship between two goods that are COMPLIMENTS?

Answer 12

an increase in the price of one good leads to a decrease in the demand for the other. (gas and cars)

Question 13

what is the relationship between two goods that are SUBSTITUTES?

Answer 13

the increase in the price of one good leads t an increase in demand for the other good. (frozen yogurt & ice cream)

Question 14

what is the law of supply?

Answer 14

when the price of a good rises, the quantity supplied also rises

Question 15

the supply curve slopes in what direction?

Answer 15

upward

Question 16

what is the market supply?

Answer 16

sum of the supplies of all sellers for a good or service

Question 17

with a decrease in supply the curve shifts to which direction?

Answer 17

to the left

Question 18

with an increase in supply the curve shifts to which direction?

Answer 18

to the right

Question 19

what four factors can cause the supply curve to shift?

Answer 19

input prices technology expectations about the future # of sellers

Question 20

what is the point called where supple and demand meet?

Answer 20

equilibrium point

Question 21

everything above the equilibrium point is considered to be a what?

Answer 21

a surplus

Question 22

everything below the equilibrium point is considered to be a what?

Answer 22

a shortage

Question 23

what does the GDP measure?

Answer 23

total income and expenditure the production of a country

Question 24

what is the GDP equation?

Answer 24

consumption + investments + gov purchases + net exports

Question 25

what is considered consumption in the GDP?

Answer 25

spending by households on goods & services with the exception of purchases of new housing

Question 26

what is considered an investment in the GDP?

Answer 26

the purchase of goods that will be used in the future to produce more goods and services

Question 27

what is considered government purchases in the GDP?

Answer 27

spending on goods and services by local, state & fed governments

Question 28

what is the GDP income approach?

Answer 28

sum profits + sum wages + sum taxes

Question 29

What is the consumer price index (CPI)?

Answer 29

measure of the overall cost of the goods and services bought by a typical consumer, indication for the cost of living.

Question 30

what is the equation to calculate the CPI (consumer price index)?

Answer 30

(# of basket goods/ total price for basket)\*100

Question 31

The CPI (consumer price index) is used to calculate what?

Answer 31

the inflation rate

Question 32

the lower the inflation rate, the ________ off you are?

Answer 32

better

Question 33

what is substitution bias?

Answer 33

prices do not change proportionately. the consumer substitutes towards goods that have become relatively less expensive. this causes the CPI to overstate the inflation rate and the increase in cost of living.

Question 34

what is the introduction of new goods?

Answer 34

new goods that were not available in the past that affect the CPI

Question 35

what is unmeasured quality change?

Answer 35

the quality of a good deteriates from one year to the next

Question 36

what is the equation for productivity?

Answer 36

GDP per capita= real GDP/Total population

Question 37

what are four determinants of productivity?

Answer 37

natural resources human capital physical capital technological knowledge

Question 38

to grow more a country has to consume \_\_\_\_\_?

Answer 38

less

Question 39

more savings equals more investments which equals what?

Answer 39

more productivity

Question 40

human capital and physical capital are considered to be what?

Answer 40

COMPLIMENTS: the increase of one causes the decrease in demand for the other

Question 41

\_\_\_\_\_\_ capital is an important determinant of growth?

Answer 41

human capital (education)

Question 42

in the market of loanable funds the supply curve represents what?

Answer 42

the savers

Question 43

in the market of loanable funds the demand curve represents what?

Answer 43

the investors

Question 44

what is the y axis of the loanable funds graph?

Answer 44

the real interest rate

Question 45

national savings equals what?

Answer 45

investments

Question 46

as the interest rate rises the quantity demanded ______ & the quantity supplied \_\_\_\_\_?

Answer 46

decreases & increases

Question 47

as the savings go up the equilibrium point goes where?

Answer 47

down

Question 48

the surplus of savings would shift the supply curve to the \_\_\_\_\_\_\_?

Answer 48

right

Question 49

an increase in life expectancy would _____ national savings?

Answer 49

increase

Question 50

what is the accumulation of inventories?

Answer 50

the production of final goods that was not sold during the year of production ex: firm produces 100 shirts but sells only 90, the extra 10 is considered accumulated inventories and investments

Question 51

in unemployment, the supply curve represents what?

Answer 51

the workers

Question 52

in unemployment the demand curve represents what?

Answer 52

the firms (demanding workers)

Question 53

increasing the labor force ____ the unemployment?

Answer 53

increases

Question 54

what is the labor force?

Answer 54

those who are willing to work unemployed + employed

Question 55

what is the participation rate?

Answer 55

labor force/ adult population

Question 56

what is the unemployment rate?

Answer 56

of unemployed/ labor force

Question 57

what is the net exports in the GDP?

Answer 57

exports - imports

Question 58

what is the GDP expenditure approach equation?

Answer 58

consumption + investment + public expenditure + exports - imports

Question 59

what is the GDP income approach equation?

Answer 59

sum profits + sum wages + sum of taxes

Question 60

what is the GDP?

Answer 60

production of final goods and services during a given year within a country at market values.

Question 61

what are homogeneous goods?

Answer 61

two or more goods that are basically the same

Question 62

what are atomistic agents?

Answer 62

many buyers, many sellers

Question 63

who determines demand?

Answer 63

the buyers

Question 64

who determines supply?

Answer 64

the seller

Question 65

in the demand curve, when the prices are lower the quantity demanded is what?

Answer 65

higher

Question 66

in the supply curve, when the prices go up the quantity supplied does what?

Answer 66

increases

Question 67

if input prices go up then the producer will need a ______ price in order to sell the same amount as before?

Answer 67

higher

Question 68

the GDP measures the ______ of a country?

Answer 68

production

Question 69

for any economy as a whole; income must equal what?

Answer 69

expenditures

Question 70

what is the equation for investments?

Answer 70

capital formation + variation of stocks

Question 71

goods and services made in this year but not sold in this year are considered what?

Answer 71

investments

Question 72

what is the nominal GDP?

Answer 72

the production of goods and services valued at current prices

Question 73

what is the equation for the real GDP?

Answer 73

nominal GDP/ GDP deflator

Question 74

the CPI represents the cost of living for what?

Answer 74

one year

Question 75

What are problems with measuring the cost of living?

Answer 75

substitution bias introduction of new goods unmeasured quality change

Question 76

what kind of capital can help a poor country catch up to a rich country?

Answer 76

physical capital (stock equipment)

Question 77

how can countries raise future productivity?

Answer 77

invest more current resources in the production of capital more saving equals more investments which equals more productivity

Question 78

poor economies need to save _____ and consume _____ to grow?

Answer 78

more less

Question 79

what is a foreign direct investment?

Answer 79

a capital investment that is owned and operated by a foreign entity

Question 80

an example of human capital is what?

Answer 80

education

Question 81

the problem for poor countries is that there is what?

Answer 81

brain drain

Question 82

what is the vicious circle in poor countries?

Answer 82

poor --\> bad nutrition --\> less productive --\> lower wages --\> poor

Question 83

what is the financial system?

Answer 83

a group of institutions in the economy . moves the economies scarce resources to safety

Question 84

in the market of loanable funds the supply curve represents what?

Answer 84

the savers

Question 85

in the market of loanable funds the demand curve represents what?

Answer 85

the investors

Question 86

in the market of loanable funds a surplus of savings would shift the supply curve in hat direction?

Answer 86

to the right

Question 87

in the market of loanable funds, as savings go up the equilibrium goes where?

Answer 87

down

Question 88

in the mark of loanable funds, as interest rates rise the quantity demanded ______ and the quantity supplied \_\_\_\_\_\_?

Answer 88

decreases increases

Question 89

national savings equal what?

Answer 89

investments

Question 90

in the labor market the supply curve represents what?

Answer 90

the workers

Question 91

in the labor market the demand curve represents what?

Answer 91

the firms (demanding workers)

Question 92

a surplus in the labor market means what?

Answer 92

unemployment

Question 93

an increase in discouraged workers causes the labor force to what?

Answer 93

decrease