BMAL-590 Macroeconomics Exam Questions Correct Answers Current Update (Verified A+ Pass)
Macroeconomics - Answers - examines the economy as a whole. When all the individuals, households, firms, governments and foreign countries act together and make decisions, the entire economy is affected.
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BMAL-590 Macroeconomics Exam
Questions Correct Answers Current
Update (Verified A+ Pass)
Macroeconomics - Answers -✔✔ examines the economy as a whole. When all the
individuals, households, firms, governments and foreign countries act together and
make decisions, the entire economy is affected.
Thus, Macroeconomics explores the determinants of aggregate income, investment,
consumption, growth, interest rates, and overall level of prices.
Macroeconomics posits that the notion of perfect markets and equilibrium do not hold
for all goods and services, and certainly not at all times.
In fact, the impetus for the growth of Macroeconomics was the great depression as
classical macroeconomic theories could not explain why high levels of unemployment
persisted.
Keynesian economics - Answers -✔✔ The central theme is the role of government in
the economy.
Keynes argued that government intervention could be an effective toolin addressing the
problems of unemployment and sluggishness output. Thus, government becomes a
facilitator in stimulating aggregate demand and lifting the economy out of a recession.
The definition of people not working according to Keynes are those not able to find a job
at the current wage rate.
Keynesian economics was deemed to be the answer until the events of the 1970s and
1980s demonstrated the limitations of government intervention and led to considerable
disillusionment.
Walter Heller - Answers -✔✔ used the term "Fine-tuning" to explain the role of
government in regulating unemployment and inflation.
The law of demand states that - Answers -✔✔ price and quantity demanded are
inversely related
The law of demand states that the quantity demanded of goods falls when the price of
the goods rises, and vice versa, provided all other factors that affect buyers' decisions
are unchanged.
The quantity demanded of a consumer good such as ice cream depends on:
,- The price of ice cream
- The prices of related goods
- Consumers' incomes
- Consumers' tastes
- Consumers' expectations about future prices and incomes
- Number of buyers, etc.
The law of demand says that the quantity demanded of a good is inversely related to its
price, provided all other factors are unchanged.
Shifts in demand are caused by changes in the factors of demand:
- Economics (the economy, consumer income, GDP, xfc etc.)
- Prices of related goods
- Consumer tastes and preferences
- Legal/Government
- Expectations about future prices and prospects
- Technology
- Number of buyers
examples of how factors can shift an entire demand curve include: - Answers -✔✔
Consumer Income:
- As income increases, the demand for a normal good will increase.
- As income increases, the demand for an inferior good will decrease.
Prices of Related Goods:
- When a fall in the price of one good reduces the demand for another good, the two
goods are called substitutes.
- When a fall in the price of one good increases the demand for another good, the two
goods are called complements.
When considering the factors involved one should be able to understand how changes
in the factors cause changes in demand, with an entire shift not a movement along the
demand curve.
Quantity supplied - Answers -✔✔ the amount of a good that sellers are willing and able
to sell.
Supply - Answers -✔✔ a full description of how the quantity supplied of a commodity
responds to changes in its price.
The law of supply states: - Answers -✔✔ the quantity supplied of a good rises when the
price of the good rises, as long as all other factors that affect suppliers' decisions are
unchanged
Market Supply - Answers -✔✔ the combined supply of everyone willing and able to sell
a good in a market. Market supply is graphically represented by a positively-sloped
, market supply curve (remember previous slide), which can be derived by combining, or
adding, the individual supplies of every seller in the market.
Stagflation - Answers -✔✔ a period of slow economic growth and high unemployment
(stagnation) while prices rise (inflation)
a phenomenon that has baffled economists. Stagflation is often caused by a supply side
shock. For example, rising commodity prices, such as oil prices, will cause a rise in
business costs (transport more expensive) and short run aggregate supply will shift to
the left. This causes a higher inflation rate and lower GDP output.
An economy is said to be in stagflation when overall price levels increase rapidly
(inflation) even as the economy itself is in a recession or high levels of unemployment
(stagnation).
This is precisely what happened in the U.S. during the 1970s. Oil prices increased
dramatically. The production costs of goods spiraled leading to an increase in
unemployment. The stagnation that followed inflamed the inflationary effects on the
economy.
Scholars have tried to explain this phenomenon in terms of an economy's productive
capacity itself declining or the failure of government policies. However there is no
consensus on the solution, if any, to the problem.
Macroeconomics attempts to address three major concerns: - Answers -✔✔ Inflation
Growth
Unemployment
Inflation - Answers -✔✔ refers to an increase in the overall price level. Inflation erodes
the purchasing power of consumers.
hyperinflation - Answers -✔✔ When inflation reaches unmanageable levels (some
countries have experienced inflation rates of over 3% per day!)
Due to hyperinflation, the Zimbabwean dollar became worthless with one quadrillion
(one hundred trillion) Zimbabwe dollars being worth just US$1 in 2015. The country was
forced to abandon its currency in favor of the U.S. dollar.
Deflation - Answers -✔✔ represents a decrease in the overall price level. Prolonged
periods of deflation are as catastrophic for the economy as inflation. As an example, the
once mighty economic superpower Japan has been facing deflation for almost two
decades.
Aggregate Output - Answers -✔✔ the economy's total production of goods and
services for a given time period
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