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Unformatted text preview: MACROECONOMICS - GUSE ECON 202 CHAPTER 8-11 SUMMARY According to classical economics, the economy moves to full employment in the long run What major historical event led to the most significant challenge to classical economic thinking? The Great Depression The market clearing assumption is the idea that prices in every market will adjust until quantity supplied and quantity demanded are equal The labor supply curve shows how many people will want jobs at each wage rate The labor demand curve slopes downward because firms wish to hire fewer workers as the wage rate increases Which of the following is a definition of the aggregate production function? the relationship describing how much output an economy can produce with different quantities of labor What is the full-employment output level? The output level that results when the labor market clears According to Say's Law, in the aggregate the production of output will generate exactly enough income to purchase what has been produced Net taxes are total tax revenues minus transfer payments Leakages are income earned but not spent, by households during a given year (net taxes and savings) Households make their savings available to borrowers through the loanable funds market The government budget deficit is created when the government expenditures exceed net taxes The supply of loanable funds curve is upward sloping According to Thomas Malthus, the human race is doomed to suffer repeated famines and wars because population increases geometrically while food supply increases arithmetically Rich countries (measured by GDP per capita) tend to have lower infant mortality rates, higher life expectancies at birth, and higher adult literacy rates than poor countries....
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- Spring '08