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Test Bank for MacroEconomics Final Review 11th Edition by N. Gregory Mankiw
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Test Bank for MacroEconomics FinalReview 11th Edition by N. Gregory
Mankiw
Economics - ANSthe study of how people, institutions, and society make economic choices
under conditions of scarcity.
Macroeconomics - ANSthe parts of economics concerned with the economy as a whole; with
such major aggregates as the household, business, and government sectors; and with measure
of the total economy.
Circular Flow Model - ANSthe flow of resources from household to firms and of products from
firms to households. These flows are accompanied by reverse flows of money firms to
households and from households to firms.
Opportunity Cost - ANSthe value of the good, service or time forgone to obtain something else.
Law of Demand - ANSthe principle that, other things equal, an increase in a products price will
reduce the quantity of it demanded, and conversely for a decrease in price.
Demand Curve - ANSa curve illustrating the inverse relationship between the price of a product
and the quantity of it demanded, other things equal.
Supply Curve - ANSa curve illustrating the direct relationship between the price of a product and
the quantity of it supplied, other things equal.
Market Equilibrium - ANSis set by the interaction of supply and demand. Equilibrium price is the
price at which the quantity demanded by consumers and the quantity that firms are willing to
supply of a good or service are the same.
Change in Demand - ANSa change in the quantity demanded of a good or service at every
price; a shift of the demand curve to the left or right.
Change in Quanitity Demand - ANSa change in the quantity demanded due to an increase or
decrease in the price of the product under consideration; a movement from one point to another
on a fixed demand curve.
GDP - ANSis the total market value of all final goods and services produced in the economy in
one year. (GDP= C+Ig+G+Xn)
, GDP=C+Ig+G+Xn - ANS(c) Personal Consumption Expeditures (Ig) Gross Private Domestic
Investment (G) Government Purchases (Xn) Net Exports
Total Market Value - ANSThe unit of measure for real domestic output or real GDP is the market
value or $
Final Goods and Services - ANSFinal goods are bought and used by the final consumer
Produced in One Year - ANSGDP is a measure of what is produced or made in one year.
Arguments for/against growth - ANSAgainst: increase in the supplies of labor, entrepreneurial
ability, energy and resources being depleted, ecological space, farmland being lost to
urbanization. For: Growth lessens the burden of scarcity, will result in rising real wages,
incomes, and standards of living, and create more jobs, decrease unemployment, Expand real
GDP, per capita, over time.
Real GDP - ANSGDP that has been deflated or inflated to reflect changes in the price level;
price level in a base period. (i.e., GDP that is adjusted for inflation)
Nominal GDP Calculations - ANSbased on prices that prevailed when the output was produced;
measure in terms of the price level at the time of measurement (i.e., GDP that is unadjusted for
inflation). Unit of Outputs (5) X Price($10)= $50 Real GDP ($10)X5= $50 {units of output X initial
Price}
Business Cycle - ANSrecurring increases and decreases in the level of economic activity over
periods of time.
Recession - ANSa period of declining GDP, accompanied by lower income and higher
unemployment.
Structural Unemployment - ANSassociated with the mismatch between jobs and the skills or
locations of those unemployed.
Frictional Unemployment - ANS"between jobs" associated with people searching for jobs or
waiting to take jobs in the near future
Cyclical Unemployment - ANSbegins with the recessionary phase of the business cycle; caused
by a decline in total spending.
Discouraged Workers - ANSare people of legal employment age who are not actively seeking
employment or who does not find employment after long-term unemployment.
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