The main steps in developing and testing an economic model or theory are each of
the following
state the research question.
make provisional assumptions that describe the economic setting and the
behavior of the economic actors.
work out the implications of the theory.
conduct an empirical analysis to compare the implications of the theory with the
data.
evaluate the results of your comparisons.
The criteria for a useful theory or model are each of the following
it has reasonable and realistic assumptions.
its implications can be tested empirically using real-world data.
its implications are consistent with the data.
it is understandable and manageable enough for studying real problems.
Can average labor productivity fall even though total output is rising?
Yes, if employment rises faster than output..
Which of the following cases would result in increased total output but a higher
unemployment rate?
The labor force decreases by 1%. The level of employment decreases by 3%.
Labor productivity increases by 5%.
The labor force increases by 7%. The level of employment increases by 5%. Labor
productivity decreases by 3%.
The idea of the invisible hand is that
with free markets and individuals acting in their best interests, the economy
will function well.
Macroeconomic analysts monitor the economy and think about the implications of
current economic events.
The main function of public-sector macroeconomic analysts is to
assist in policymaking.
What point was economist John Maynard Keynes trying to make when he noted
that "in the long run we're all dead"?
It may not be good government policy to wait for wages and prices to adjust to
achieve equilibrium in markets since they are slow to adjust.
Inflation is an ongoing increase in the prices of goods and services, while deflation is
an ongoing decrease in the prices of goods and services.
According to the text, which of the following conditions is necessary for a theory to
be useful?
It must have implications that can be tested by empirical analysis.
Prices were much higher in Canada in 2013 than in 1914.
Does this fact mean that people were economically better off in 1914?
Uncertain
If people are economically better off in 2018 than in 1890, it must be true that
incomes have risen faster than prices.
How have total output and output per worker changed over time in Canada?
Total output has grown strongly, and output per worker has grown strongly.
These changes have affected the lives of typical people by leading to
a higher standard of living in Canada.
Classical economists believe that the best way to solve the problem of high
unemployment is
to do nothing; the economy will rapidly adjust on its own.
Keynesians think that wages and prices adjust slowly when the economy is out of
equilibrium. If the Keynesian theory is correct, unemployment will persist.
Each of the following is a principal professional activity of macroeconomists
forecasting key macroeconomic variables.
macroeconomic data development.
macroeconomic analysis
macroeconomic research.
Private disposable income minus consumption equals
private saving.
Private saving equals
(Y + NFP + TR + INT−T) − C.
The private saving rate equals
private saving divided by private disposable income.
Private saving is equal to
disposable income minus consumption.
National saving is equal to
government saving plus private saving.
What problem does government control of prices create for economists attempting
to measure a country's GDP?
prices do not measure market value
In countries in which people grow their own food, make their own clothes, and
provide services for one another within a family or village group, why might official
GDP figures underestimate these nations' actual GDPs?
such goods and services are not sold on the market, making their value difficult
to measure.
Nominal GDP 就是把所有的×一下加在一起
percentage increase in nominal GDP since the base year 就是 除一下减一
real GDP 就是用这一年的量×上一年的价
GDP deflator = N/R
是 GDP 别搞错了
The inflation rate 后一年减去前一年的 GDP deflator
For the purposes of assessing an economy's growth performance, the more
important statistic is real GDP.
Real GDP is a better measure of economic growth than nominal GDP because
an increase in nominal GDP may show an increase in prices rather than an
increase in output.
A budget deficit is equal to government expenditure minus government revenue.
A budget surplus is equal to government revenue minus government expenditure.
The term "budget deficit" is used to describe government saving when that value is negative,
while the term "budget surplus" is used to describe that value when it positive.
Nominal interest rate 最开始的一年多收到的钱除以原来的钱
Actual inflation rate 用第二年 CPI 多出来的钱除以第一年总钱
Real interest rate 是 nominal 减去 inflation
Expected inflation rate 是 guess 的 CPI 多出来的除以第一年 CPI
Expected real interest rate 是 nominal 减去 expect inflation rate
correct statement about the national income accounts
The product approach to measuring economic activity is calculated as the sum of
the value added by producers.
There are three approaches to measuring current economic activity: the product
approach, the income approach, and the expenditure approach. In principle, the three
approaches give the same answer.
The alternative approaches to measuring economic activity are useful because each
approach gives a different perspective on the economy.
The correct interest rate for studying most economic decision is the expected real
interest rate.
A problem with using the expected real interest rate to study economic decisions is
that:
it is difficult to determine what the public's expected rate of inflation is.
Total value added by all producers = total income = total amount spent by all ultimate
users of output
inflation rate = 第二年除以第一年 – 1
inflation rate 负数 就是 deflation
A nation's gross domestic product (GDP) is defined as the market value of final goods
and services newly produced within a nation during a fixed period of time. There are
many practical issues that arise in measuring economic activity as defined above.
Which is one of them?
The measure leaves out the economic costs of environmental degradation in the
calculation of firms' contribution to output, creating an upward bias.
Some non-market goods and services, such as activities in the underground economy,
are estimated and partially incorporated in official GDP measure.
There are some useful goods and services that are not sold in formal markets and so
they are excluded from the measure, creating a downward bias.
The nominal interest rate is
the rate at which the dollar value of an asset increases over time
The real interest rate is
the rate at which the purchasing power of an asset increases over time
The most important interest rate concept for the decisions made by borrowers and lenders is
the expected real interest rate
In Canada, CPI inflation may overstate true increases in the cost of living
by up to 0.6 percentage points each year.
Expenditure approach 给出去
Income approach 别人的 income 和自己的 income
Product approach domestic value
Net government income minus government purchases of goods and services equals
government saving.
Government saving equals (T – TR – INT ) − G.
The government budget surplus equals
government saving.
Supply of labor 是指提供的劳动力？行动力
Suppose the population falls, the labor force is constant, the number of unemployed
rises, and the number of employed falls (but by less than the decline in population).
In this situation, the unemployment rate will increase and the employment ratio will
increase.
Suppose that population is constant, the labor force declines, employment rises, and
unemployment falls.
In this situation, the participation rate will decrease and the employment ratio will
increase.
What two variables are related by the aggregate labor supply curve?
the quantity of labor supplied and the real wage
What are the primary factors that cause the aggregate labor supply curve to shift?
the expected future real wage, wealth, the size of the population, and factors that influence
labor force participation
A technological breakthrough raises a country's total factor productivity A by 10%.
How does this change affect the graphs of both the production function relating output
to capital and the production function relating output to labor?
The graphs of both production functions shift upward.
A 10% increase in A will increase the MPK by 10%
and increase the MPN by 10%
The production function slopes upward, but its slope declines from left to right.
It slopes upward because
additional units of input lead to additional output.
Its slope declines from left to right because
there is diminishing marginal productivity because at least one input is fixed.
W=MPN 是 labor demand ND NS=ND 是 equilibrium level of the real wage
equilibrium level of employment 就是把算出来的 wage 带入到 nd 或者 ns 哪个式子都行
total after-tax wage income 就是吧 W × employment
Suppose the government levies a lump-sum tax on individuals. Which of the following
best explains the effect on the supply of labor?
A lump-sum tax has only an income effect, so increasing the tax will cause the supply of
labor to increase.
What is frictional unemployment?
Unemployment arising as workers search for suitable jobs and firms search for suitable
workers.
Frictional unemployment is necessary in a well-functioning economy because
it takes time to find good-quality matches between workers and jobs
The benefit to a firm of employing an additional worker in terms of the extra revenue
produced is known as the
marginal revenue product of labor.
The marginal revenue product of labor equals P×MPN
A firm's profits are at their maximum if the firm hires a quantity of labor such that
MRPN = W.
How would each of the following affect the current level of full-employment output?
A large number of immigrants entering the country increases the labor force and thus fullemployment output INCREASES.
Depletion of energy supplies decreases other factors of production and thus fullemployment output decreases.
New teaching techniques improve the educational performance of high school seniors.
Improving the educational performance of current students does not change anything and
thus full-employment output does not change.
A new law mandates the shutdown of some unsafe forms of capital.
Shutting down unsafe forms of capital decreases the capital stock and thus fullemployment output decreases.
Which of the following best explains why the profit-maximizing level of employment for
a firm occurs when the marginal revenue product of labor (MRPN) equals the nominal
wage (W)?
At that level of employment, the marginal benefit from the last worker is equal to the
marginal cost of the last worker.
How can this profit-maximizing condition be expressed in real terms? In the equations
below, MPN is the marginal product of labor, MRPN is the marginal revenue product of
labor, W is the nominal wage, and P is the price level.
MPN = W/P
The labor supply curve of an individual relates the amount of labor supplied to the
current real wage rate
A decrease in wealth shifts the labor supply curve to the right.
An increase in the expected future real wage rate shifts the labor supply curve to the left.
A temporary increase in the wage rate is likely to increase the amount of labor supplied.
This is because for temporary wage changes, the income effect is likely to be less than the
substitution effect.
Which of the following statements best states why a permanent increase in the real wage
might lead to a decrease in the quantity of labor supplied?
For a permanent wage increase, the income effect might exceed the substitution effect, thus
the quantity of labor supplied could fall.
What is structural unemployment?
Long-term, chronic unemployment that exists even when the economy is not in a recession.
What are the two principal sources of structural unemployment?
workers with limited skills, and long-term declines in some industries
The marginal product of capital, or MPK, is
the additional amount of output produced when one unit of capital is added.
How can the MPK be shown graphically?
The MPK is the slope of the graph of the production function, with output on the vertical
axis and capital on the horizontal axis, when labor is held constant.
The labor force is the total number of employed and unemployed workers.
The unemployment rate is the fraction of the labor force that is not employed.
The participation rate is the fraction of the working-age population that is in the labor force.
The employment ratio is the fraction of the working-age population that is employed.
Full-employment output is the level of output that firms supply when wages and prices in the
economy have fully adjusted.
How is full-employment output affected by an increase in labor supply?
Full-employment output will increase
How is full-employment output affected by a beneficial supply shock?
Full-employment output will increase.