No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Eighteen: The “macro” view of the economy 467 CHAPTER EIGHTEEN: QUESTIONS FOR REVIEW THE FOLLOWING QUESTIONS ARE TRUE OR FALSE 1. If there are idle resources, government spending will not incur an opportunity cost. 2. From an economic perspective, the optimal size of government is no government to unfetter free markets. 3. GDP gives a complete measure of a nation’s well-being. 4. If the unemployment rate is very low, we know that we have a healthy labor market. 5. The labor force participation rate has risen sharply since the recession of 2008-09. 6. The unemployment rate has stayed at historically high numbers since the 2008-09 recession. 7. Declining labor force participation can be completely explained by demographics. 8. Fiscal policy concerns the taxing and spending decisions of the government to influence the economy. 9. Crowding out refers to increased demand for a hot item that transfers demand from less desired items. 10. Increased productivity is the key to economic growth. THE FOLLOWING QUESTIONS ARE SHORT ANSWER 11. Why is economic growth so important? Are there any concerns with growth? 12. Consumption spending is the largest component of GDP. Does this mean that it should be the most important measure of economic activity? 13. Macroeconomics assumes ceteris paribus just like microeconomics. Why is this potentially a problem?

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