Question 1

What characterizes a competitive equilibrium?
A) Markets are rationed.
B) Governments stay out of the market.
C) Economic agents are price-takers.
D) It is costly to experiment with policies.

Accepted Answer

Economic agents being price-takers is a key feature of a competitive equilibrium. This means that no one buyer or seller has enough power to affect the market price, and everyone has to accept the prevailing price as given. The other options are not necessarily defining characteristics of a competitive equilibrium - markets can be rationed even in a non-competitive market, governments can intervene in a variety of ways, and experimentation with policies can be costly regardless of the type of market.

Question 2

For the study of economic growth,it is most helpful to examine movements in ________; for the study of business cycles,it is most helpful to examine movements in ________.
A) trend GNP; trend GNP
B) trend GNP; deviations from trend in GNP
C) deviations from trend in GNP; trend GNP
D) deviations from trend in GNP; deviations from trend in GNP

Accepted Answer

B

Question 3

Over the twentieth century,growth in per-capita GNP was highest
A) immediately prior to the Great Depression.
B) during World War II.
C) during the 1960s.
D) during the 1980s.

Accepted Answer

B

Question 4

The relationship between the growth rate of an economic variable,gt,and its level,yt,can be approximated by
A) gt = yt - yt - 1.
B) gt = logt - log yt - 1.
C) yt = log gt - log gt - 1.
D) log gt = yt - yt - 1.

Accepted Answer

The growth rate of an economic variable can be approximated by the difference in the natural logarithms of its levels at two consecutive periods, which is represented by gt = log yt - log yt-1.

Question 5

Which is a question of interest in this book?
A) What causes illegal immigration?
B) What mechanism could force people to pollute less?
C) What causes economic fluctuations?
D) What is the effect of penalties on crime?

Accepted Answer

The question "What causes economic fluctuations?" is a broad and fundamental question often explored in economic literature, making it a likely question of interest in a book focused on economics.

Question 6

Which of the following assertions is false?
A) The Great Depression was a typical business cycle.
B) Very rapid growth occurred during World War II.
C) Real GDP per capita dipped about 30% during the Great Depression.
D) On average, the U.S. economy grows at a rate of 2.1%.

Accepted Answer

The Great Depression was not a typical business cycle; it was a severe and prolonged economic downturn that lasted for 10 years and had several underlying causes, including an unsustainable credit boom and a lack of regulation in the financial sector.

Question 7

A useful macroeconomic model
A) is extremely realistic.
B) is simple.
C) never generates testable hypotheses.
D) provides a lot of intricate details.

Accepted Answer

A useful macroeconomic model should be simple enough to understand and use, while still able to capture the important factors and relationships in the economy. It is not necessary for the model to be extremely realistic or provide a lot of intricate details, but it should generate testable hypotheses.

Question 8

When we say the U.S. economy has grown on average at 2.1%,we mean
A) the inflation rate.
B) the growth rate of nominal GDP.
C) the growth rate of per-capita nominal GDP.
D) the growth rate of per-capita real GDP.

Accepted Answer

When we say the U.S. economy has grown on average at 2.1%, we typically refer to the growth rate of per-capita real GDP, which adjusts for inflation and reflects the actual increase in production and economic output per person in the country. This means that the economy has expanded by 2.1% each year when adjusted for changes in the price level and population growth.

Question 9

Primarily,macroeconomists use microeconomic principles to study
A) business cycles and trends in the stock market.
B) long-run economic growth and antitrust policies.
C) trends in the stock market and long-term economic growth.
D) long-run economic growth and business cycles.

Accepted Answer

Macroeconomists use microeconomic principles to analyze long-run economic growth and business cycles, as they are concerned with aggregate variables such as gross domestic product, inflation, and unemployment. Antitrust policies and trends in the stock market fall under microeconomics, which focuses on individual market behavior and consumer choices.

Question 10

The structure of a macroeconomic model involves all of the following except
A) the available technology.
B) the behavior of consumers and firms.
C) the preferences of consumers.
D) the available resources.

Accepted Answer

The answer of The structure of a macroeconomic model involves...

Question 11

Over the course of the twentieth century,the typical American
A) remained equally as rich.
B) became twice as rich.
C) became five times as rich
D) became eight times as rich.

Accepted Answer

According to economic data, the average income in the United States increased about eight-fold between 1900 and 2000, adjusted for inflation. Therefore, choice D ("became eight times as rich") is the best answer.

Question 12

Which is a question of interest in this book?
A) Where is the stock market heading?
B) What is the optimal inflation rate?
C) How are stock options priced?
D) What are commodity futures?

Accepted Answer

The answer of Which is a question of interest in...

Question 13

What do we assume about households and firms?
A) They act irrationally.
B) They do what the government tells them to do.
C) They look after each other.
D) They optimize.

Accepted Answer

In economics, households and firms are assumed to behave in a rational manner and make decisions based on their own self-interest. This assumption is fundamental to the concept of optimization, which states that households and firms make decisions to maximize their utility or profits, given their limited resources. Therefore, option D is the correct choice.

Question 14

Macroeconomic models are
A) never wrong.
B) accurate descriptions of the economy.
C) simple abstractions of reality.
D) consistent with all economic data.

Accepted Answer

Macroeconomic models are simplified representations of reality, and as such, they necessarily make certain assumptions and omit certain details in order to be manageable. They can be useful for making predictions and testing theories, even if they are not fully accurate descriptions of the economy. Therefore, option C is the best answer. Options A, B, and D are incorrect because macroeconomic models are not infallible, perfect descriptions of the economy or universally consistent with all economic data.

Question 15

The two most important American business cycle events of the twentieth century were
A) the Great Depression and stagflation.
B) World War II and the Great Depression.
C) the productivity slowdown and the Great Depression.
D) government budget deficits and World War II.

Accepted Answer

The Great Depression of 1929-1939 and World War II (1939-1945) were the two most important American business cycle events of the twentieth century. The Great Depression was the longest and most severe economic downturn in American history, with high levels of unemployment and poverty. The country's entry into World War II spurred economic growth and ended the Depression, as the government invested heavily in defense spending and job creation. The war also had a profound impact on the global economy and paved the way for America's emergence as a superpower.

Question 16

Which is a question of interest in this book?
A) What causes growth in the long term?
B) How should a labor contract be structured?
C) How should a government be elected?
D) What is the impact of government provided health care?

Accepted Answer

Long-term growth is a central topic in economics, and this book is about economics.

Question 17

The business cycle component of the log of real per-capita GNP is equal to
A) log of actual real GNP - log of trend GNP.
B) log of trend GNP ÷ log of actual real GNP.
C) log of trend GNP - log of actual real GNP.
D) log of actual real GNP ÷ log of trend GNP.

Accepted Answer

The business cycle component of the log of real per-capita GNP measures the deviation of actual real GNP from trend GNP. Therefore, it can be calculated as the log of actual real GNP minus the log of trend GNP, which corresponds to answer choice A.

Question 18

Which of the following questions is of most interest for MACROECONOMISTS?
A) Why is there inflation?
B) Why does the steel industry want tariffs?
C) What is the appropriate stance of antitrust policy?
D) Why do foreigners immigrate to the United States?

Accepted Answer

Inflation is one of the key macroeconomic concerns as it affects the overall economy, prices and wages, and policies related to monetary and fiscal policy. Hence, it is of primary interest to macroeconomists. The other options are more geared towards microeconomics, trade policy, and immigration policy.

Question 19

Which of the following topics is NOT a primary concern of macroeconomists?
A) fluctuations in the level of economic activity
B) differences in standards of living across countries
C) relative wages of skilled and unskilled workers
D) unemployment

Accepted Answer

While relative wages between skilled and unskilled workers is certainly a topic of interest to economists, it is more of a concern for microeconomists rather than macroeconomists. Macroeconomists tend to focus on broader issues such as economic growth, inflation, and overall fluctuations in economic activity.

Question 20

In 2011,the per-capita GDP in the United States,in 2005 dollars,was about
A) $17,500.
B) $27,500.
C) $43,000.
D) $47,500.

Accepted Answer

In 2011, the per-capita GDP in the United States, adjusted to 2005 dollars, was approximately $43,000.

Quiz 1: Introduction

What characterizes a competitive equilibrium?

For the study of economic growth,it is most helpful to examine movements in ; for the study of business cycles,it is most helpful to examine movements in .

Over the twentieth century,growth in per-capita GNP was highest

The relationship between the growth rate of an economic variable,gt,and its level,yt,can be approximated by

Which is a question of interest in this book?

Which of the following assertions is false?

A useful macroeconomic model

When we say the U.S. economy has grown on average at 2.1%,we mean

Primarily,macroeconomists use microeconomic principles to study

The structure of a macroeconomic model involves all of the following except

Over the course of the twentieth century,the typical American

Which is a question of interest in this book?

What do we assume about households and firms?

Macroeconomic models are

The two most important American business cycle events of the twentieth century were

Which is a question of interest in this book?

The business cycle component of the log of real per-capita GNP is equal to

Which of the following questions is of most interest for MACROECONOMISTS?

Which of the following topics is NOT a primary concern of macroeconomists?

In 2011,the per-capita GDP in the United States,in 2005 dollars,was about