This event would cause an extreme inward shift of the USA's PPF. Structural unemployment You earn 500 a month, and currently have 200 in currency, 100 in checking, 2000 in savings, 3000 in illiquid assets, and 1000 of debt. How much do you have in money, annual income, and wealth? Explain how the following event will affect a country's PPF: a devastating earthquake destroys numerous production facilities and the state of CA disappears into the Pacific Ocean How do increases in spending on war affect the aggregate demand curve?

Explain how the following event will affect a country's PPF: a devastating earthquake destroys numerous production facilities and the state of CA disappears into the Pacific Ocean

Constant opportunity cost If you spend more of your income on consumption goods, the production of investment goods will: Assume a desert economy in which labor is the only scarce resource: There are six equally productive individuals, and each can gather 25 coconuts, or build one hut in a day. Does this production schedule exhibit constant or increasing opportunity cost? In a closed economy, what is the formula for public savings M2 Money Supply consists of

Assume a desert economy in which labor is the only scarce resource: There are six equally productive individuals, and each can gather 25 coconuts, or build one hut in a day. Does this production schedule exhibit constant or increasing opportunity cost?

The opportunity cost of two additional huts would be 50 coconuts (25 coconuts per one hut) If, in a closed economy, real GDP is $30 billion, consumption is $20 billion, and government purchases are $5 billion, what is total saving in the economy? Consider the following data for a closed economy: Y= $12 Trillion C=$8 Trillion I=$2 Trillion G= $2 Trillion TR=$2 Trillion T=$3 Trillion What is the level of public saving? Assume a desert economy in which labor is the only scarce resource: There are six equally productive individuals, and each can gather 25 coconuts, or build one hut in a day. Suppose the workers are making two huts per day in addition to collecting coconuts. Compute the opportunity cost of of an additional two huts per day. Assume that inventories declined by more than analysts predicted. This implies that

Assume a desert economy in which labor is the only scarce resource: There are six equally productive individuals, and each can gather 25 coconuts, or build one hut in a day. Suppose the workers are making two huts per day in addition to collecting coconuts. Compute the opportunity cost of of an additional two huts per day.

One person is not working. 2 huts= 2 people, 75 coconuts= 3 people. Consider the following data for a closed economy: Y= $12 Trillion C=$8 Trillion I=$2 Trillion G= $2 Trillion TR=$2 Trillion T=$3 Trillion What is the level of private savings in this economy? Indicate which of the following transactions is included in US GDP. 1. Textbook purchased by a student in NJ, book produced in HI. 2. 40 lbs of apples produced in WA, traded for ten pounds of honey 3. under the table babysitting cash 4. Fighter jet produced in TX sold to Saudi Arabia 5. Cashing in on an annuity If an increase in autonomous consumption spending of $25 million results in a $100 million increase in equilibrium real GDP, then the MPC is (MPC= change in Consumption/ change in disposable income) Assume a desert economy in which labor is the only scarce resource: There are six equally productive individuals, and each can gather 25 coconuts, or build one hut in a day. Assume in one day, two huts were built, and 75 coconuts were gathered. What does this situation represent? (What occurs to cause this?)

Assume a desert economy in which labor is the only scarce resource: There are six equally productive individuals, and each can gather 25 coconuts, or build one hut in a day. Assume in one day, two huts were built, and 75 coconuts were gathered. What does this situation represent? (What occurs to cause this?)

structurally unemployed Last week, six Swedish kronor could purchase one U.S. dollar. This week, it takes eight Swedish kronor to purchase one U.S. dollar. This change in the value of the dollar will ________ exports from the United States to Sweden and ________ U.S. aggregate demand. automatic stabilizers Determine the labor classification for each of the examples: employed, cyclically unemployed, out of the labor force, frictionally unemployed, or structurally unemployed: Homer lost his job last week at a nuclear power plant. The plant was closed in favor of a hydroelectric power plant. Homer has skills special to nuclear power plants. How do increases in spending on war affect the aggregate demand curve?

Determine the labor classification for each of the examples: employed, cyclically unemployed, out of the labor force, frictionally unemployed, or structurally unemployed: Homer lost his job last week at a nuclear power plant. The plant was closed in favor of a hydroelectric power plant. Homer has skills special to nuclear power plants.

Out of the labor force Refer to the graph. The loanable funds market is in equilibrium, as shown above. As a result of an increase in the government budget deficit, the_________ for loanable funds will ___________, thereby __________ the equilibrium real interest rate and __________ the equilibrium quantity of loanable funds Determine the labor classification for each of the examples: employed, cyclically unemployed, out of the labor force, frictionally unemployed, or structurally unemployed: Tom chooses not to use a ladder to aid his job performance. He quits and considers what to do next. Determine the labor classification for each of the examples: employed, cyclically unemployed, out of the labor force, frictionally unemployed, or structurally unemployed: Ed is 6 years old. M2 Money Supply consists of

Determine the labor classification for each of the examples: employed, cyclically unemployed, out of the labor force, frictionally unemployed, or structurally unemployed: Ed is 6 years old.

1. Yes 2. No 3. No 4. Yes 5. No D. New government regulations decrease the profitability of a new investment. Refer to the graph. Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP 1 to GDP 2. This amounts to 400 billion. If the MPC is .75, what is the distance between point N and L (how much did government spending change)? frictional unemployment Indicate which of the following transactions is included in US GDP. 1. Textbook purchased by a student in NJ, book produced in HI. 2. 40 lbs of apples produced in WA, traded for ten pounds of honey 3. under the table babysitting cash 4. Fighter jet produced in TX sold to Saudi Arabia 5. Cashing in on an annuity

Indicate which of the following transactions is included in US GDP. 1. Textbook purchased by a student in NJ, book produced in HI. 2. 40 lbs of apples produced in WA, traded for ten pounds of honey 3. under the table babysitting cash 4. Fighter jet produced in TX sold to Saudi Arabia 5. Cashing in on an annuity

Decrease in expected future income Assume a desert economy in which labor is the only scarce resource: There are six equally productive individuals, and each can gather 25 coconuts, or build one hut in a day. Suppose the workers are making two huts per day in addition to collecting coconuts. Compute the opportunity cost of of an additional two huts per day. What impact does deflation have on real GDP demanded Which of the following will reduce consumer expenditures: decrease in interest rates, decrease in housing prices, decrease in expected future income, decrease in the price level. D. GDP

Which of the following will reduce consumer expenditures: decrease in interest rates, decrease in housing prices, decrease in expected future income, decrease in the price level.

Recession, Cash flow During a ______ many firms experience reduced profits, which reduces _________ and investment spending. D. New government regulations decrease the profitability of a new investment. German luxury car exports were hurt in 2009 because of the recession. How would this decrease in exports have afected Germany's aggregate demand curve? What is the definition of GDP

During a ______ many firms experience reduced profits, which reduces _________ and investment spending.

Macroeconomics Review

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Cards in this deck(81)

This event would cause an extreme inward shift of the USA's PPF.

Constant opportunity cost

The opportunity cost of two additional huts would be 50 coconuts (25 coconuts per one hut)

One person is not working. 2 huts= 2 people, 75 coconuts= 3 people.

structurally unemployed

Out of the labor force

Frictionally unemployed

1. Yes 2. No 3. No 4. Yes 5. No

Decrease in expected future income

Recession, Cash flow

Increase consumption by 1.2 million

the growth rate of U.S. GDP is faster than the growth rate of GDP in other countries.

increase, decrease

less

firms will experience an unplanned increase in inventory levels

Three trillion

negative 1 trillion (deficit)

Y + TR - Consumption - Taxes

T- G - TR

Inventories have risen above their desired level, firms decrease production

Refer to figure one- if the economy is at point J, which of the following is true:

The economy is in a recession

the economy is in an expansion.

Planned aggregate expenditure was greater than GDP

Refer to figure: which of the following is consistent with the graph above?

100 Billion

40 Billion

5 billion

If government saving is negative, which of the following are true:

Increase, increase

MPC= .75

Autonomous consumption is a type of expenditure that does NOT depend on:

If an increase in autonomous consumption spending of $25 million results in a $100 million increase in in equilibrium real GDP, then the MPC is:

positive, greater, greater

Wealth Effect: lower price level means your $ goes farther, so you can spend on more Interest Rate Effect: lower price level means less inflation and lower interest rates. Meaning people will borrow more

Supply, fall, increasing, decreasing

The quantity of loanable funds demanded will fall below 120 million

supply, left, rise

supply, right, fall

Unemployment insurance and other government transfer programs are mor prevalent

fall

Imports, exports, net exports

increases quantity demanded

They will move the economy up along a stationary aggregate demand curve

The aggregate demand curve would have shifted to the left.

decrease, decrease

AD2 to AD1

AD1 to AD2

AD2 to AD1

AD1 to AD2

money----> 300 | annual income-----> 6000 | wealth------> 4300

increase, not change

not change (credit cards don't have an impact)

all final goods and services produced in a country's borders in a year minus capital consumption allowance

the total market value of all final goods and services produced annually within a countries boundaries

1) underground activites 2) resale of used goods 3) pure financial transactions 4) Government and private transfer payments 5) goods and services produced and consumed at home

Nominal GDP/Real GDP x 100 measures the change in price level

Y-C-G

Gross National Product - the sum of all goods and services produced in a nation by its nationals in a year

16 years old

Employed, unemployed, and out of the work force

U/(U+E) x 100

people capable of working but have not looked for a job in the last 4 weeks

(E+U)/(E+U+O) x 100

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs. Short term, Ex: seasonal workers

caused by changed in the demand for labor. i.e, when certain jobs become obselete. EX: a glass blower getting replaced by a glass blowing machine

caused by a recession phase of the business cycle. Less demand for goods and less revenue means companies can't hold as great a workforce.

the unemployment rate that arises from the effects of frictional plus structural unemployment

Y + TR - C - T

T-G-TR

coins and currency held by the nonbank public, checkable deposits, and traveler's checks

M1 + Savings deposits, small time deposits, and money market mutual funds

Decreases in C, I, G, or NX Higher interest rates or price level

Increases to C, I, G, or NX lower interest rates or price level

1/(1-MPC)

progressively graduated corporate and personal income taxes, and transfer systems such as unemployment insurance and welfare

= (Yf - Ye)/tax multiplier

-MPC/MPS

the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending

represents changes in government spending and taxation that need specific approval from Congress and the President. Examples include increases in spending on roads, bridges, stadiums, and other public works.

Yf = the full employment level of GDP (i.e., potential GDP) Ye = the current equilibrium level of GDP

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