Economics and Macroeconomic Concepts

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Questions and Answers

What is the target inflation rate set by governments and central banks?

2% (correct)

Price level stability does not contribute to employment.

False

What is real output measured by?

Gross Domestic Product (GDP) at constant prices

Sustainable economic growth means a rate of growth which can be maintained without creating other significant economic problems, especially for ________________ generations.

future Signup and view all the answers

What is the main reason for a trade-off between rapid economic growth today and growth in the future?

Both A and B Signup and view all the answers

Periods of growth are often triggered by increases in aggregate supply.

False Signup and view all the answers

Match the following macroeconomic objectives with their descriptions:

Price level stability = When the prices of goods and services aren't regularly volatile, consumers are more likely to make buying and selling decisions without thinking about inflation or the consequences of it. Sustainable economic growth = A rate of growth which can be maintained without creating other significant economic problems, especially for future generations. Balance of payments = Maintaining a balance of payments with the rest of the world. Full employment = A situation where all available labor resources are being used. Signup and view all the answers

What happens when output does not increase in response to an increase in aggregate demand?

The price level rises. Signup and view all the answers

What is the origin of the word "economy"?

Greek word for "one who manages a household" Signup and view all the answers

The management of society's resources is important because resources are abundant.

False Signup and view all the answers

What is the definition of scarcity?

Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have. Signup and view all the answers

The study of how society manages its scarce resources is called _______________________.

economics Signup and view all the answers

Match the following concepts with their definitions:

Economics = Study of how society manages its scarce resources Scarcity = Limited resources and inability to produce all desired goods and services Household = A unit that manages its resources, such as a family Signup and view all the answers

How do resources get allocated in most societies?

Through the combined actions of millions of households and firms Signup and view all the answers

Economists study how people make decisions about what jobs to do and what goods to produce.

True Signup and view all the answers

What do economists study in addition to how people make decisions?

Economists also study how people interact with one another. Signup and view all the answers

What is the primary focus of macroeconomics?

Variables and data at the national level Signup and view all the answers

According to economists, full employment means that everyone has a job.

False Signup and view all the answers

What is the primary reason for achieving price stability?

To prevent inflation from affecting consumer spending Signup and view all the answers

The balance of payments is an important macroeconomic objective because it reflects the ______________ of a country.

economic transactions with the rest of the world Signup and view all the answers

Match the following macroeconomic objectives with their definitions:

Full employment = A situation where unemployment has fallen to the lowest possible level without causing inflation Price stability = A situation where the general price level is stable and does not affect consumer spending Economic growth = A high, but sustainable, rate of increase in national income and output Balance of payments = A situation where a country's economic transactions with the rest of the world are in equilibrium Signup and view all the answers

What is the primary consequence of unemployment falling too much?

Inflation will rise Signup and view all the answers

Classical economists and Keynes view full employment in the same way.

False Signup and view all the answers

What is the primary goal of achieving a high, but sustainable, rate of economic growth?

To increase national income and output Signup and view all the answers

Study Notes

Macroeconomic Objectives

The four major objectives of macroeconomics are:
- Full employment
- Price stability
- A high, but sustainable, rate of economic growth
- Keeping the balance of payments in equilibrium

Price Level Stability

Price level stability contributes to employment
Consumers make buying and selling decisions without thinking about inflation when prices are stable
A target inflation rate of up to 2% is set by governments and central banks

Economic Growth

Economic growth occurs when real output increases over time
Real output is measured by Gross Domestic Product (GDP) at constant prices
Sustainable economic growth means a rate of growth that can be maintained without creating significant economic problems for future generations

Balance of Payments

Maintaining a balance of payments with the rest of the world is a macroeconomic objective
Macroeconomic performance relies on measures of economic activity, focusing on variables and data at the national level within a specific period of time

Full Employment

Full employment refers to a situation in which every able-bodied person who is willing to work at the prevailing rate of wages is employed
Full employment means that unemployment has fallen to the lowest possible level that won't cause inflation
Full employment is also defined as a situation where there is no involuntary unemployment

Introduction to Macroeconomics

The word "economy" comes from the Greek word "oikonomos", meaning "one who manages a household"
A society faces many decisions, including allocating resources among its members and deciding who will do which tasks
Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have
Economics is the study of how society manages its scarce resources

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Description

Test your understanding of macroeconomic concepts, including inflation targets, price level stability, and sustainable economic growth. This quiz covers key concepts in economics and their implications.

Economics and Macroeconomic Concepts

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Questions and Answers

What is the target inflation rate set by governments and central banks?

Price level stability does not contribute to employment.

What is real output measured by?

Sustainable economic growth means a rate of growth which can be maintained without creating other significant economic problems, especially for ________________ generations.

What is the main reason for a trade-off between rapid economic growth today and growth in the future?

Periods of growth are often triggered by increases in aggregate supply.

Match the following macroeconomic objectives with their descriptions:

What happens when output does not increase in response to an increase in aggregate demand?

What is the origin of the word "economy"?

The management of society's resources is important because resources are abundant.

What is the definition of scarcity?

The study of how society manages its scarce resources is called _______________________.

Match the following concepts with their definitions:

How do resources get allocated in most societies?

Economists study how people make decisions about what jobs to do and what goods to produce.

What do economists study in addition to how people make decisions?

What is the primary focus of macroeconomics?

According to economists, full employment means that everyone has a job.

What is the primary reason for achieving price stability?

The balance of payments is an important macroeconomic objective because it reflects the ______________ of a country.

Match the following macroeconomic objectives with their definitions:

What is the primary consequence of unemployment falling too much?

Classical economists and Keynes view full employment in the same way.

What is the primary goal of achieving a high, but sustainable, rate of economic growth?

Study Notes

Macroeconomic Objectives

Price Level Stability

Economic Growth

Balance of Payments

Full Employment

Introduction to Macroeconomics

Studying That Suits You

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