Test 4

Question 1

is the study of the aggregate economy.

Answer 1

macroeconomics

Question 2

what does macro outcomes include?

Answer 2

• output
• jobs
• prices

Question 3

the total volume of goods and services produced (real GDP)

Answer 3

output

Question 4

the levels of employment and unemployment

Answer 4

jobs

Question 5

the average prices of goods and services.

Answer 5

prices

Question 6

any influence on macro outcomes must be transmitted through _____ and ____.

Answer 6

supply and demand

Question 7

is the total quantity of output demanded at alternative price levels in a given time period.

Answer 7

aggregate demand

Question 8

why does the curve slope downward?

Answer 8

• law of demand

- law of diminishing marginal utility

Question 9

• one good/service

- price and quantity schedules for individual firms

Answer 9

individual demand

Question 10

• one good/service
• market price
• market output

Answer 10

market demand

Question 11

• all goods/services
• price level
• total output/GDP

Answer 11

aggregate demand

Question 12

why does the curve slope downward for individual and market demand?

Answer 12

law of demand

law of diminishing marginal utility

Question 13

what are the three different demand curves?

Answer 13

individual demand
market demand
aggregate demand

Question 14

illustrates how the real value of purchases varies with the average level of prices.

Answer 14

the aggregate demand curve

Question 15

what does the downward slope of an aggregate demand suggest?

Answer 15

it suggests that with a given (constant) income, at lower price levels people will buy more goods and services

Question 16

what are the three reasons for the downward slope for an aggregate demand?

Answer 16

• real balances effet
• foreign trade effect
• interest rate effect

Question 17

a change in the price level affects the purchasing power of money

Answer 17

real-balances effect

Question 18

balance of trade depends on domestic price level relative to foreign.

Answer 18

foreign-trade effect

Question 19

change in price level affects demand for loan-financed purchases.

Answer 19

interest-rate effect

Question 20

is measured by how many goods and services your money can buy.

Answer 20

real value of money

Question 21

are worth more when the price level falls, therefore, you can buy more with the same amount of cash.

Answer 21

cash balances

Question 22

what shifts the demand curves for individual demand and market demand?

Answer 22

-determinants of demand:

income, tastes, preferences, expectations, other products, etc

Question 23

what shifts the AD curve?

Answer 23

internal market forces
external market forces
policy levers

Question 24

lower interest rates increases _______.

Answer 24

borrowing

Question 25

increasing borrowing, increases _______.

Answer 25

spending

Question 26

increasing spending, increases _______.

Answer 26

aggregate demand

Question 27

what are the internal market forces?

Answer 27

- population growth - consumer and business spending behavior - new technology - determinants of demand

Question 28

what are some external shocks?

Answer 28

- wars - natural disasters - terrorist attacks - trade disruptions

Question 29

what are some policy levers?

Answer 29

- tax policy - government spending - changes in interest rates - regulation - immigration policy - trade policy

Question 30

why does the curve slope upward for the aggregrate supply curve?

Answer 30

profit effect | cost effect

Question 31

why does the curve slope upward for the individual and market supply?

Answer 31

law of supply

Question 32

why does the curve slope downward for the AD?

Answer 32

real balances effect foreign trade effect interest rate effect

Question 33

two reasons for upward sloping curve?

Answer 33

- the profit effect | - the cost effect

Question 34

changing price levels affect the profitability of supply goods. -rate of output increases when price level increases.

Answer 34

the profit effect

Question 35

- costs increase as output expands - producers are wiling to supply additional output if prices rise at least as much as costs - costs remain constant in the short run, so more output at higher prices means more profit. therefore, as prices increase, more output is produced.

Answer 35

the cost effect

Question 36

the unique combination of price level and real output compatible with aggregate demand and aggregate supply. -it is the only price output combination mutually compatible with both buyers and sellers intentions

Answer 36

macro equilibrium

Question 37

are alternating periods of economic growth and contraction. | -result from recurrent shifts of the aggregate supply and demand supply.

Answer 37

business cycles

Question 38

a decrease in aggregate supply reduces _________.

Answer 38

real output and raises the price level.

Question 39

shifts in an aggregate demand can be caused by changes in the __________.

Answer 39

export demand, expectations, taxes, or other events.

Question 40

shifts in an aggregate supply can be caused in __________________.

Answer 40

changes in costs of production due to import prices, natural disasters, changes tax policies, or other events

Question 41

what the two potential problems with macro equilibrium?

Answer 41

- undesirability | - instability

Question 42

the price-output relationship at equilibrium may not satisfy our macroeconomic goals.

Answer 42

undesirability

Question 43

even if the designated macro equilibrium is optimal, it may be displaced by macro disturbances.

Answer 43

instability

Question 44

what are the undesirable outcomes?

Answer 44

- not at full employment GDP - unemployment - inflation

Question 45

the rate of real output (GDP) produced at full employment

Answer 45

not at full employment GDP

Question 46

the ability of labor-force participants to find jobs.

Answer 46

unemployment

Question 47

an increase in the average level of prices of goods and services.

Answer 47

inflation

Question 48

the aggregate demand curve might shift as a result of changes in:

Answer 48

- consumer sentiment - taxes on consumer income - interest rates

Question 49

the aggregate supply curve might shift as a result of changes in:

Answer 49

- the price or availability of raw materials - business taxes - environmental or workplace regulations

Question 50

is the use of gov't taxes and spending to alter macroeconomic outcomes.

Answer 50

fiscal policy