Econ Final

Attempts to bypass price rationing in the market
are costly
Macroeconomic policies became more influenced by Keynes theories starting with
the Great Depression
Favored customers are customers who receive special treatment during periods of
excess demand
Macroeconomics is best described as the study of
the nation’s economy as a whole
According to Keynes, the level of employment is determined by
the level of aggregate demand for goods and services
A minimum price set by the government that sellers may charge for a good is known as
a price floor
Market price of coffee = $3, gov won’t allow coffee growers to charge more than $2, what will happen?
There will be a shortage of coffee
If the price floor is set below the equilibrium price
the floor will be ineffective
Aggregate behavior is
the behavior of all households and firms together
An example of a price ceiling would be the government setting the price of sugar
below the equilibrium market price
According to Classical economists, the economy
is self- correcting
If the price ceiling is set below the equilibrium price
there will be a shortage
A farmer buys a new tractor from John Deere, this is included in GDP as
part of gross private domestic investment
Real GDP is gross domestic product measured
in the prices of a base year
Which of the following is a good or service counted in GDP
a new tire you buy for your personal car
Which of the following is an example of an intermediate good
pizza sauce you purchase to make pizzas to sell for a fund- raiser for an org you belong to
Which is an example of a final good or service?
a computer purchased by Federal Express to track shipments
The value of what KFC produces in Japan is included in the US ____ and in the Japanese _____
GDP is not a perfect measure of social welfare and the society’s economic well-being because
all of the above
Real GDP in 2012 using 2011 prices is higher than nominal GDP in 2012, then
real GDP in 2012 is larger than real GDP in 2011
Double counting can be avoided by
not counting the value of intermediate goods in GDP
When calculating GDP, exports are _____ and imports are _____
added, subtracted
Which would be counted in 2013’s GDP
the bonus check a stockbroker gets from his/her company 2013
You save $80 with a $400 rise in income
your MPC = .8
Which component of investments do firms have the least amount of control?
changes in inventories
Diane lost her job and started looking for another job, as a result
unemployment increases
CPI 1 = 300 and CPI 2 = 150, rate of inflation is
150-300/300 (x100)
In a closed economy with no government, AE is
consumption plus investment or C+I
Classifying discouraged workers as unemployed would not change the unemployment rate
increase the unemployment rate
Planned investment – Actual investment =
Unplanned inventory investment
1 – mpc
1- change in C/ change in Y
Unemployment rate =
Employed / (Employed + Unemployed)
The broadest based price index available is the
GDP deflator
Labor force participation rate =
(unemployed + employed) / (unemployed + employed + not in labor force)
A decrease in planned investment causes
output to decrease, but by a larger amount than the decrease in investment
Tax multiplier =
-b / 1-b
Assuming there is no foreign trade in the economy, the economy is in equilibrium when
I+G = S+T
Assuming there is no government or foreign sector, the formula for the multiplier is
1 / (1-MPC)
Income – Net Taxes =
Disposable Income= Yd
Government spending multiplier=
1 / 1-b
If the government wants to reduce unemployment, government purchases should be _____ and/or taxes should be _____
increased; decreased
How will equilibrium AE and equilibrium AO change as a result of a decrease in investment?
AE line shifts down, decreasing equilibrium output and equilibrium expenditure
Taxes > Money Spent
Budget Surplus
AE= C + I, equilibrium?
Y= AE, solve for Y
Firms react to unplanned inventory reductions by
increasing output
Level for saving=
Output(Income) – Consumption Spending – Net taxes or Y-C-T
Fiscal policy refers to
the spending and taxing policies used by the government to influence the economy