30 Questions
Which approach is used to calculate GDP by summing up the value added by all industries in the economy?
Production Approach
What is the biggest sector in countries like Austria?
Tertiary Sector - Services
Why is real GDP more meaningful for time comparisons?
Price effects are adjusted for in real GDP
What are the two main drivers for economic growth?
Increases in work volume and labor productivity
Which one of these is a typical topic in macroeconomics?
Output and inflation
What is a fallacy of composition?
The assumption that what is true for one member of a group is true for all members
Which one of these is an example of a market failure?
Monopoly in the market
What happens if everyone saves more money simultaneously?
Reduced economic growth
What are the effects of unemployment?
Losses in human capital
Based on the text, which type of unemployment is caused by a shortage of jobs during recessions or downturns?
Cyclical (demand deficient)
How is full employment defined?
A state where all eligible individuals can find jobs at prevailing wage rates
In the simple neoclassical model, how is the (real) wage determined?
Exclusively by labor demand and labor supply
According to the Keynesian model, why can there be persistent unemployment?
Insufficient aggregate demand
In the Keynesian model, why don't firms invest more if saving is increased?
Increased saving leads to reduced consumption
What are passive labor market policies?
Unemployment benefits
According to the heterodox and orthodox view, what is money?
All of the above
Which of the following is NOT a duty of the central bank?
Operating payment systems
What is the purpose of legal tender laws?
To create demand for a currency
What is the topmost layer of the pyramid of liabilities?
Banknotes and coins
What is the difference between stable inflation and accelerating inflation?
Stable inflation is a continuous rise in the price level, while accelerating inflation is a one-off price rise
Which of the following is a fiscal policy measure to combat the effects of inflation?
One time payments
What is one of the fiscal policies against the causes of inflation mentioned in the text?
Investments in renewable energy production
Why might deficit rules be problematic according to the text?
They prevent necessary investments
What does the text mention as a need for massive investments?
Climate crisis
What was the rationale behind choosing the 60% public debt threshold according to the text?
Unrealistic growth assumptions
What do countries in Europe require different degrees of according to the text?
Investments for convergence
Which one of these is the most correct?
Fiscal policy refers to government decisions on taxation and spending, while monetary policy involves central bank actions.
Which one of these is the most correct?
Neoclassical economics assumes that markets self-regulate and reach equilibrium, while Keynesian economics believes that government intervention is necessary to stabilize the economy during recessions.
Which one of these is the most correct?
Stocks represent a quantity or accumulation of something at a specific point in time, while flows refer to the rate at which that quantity changes over a period of time.
Which one of these is the most correct?
GDP measures the total value of goods and services produced within a country's borders during a specific time period, including consumption, investment, government spending, and net exports.
Study Notes
GDP Approaches
- Gross Domestic Product (GDP) can be calculated by summing the value added by all industries within an economy.
Economic Sectors
- In countries like Austria, the largest sector is typically the service sector.
Real GDP
- Real GDP, adjusted for inflation, provides a more accurate basis for comparing economic performance over time.
Economic Growth Drivers
- Two main drivers of economic growth are technological advancement and increases in capital investment.
Macroeconomics Topics
- Macroeconomics commonly addresses issues like inflation, unemployment, and economic output.
Fallacy of Composition
- This fallacy occurs when it is assumed that what is true for one part is also true for the whole.
Market Failures
- An example of market failure is when externalities, like pollution, lead to inefficient market outcomes.
Collective Saving Impact
- If everyone saves more money at the same time, it can lead to a decrease in overall demand, potentially causing an economic downturn.
Effects of Unemployment
- Unemployment can result in reduced income, decreased consumer spending, and negative impacts on mental health.
Types of Unemployment
- Cyclical unemployment arises during economic recessions when there is a shortage of jobs.
Full Employment Definition
- Full employment is defined as the lowest level of unemployment that an economy can sustain without causing inflation.
Wage Determination
- In the simple neoclassical model, (real) wages are determined by the supply and demand for labor.
Keynesian Perspective on Unemployment
- The Keynesian model suggests that persistent unemployment can occur due to insufficient aggregate demand.
Firm Investment and Saving
- According to the Keynesian model, firms may not invest more despite increased savings because they anticipate weak demand.
Passive Labor Market Policies
- These policies are designed to support unemployed individuals without actively creating jobs, such as providing unemployment benefits.
Concepts of Money
- The heterodox view sees money as a social construct, while the orthodox view treats it as a tool for facilitating trade.
Central Bank Duties
- Duties of the central bank typically exclude direct involvement in the actual production of goods and services.
Legal Tender Laws Purpose
- Legal tender laws establish a currency that must be accepted if offered in payment of a debt.
Pyramid of Liabilities
- The topmost layer of the pyramid of liabilities consists of central bank currency.
Inflation Types
- Stable inflation implies a consistent rate over time, whereas accelerating inflation refers to rapidly increasing prices.
Fiscal Policy Against Inflation
- One fiscal policy measure to combat inflation is reducing government spending.
Deficit Rules Concerns
- Deficit rules may be problematic as they can limit the government’s ability to invest in growth during economic downturns.
Investment Needs
- The text mentions a critical need for massive investments in infrastructure to support economic development.
Public Debt Threshold Rationale
- The 60% public debt threshold was chosen as a guideline to promote fiscal sustainability among EU countries.
European Economic Requirement
- Countries in Europe require varying degrees of fiscal and monetary coordination to maintain economic stability.
Test your knowledge of central banking and currency demand in this quiz. Learn about the relationship between taxes, government currency, legal tender laws, and the duties of a central bank.
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