Macroeconomics Theory and Practice
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Economists use the term "business cycle" to refer to:
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The disposable income (net pay after taxes) a household receives can be disposed of in one of two ways: consumption or savings. where,
YD = disposable income
C = consumption
S = savings
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A severe recession in both scale and duration is called _____.
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_____ applied the concept of declining returns when he conjectured in 1798 (An Essay on the Principle of Population) that the world population would eventually outgrow the capability to produce food.
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_____- Aggregate Output (or National Income), Y = Aggregate Demand, AD
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In exchange rates,_____ means that they fluctuate day to day according to the market.
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The _____ test would involve entering economic growth rates for selected countries in a spreadsheet and statistically comparing growth rates for those two groups of years.
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Endogenous growth theory, first developed by _____
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_____ simply means that if the labor force grows at 2% per year and capital grows at 2% per year (the capital-labor ratio in this steady state model is constant) then output also grows at 2% per year.
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_____ an increase in government debt is accompanied by an increase in the foreign trade deficit (imports exceeds exports)
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The best available economic measure of quantity is ____________.
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Neoclassical growth model pioneered by Denison
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____________ cannot be used in empirical analysis.
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A growth rate is simply the amount of increase or decrease divided by the starting level.
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Floating means that exchange rate is steady or constant in day to day basis according to the market.
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If there is no technical progress, the output per capita will be on its growth level.
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Economic growth is the change in aggregate real GDP or average real GDP per person over time.
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The price of one currency in terms of another currency.
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Growth models focus on the long-run trend in output, more commonly called potential or full-employment output, rather than the short-run booms and busts in which an economy cycles around its long-term trend.
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The empirical test would involve entering economic growth rates for selected countries in a spreadsheet and statistically comparing growth rates for those two groups of years.
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Things that are available in sufficient amounts to satisfy all possible needs. There is no opportunity cost involved in their use or consumption.
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_____ simply means that if the labor force grows at 2% per year and capital grows at 2% per year (the capital-labor ratio in this steady state model is constant) then output also grows at 2% per year.
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Comparing growth rates across countries is not a problem despite differences in currencies because growth rates are _____ of the units of measurement.
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When many suppliers and many consumers (competitive) engaged in trade without interference from government (free).
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The overall goal of government economic policy is to promote economic _____.
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Analysis of the behavior of individual decision-making units (individuals, households, firms).
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When the amount that the quantity demanded exceeds the quantity supplied when the market price is below the equilibrium price.
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______ Latin term that used in economics means all other non-price factors that affect the amount we consume or produce do not change.
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The market value of final goods and services (i.e., sold to final consumers) produced by a nation during a specific period, usually 1 year.
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Analysis of the behavior of an economy as a whole.
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Y = A * f(K, L ) is the formula used to measure _____.
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In comparing growth of countries as to levels of output or income across countries we run into the problem of differences in currencies
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Recurrent, systematic fluctuations in the level of business activity, often characterized by changes in growth rate of real GDP.
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The __________ is a graphic representation of the market supply schedule and the Law of Supply
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In exchange rates,_____ means that they fluctuate day to day according to the market.
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A recession that is major both in scale and duration.
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In exchange rates,_____ means that they stay at the same value as set by the government.
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A shift of the demand curve in response to a change in one of the variables assumed to be held constant under the ceteris paribus assumption (e.g., income), holding the good's price constant.
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_____- Aggregate Output (or National Income), Y = Aggregate Demand, AD
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A period of decline in total output, income, employment, and trade, usually lasting from six months to a year.
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Percent Change in (Q/L) = (Percent Change in Q) - (Percent Change in P).
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Recession is
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___________ relates to the effect that a small or unit change one variable has on another variable.
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__________ is also referred to as a direct relationship. As the value of X increases, the value of Y increases.
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Consumer Price Index (CPI) includes
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_________ is a very small increase of decrease in the quantity of some variable.
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Percent Change in (P x Q) = (Percent Change in P) + (Percent Change in Q)
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Macroeconomics is analysis of the behavior of an economy as a nation.
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A line showing X and Y pair is referred as ____________.
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The test of a proposition or theory using actual observations or numbers is
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In Demand Curve Shifts, a change in any of these will cause the demand to curve shift to the right or left, when the demand curve is shifting to the right. The rightward shift is called ___________________.
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__________ is an advantage of a person who can produce a good or service with fewer resources than another person.
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___________is the amount that the quantity demanded exceeds the quantity supplied when the market price is below the equilibrium price.
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Indivisibility is when some goods can be broken into small tradable quantities.
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___________, as more scarce resources are used to increase production of one good or service, production of another good or service falls by larger and larger amount.
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__________is the amount that the quantity supplied exceeds the quantity demanded when the market price is above the equilibrium price.
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Money is a common medium of exchange and represents the general purchasing power.
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In general, countries that have a larger investments in capital goods are wealthier and have economic growth rate.
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____________ is when we specialize and both benefit after the exchange
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A country should specialize in a good in which it has comparative advantage.
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__________as the shift of the supply curve in response to a change in one of the variables assumed to be held constant under the ceteris paribus assumption (e.g., technology), holding the good's price constant.
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The slope of a curve can be determined from a graph by dividing the vertical change in the Y variable or rise by the horizontal change in the X variable or run.
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A market is in ______________ when the quantity demand is equal to quantity supplied at the market price.
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Economic growth is
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Law of Demand Ceterus Paribus
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____________ is when we specialize and both benefit after the exchange
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Ceteris paribus, means
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It is comparative advantage or opportunity cost and not absolute advantage that yields an incentive for specialization and trade.
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Independent variable can be seen in the _______________ of the equation.
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What is the value of total output (nominal GDP) corrected for any changes in prices.
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Quantity of goods and services that can be purchased with a given amount of money.
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__________is the amount that the quantity supplied exceeds the quantity demanded when the market price is above the equilibrium price.
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__________ is an advantage of a person who can produce a good or service with fewer resources than another person.
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__________is the price at which the quantity demanded is equal to the quantity supplied. Other things being unchanged, there is no tendency for this price to change.
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The test of a proposition or theory using actual observations or numbers is called _______.
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____________ a graph that indicates all possible combinations of two goods or services that can be produced within an economy given the full and efficient use of all available resources.
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Understanding measures of Elasticity is critically important in Microeconomics, references to Elasticities are infrequent in Macroeconomics
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__________ a variable that depends on the value of the independent variable(s) can be seen in the left side of the equation.
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__________ is also referred to as a direct relationship. As the value of X increases, the value of Y increases.
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______________ is a movement along a fixed supply curve in response to a change in the price of that good, ceteris paribus (everything else unchanged).
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___________ is a legal requirement that maintains the market price below the equilibrium price.
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In general, countries that have a larger investments in capital goods are wealthier and have economic growth rate.
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Political Science is the study of mankind in the ordinary business of life.
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The point where the curve crosses the vertical axis is referred as ____________.
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In Demand Curve Shifts, a change in any of these will cause the demand to curve shift to the right or left, when the demand curve is shifting to the right. The rightward shift is called ___________________.
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Percentage of Change = ending value- starting value /starting value x 100.
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___________ as the price of a good or service increases the quantity you would be willing and able
to produce during some period of time increases.
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A country should specialize in a good in which it has comparative advantage.
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According to __________, that if more of the time is spent in one activity then you must invest your resources to develop specialized tools or machines to aid me in my task.
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Net Domestic Product (NDP) = C + In + G + NX = GDP - depreciation
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______ Latin term that used in economics means all other non-price factors that affect the amount we consume or produce do not change.
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____________________ is measured by the money (dollar) value of all final goods and services produced byan economy during a given period of time, usually a year.
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____________________the amount by which the value of a firm's finished products exceeds the value of goods and services the firm purchases
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Price Index = current-year total cost of market basket of goods and services / base-year total cost of market basket of goods and services
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__________ is described as a fixed-weight price index (also referred to as a Laspeyres price index), which measures the cost of a fixed basket of goods relative to a base period
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The market value of final goods and services (i.e., sold to final consumers) produced by a nation during a specific period, usually 1 year.
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Microeconomic demand and supply curves depend on differences in ________ prices
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__________________ - the market value of final goods and services (i.e., sold to final consumers) produced by a nation during a specific period, usually 1 year.
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_____________________- the market value of final goods and services produced by labor and property supplied by the residents of a nation during a specific period, usually 1 year.
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When the amount that the quantity demanded exceeds the quantity supplied when the market price is below the equilibrium price.
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When many suppliers and many consumers (competitive) engaged in trade without interference from government (free).
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Percentage decline in the average level of prices.
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When the price of resources in the production process increases, firms try to pass on these increases to the product price this is called ________.
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________ represent a cost to not only individuals but also the macroeconomy or reduce overall economic efficiency in that they represent an unnecessary cost of transforming resources into final goods and services.
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GDP Deflator = Nominal (current-dollar) GDP /Real (constant-dollar) GDP * 100
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Deflation Rate = Price Index Year 2 - Price Index Year 1 /Price Index Year 1 * 100
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__________is the measure of the average level of prices for some specified bundle of goods and services, relative to the prices in a specified base year
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We can represent a single person's decision about how many items to purchase over a year in a table called a _______.
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A period of decline in total output, income, employment, and trade, usually lasting from six months to a year.
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___________ is a term used to denote a very high rate of inflation.
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A _______is a collection of suppliers and consumers engaged in trade.
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An increase in income leads to an increase in demand (the demand curve shifts to the right).
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When the amount that the quantity supplied exceeds the quantity demanded when the market price is above the equilibrium price
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Analysis of the behavior of individual decision-making units (individuals, households, firms).
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Nominal interest rate - expected rate of price inflation.
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A market is in _______ when the quantity demanded is equal to quantity supplied at the market price.
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The GDP Deflator is described as a variable-weight price index (also referred to as a Paasche price index)
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__________- percentage rate of increase in the price index per period.
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Things that are available in sufficient amounts to satisfy all possible needs. There is no opportunity cost involved in their use or consumption.
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Tangible things that satisfy people's wants and desires.
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When the average level of prices increases over time the economy is said to be experiencing _______________.
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A shift of the demand curve in response to a change in one of the variables assumed to be held constant under the ceteris paribus assumption (e.g., income), holding the good's price constant.
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Intangible but useful activities that are valued by people.
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What approach that measures total economic activity by adding the amount spent by allultimate or final consumers of products and service?
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______________ - average output per hour of labor (e.g., total real GDP divided by the total number of labor-hours worked)
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____________consists of transactions that are not documented for various reasons.
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What kind of resources in which examples are petroleum, natural gas, coal, and nonfuelminerals extracted from the ground is included in GDP in the products produced from them
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Transfer Payment - a payment made for which no goods or services are provided in return. Transfer payments are excluded from _______.
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Net Investment (In) = Gross Investment (Ig) - Depreciation
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Real GDP - value of total output corrected for any changes in prices. Also referred to as "constant-dollar" GDP. Real GDP is reported quarterly by the Bureau of Economic Analysis
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An increase in income leads to a decrease in demand (the demand curve shifts to the left).
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Percentage increase in the average level of prices.
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A _______ is the opposite situation of a price ceiling.
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Goods and services those are scarce. There is an opportunity cost involved in their use or consumption.
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A recession that is major both in scale and duration.
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When the government increases money supply faster than the economy is growing you generally end up with deflation.
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Gross National Product (GNP) = C + Ig + G + NX
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Recurrent, systematic fluctuations in the level of business activity, often characterized by changes in growth rate of real GDP.
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The _______ is a graphic representation of the market demand schedule and the Law of Demand
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