Macroeconomics Terminologies Review Questions with complete Solutions Graded A+
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Macroeconomics
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Macroeconomics
Macroeconomics Terminologies Review Questions with complete Solutions Graded A+
Aggregation - Answers Combining many individual markets into one overall market
Aggregate Demand Curve - Answers Shoes the quantity of domestic product that is demanded at each possible value of the price level
Aggre...
Macroeconomics Terminologies Review Questions with complete Solutions Graded A+
Aggregation - Answers Combining many individual markets into one overall market
Aggregate Demand Curve - Answers Shoes the quantity of domestic product that is demanded at each
possible value of the price level
Aggregate Supply Curve - Answers Shows, for each possible price level, the quantity of foods and
services that all the nation's businesses are willing to produce during a specified per of of time, holding
all other determinants of aggregate quantity supplied constant.
Inflation - Answers Refers to a sustained increase in the general price level
Recession - Answers A period of time during which the total output of the economy declines
Gross Domestic Product - Answers The sum of the money values of all final goods and serves produced
in the domestic economy and sold on organized markets during a specific period of time, usually a year
Nominal GDP - Answers Calculated by valuing all outputs at current prices
Real GDP - Answers Calculated by valuing outputs of different years at common prices. Therefore, real
GDP is a far better measure than nominal GDP of changes in total production
Final goods and services - Answers Those that are purchased by their ultimate users
Intermediate good - Answers A good purchased for resale or for use in producing another good
Real GDP per capita - Answers the ratio of real GDP divided by population
Deflation - Answers Refers to a sustained decrease in the general price level
Fiscal Policy - Answers A government's plan for spending and taxation, it can be used to steer aggregate
demand in the desired direction
Stagflation - Answers Inflation that occur while the economy is growing slowly or in a recession
Monetary Policy - Answers Actions taken by the Federal Reserve to influence aggregate demand by
changing interest rates and the money supply. It is aimed at affecting the economy.
Stabilizing Policy - Answers Government programs designed to prevent or shorten recessions and to
counteract inflation
Labor Productivity - Answers The amount of output a worker turns out in an hour (or a week, or a year)
of labor. If output is measured by GDP, it is GDP per hours of work.
Potential GDP - Answers The real GDP that the economy would produce if its labor and other resources
were fully employed.
, How can growth rate of potential GDP be calculated? - Answers By adding:
growth rate of labor input + growth rate of labor productivity
How do you calculate GDP? - Answers Hours of work x Labor Productivity
Labor Force - Answers THe number of people holding or seeking jobs.
Production Function - Answers Shows the volume of output that can be produced from given inputs
(such as labor and capital), given the available technology in an economy.
Unemployment Rate - Answers The number of unemployed people, expressed as a percentage of the
labor force.
Discouraged Worker - Answers An unemployed person who gives up looking for work and is therefore
no longer counted as part of the labor force.
Frictional Unemployment - Answers Unemployment that is due to normal turnover in the labor market.
It includes people who are temporarily employed between jobs because they are moving or chaining
occupations, or are unemployed for similar reasons.
Structural Unemployment - Answers Workers who have lost their jobs because they have been displaced
by automation, because their skills are no longer in demand or because of similar reasons.
Cyclical Unemployment - Answers THe portion of unemployment that is attributable to a decline in the
economy's total production. Cyclical unemployment rises during recessions and falls as prosperity is
restored.
Full Employment - Answers A situation in which everyone who is willing and able to work can find a job.
At full employment, the measured unemployment rate is still positive.
Unemployment Insurance - Answers A government program that replaces some of the wages lost by
eligible workers who lose their jobs.
Purchasing Power - Answers The volume of goods and services a given sum of money will buy.
Real Wage - Answers The wage rate adjusted for inflation. Specifically, it is the nominal wage divided by
the price index. The real wage thus indicates the volume of goods and services that the nominal wages
will buy.
REAL WAGE = (Nominal Wage) / (Price level) * 100
Relative Price - Answers Price in terms of some other item rather than in terms of dollars.
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