Summary: Macroeconomics

Read the summary and the most important questions on Macroeconomics

• 1 Economic Concepts

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• Before we start MACRO economics, we need to know economics.What is Economics? 

  A type of social science that analyzes the most efficient way to use our scarce resources.

• The three factors of production are what?One deals with a placeOne deals with workersOne deals with payment

  • Land
    
  • labour
  • capital

• What is an Opportunity cost? An example could be that I have Playdium calling today at this exact time for a shift but I have to study Macroeconomics and understand opportunity cost. I have to choose.

  The most desirable alternative given up when you make a choice

• 8 LIMIT INFLATION

• 8.1 Chapter 8

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• For the "Yes, markets quickly self-adjust" camp, when a negative demand shock occurs,Lower interest rates will decrease investmentFalling Canadian prices decrease net exportsWorkers and employers accept lower wages.Falling prices will lower the sales of products and services  

  Workers and employers accept lower wages

• In the short run, the aggregate quantity supplied of real GDPDecreases when there is a negative supply shockIncreases when there is a positive supply shockIncreases when the price level risesDecreases when the price level rises  

  Increases when the price level rises

• Aggregate demand increases if:Transfer payments decreaseBusiness investors become less optimisticGovernment decreases taxesthe CPI decreases   

  Government decreases taxes

• The long-run aggregate supply curve is:Vertical at potential GDPSloping upward due to the effects of price level changes on outputThe same as the short-run aggregate supply curveThe same as the PPF  

  Vertical at potential GDP

• Suppose the economy is in​ long-run equilibrium and there is a decrease in aggregate demand. Which of the following statements is​ true? The equilibrium price level will ​fall, and equilibrium GDP will increase. The equilibrium price level will rise, and equilibrium GDP will be unchanged. The equilibrium price level will fall, and equilibrium GDP will be unchanged. The equilibrium price level will rise, and equilibrium GDP will increase.

  The equilibrium price level will fall, and equilibrium GDP will be unchanged. 
  
  
  
  When there is a decrease in aggregate demand and​ long-run aggregate supply is​ vertical, the equilibrium price level will fall and equilibrium GDP will be unchanged.

• For the "Yes, markets quickly self-adjust" camp, when a negative demand shock occurs,Lower interest rates will decrease investmentworkers and employers accept lower wages falling Canadian prices decrease net exports Falling prices will lower the sales of products and services.  

  Workers and employers accept lower wages 
  
  In output markets, prices fall due to surpluses and falling wage​ costs, increasing sales of products and services until they are back to the level of potential GDP.

• According to the "No, markets fail often" view, expectations are Predictable Unknown Rational and steady Based on animal spirits and volatile  

  Based on animal spirits and volatile
  
  There are theories about how expectations adjust.