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Questions and Answers
What is the target inflation rate set by governments and central banks?
What is the target inflation rate set by governments and central banks?
Price level stability does not contribute to employment.
Price level stability does not contribute to employment.
False
What is real output measured by?
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.
Sustainable economic growth means a rate of growth which can be maintained without creating other significant economic problems, especially for ________________ generations.
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What is the main reason for a trade-off between rapid economic growth today and growth in the future?
What is the main reason for a trade-off between rapid economic growth today and growth in the future?
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Periods of growth are often triggered by increases in aggregate supply.
Periods of growth are often triggered by increases in aggregate supply.
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Match the following macroeconomic objectives with their descriptions:
Match the following macroeconomic objectives with their descriptions:
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What happens when output does not increase in response to an increase in aggregate demand?
What happens when output does not increase in response to an increase in aggregate demand?
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What is the origin of the word "economy"?
What is the origin of the word "economy"?
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The management of society's resources is important because resources are abundant.
The management of society's resources is important because resources are abundant.
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What is the definition of scarcity?
What is the definition of scarcity?
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The study of how society manages its scarce resources is called _______________________.
The study of how society manages its scarce resources is called _______________________.
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Match the following concepts with their definitions:
Match the following concepts with their definitions:
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How do resources get allocated in most societies?
How do resources get allocated in most societies?
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Economists study how people make decisions about what jobs to do and what goods to produce.
Economists study how people make decisions about what jobs to do and what goods to produce.
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What do economists study in addition to how people make decisions?
What do economists study in addition to how people make decisions?
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What is the primary focus of macroeconomics?
What is the primary focus of macroeconomics?
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According to economists, full employment means that everyone has a job.
According to economists, full employment means that everyone has a job.
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What is the primary reason for achieving price stability?
What is the primary reason for achieving price stability?
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The balance of payments is an important macroeconomic objective because it reflects the ______________ of a country.
The balance of payments is an important macroeconomic objective because it reflects the ______________ of a country.
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Match the following macroeconomic objectives with their definitions:
Match the following macroeconomic objectives with their definitions:
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What is the primary consequence of unemployment falling too much?
What is the primary consequence of unemployment falling too much?
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Classical economists and Keynes view full employment in the same way.
Classical economists and Keynes view full employment in the same way.
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What is the primary goal of achieving a high, but sustainable, rate of economic growth?
What is the primary goal of achieving a high, but sustainable, rate of economic growth?
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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.