Deck 1: Introduction to Macroeconomics

Question 1

When we look at the ________ run, we are concerned with ________.

A) long; the money supply
B) long; the causes of economic fluctuations
C) long; the causes of economic growth
D) long; the causes of inflation
E) long; unemployment

Answer 1

long; the causes of economic growth

Question 2

Which of the following does macroeconomics endeavor to answer?
i. How does a dairy farmer react to rising wheat prices?
ii. What causes an increase in the price of Apple stock?
iii. What are potential causes of financial crises?

A) i only
B) ii only
C) iii only
D) i, ii, and iii
E) ii and iii

Answer 2

iii only

Question 3

________ are parameters to the model and generally are fixed over time, while ________ are the outcomes of the model.

A) Shocks; parameters
B) Endogenous variables; exogenous variables
C) Endogenous variables; shocks
D) Exogenous variables; endogenous variables
E) Parameters; system variables

Answer 3

Exogenous variables; endogenous variables

Question 4

Consider the following model of the labor market:
Labor supply:
Labor demand:
The values of the equilibrium quantity of labor, L, and wage, w, are:

A) .
B) .
C) .
D) .
E) .

Question 5

Which of the following lists the four steps we use to study macroeconomic behavior in the correct order?

A) (1) document the facts; (2) develop a model; (3) compare the predictions of the model to the original facts; and (4) use the model to make other predictions that may eventually be tested
B) (1) document the facts; (2) use the model to make other predictions that may eventually be tested; (3) compare the predictions of the model to the original facts; and (4) develop a model
C) (1) compare the predictions of the model to the original facts; (2) develop a model; (3) document the facts; and (4) use the model to make other predictions that may eventually be tested
D) (1) develop a model; (2) document the facts; (3) compare the predictions of the model to the original facts; and (4) use the model to make other predictions that may eventually be tested
E) None of these answers is correct.

Question 6

When we look at the ________ run, we are concerned with the ________.

A) short; causes of economic fluctuations
B) long; causes of economic fluctuations
C) short; determinants of economic growth
D) long; causes of inflation
E) long; money supply

Question 7

Which of the following does macroeconomics endeavor to answer?
i. What role does the government play in recessions, booms, and determining the rate of inflation?
ii. What caused the currency crises in Mexico in the mid-1990s and in many Asian economies at the end of the 1990s?
iii. How does a dairy farmer react to rising milk prices?

A) iii only
B) ii only
C) i and ii
D) i, ii, and iii
E) i and iii

Question 8

The three main variables we discuss in the short run are:

A) economic fluctuations, interest rates, and unemployment.
B) economic fluctuations, inflation, and money.
C) economic fluctuations, inflation, and unemployment.
D) interest rates, money supply, and taxes.
E) economic fluctuations, interest rates, and money.

Question 9

Consider the following model of the labor market:
Labor supply:
Labor demand:
The value of the equilibrium quantity of labor, L, and wage, w, are:

A) =4^4/5; = 1/5.
B) = 5; = 6.
C) = 6; = 5.
D) =6; = 6.
E) Not enough information is given.

Question 10

Which of the following questions should a successful model predict?
i. Why, in general, do Americans have higher incomes than Africans?
ii. How much less unemployment is there during an economic expansion?
iii. Why does the United States have a lower unemployment rate than Europe?

A) i and ii
B) ii only
C) iii only
D) i, ii, and iii
E) i and iii

Question 11

Which of the following does macroeconomics NOT endeavor to answer?
i. Why is the typical person in the United States today more than 10 times richer than the typical person a century ago?
ii. Why has the unemployment rate been nearly twice as high in Europe as in the United States in recent years?
iii. Why has the price of orange juice risen sharply?

A) ii and iii
B) i only
C) ii only
D) i, ii, and iii
E) iii only

Question 12

Which of the following questions should a successful model predict?
i. How do changes in government policies change the labor market?
ii. How does money supply influence inflation?
iii. How does investment affect economic growth?

A) ii only
B) i, ii, and iii
C) iii only
D) i and ii
E) i and iii

Question 13

Which of the following questions should a successful model predict?
i. How do changes in government policies change the labor market?
ii. How does money supply influence inflation?
iii. What is the relationship between inflation and unemployment?

A) iii only
B) ii only
C) i, ii, and iii
D) i and ii
E) i and iii

Question 14

A central topic of study in macroeconomics is ________, while a central topic of study in microeconomics is ________.

A) the cosmos; particle physics
B) the overall performance of an economy; an individual market
C) an individual market; the overall performance of an economy
D) the overall performance of a single economy; the individual firm
E) consumer behavior; firm behavior

Question 15

Macroeconomics is to microeconomics what ________ is to ________.

A) cosmology; particle physics
B) particle physics; cosmology
C) physics; biology
D) chemistry; organic chemistry
E) biology; zoology

Question 16

Actual gross domestic product (GDP) is ________ equal to potential GDP.

A) rarely not
B) always
C) always not
D) rarely
E) Not enough information is given.

Question 17

Consider the following model of the labor market:
Labor supply:
Labor demand:
The endogenous variables are:

A) and .
B) and the equilibrium wage, w.
C) and the equilibrium wage, w.
D) the equilibrium quantity of labor, L*, and wage, w*.
E) and the equilibrium quantity of labor, L.

Question 18

Which of the following does macroeconomics endeavor to answer?
i. Why is the typical person in the United States today more than 10 times richer than the typical person a century ago?
ii. Why has the unemployment rate been nearly twice as high in Europe as in the United States in recent years?
iii. What determines the rate of inflation? What determines how rapidly the overall price level in an economy increases?

A) i only
B) i, ii, and iii
C) ii only
D) i and ii
E) ii and iii

Question 19

Which of the following does macroeconomics endeavor to answer?
i. What role does the government play in recessions, booms, and determining the rate of inflation?
ii. What causes an increase in the price of Exxon stock?
iii. How does a dairy farmer react to rising milk prices?

A) i only
B) ii only
C) iii only
D) i, ii, and iii
E) ii and iii

Question 20

Income per person began at ________ in 1870 and ________ over a factor of 15 to ________ in 2012.

A) $2,500; rose; $35,000
B) $2,800; rose; $58,000
C) $2,800; rose; $100,000
D) $44,000; fell; $3,500
E) $40,000; fell; $2,500

Question 21

What are the steps macroeconomists use to analyze the economy?

Question 22

The short run is concerned with ________, while the long run is concerned with ________.

A) inflation; unemployment
B) the causes of economic fluctuations; inflation
C) the causes of economic fluctuations; the determinants of economic growth
D) the determinants of economic growth; the causes of economic fluctuations
E) the causes of economic fluctuations; the money supply

Question 23

A main concern of long-run macroeconomics is the causes of economic fluctuations.

Question 24

These four steps, in the following order, are used to study macroeconomic behavior:
(1) document the facts;
(2) develop a model;
(3) compare the predictions of the model to the original facts; and
(4) use the model to make other predictions that eventually may be tested.

Question 25

An endogenous variable is often called a parameter.

Question 26

What are at least four of the main concerns of the study of macroeconomics?

Question 27

A main concern of short-run macroeconomics is the causes of economic growth.

Question 28

A main concern of long-run macroeconomics is the causes of economic growth.

Question 29

Consider the following model of the labor market:
Labor Supply:
Labor Demand:
(a) Identify the model's parameters.
(b) Identify the endogenous variables.
(c) Solve the model.
(d) What must the relationship between
and
be?
(e) If the supply and demand for labor were given as
and
what are the equilibrium wage and labor force?

Question 30

Macroeconomics is the study of an individual market.

Question 31

An economic model is an exact replica of the economy.

Question 32

An exogenous variable is one that is taken as given (what the text refers to as parameters).

Question 33

A main concern of short-run macroeconomics is the causes of economic fluctuations and how to fix them.

Question 34

These four steps, in the following order, are used to study macroeconomic behavior:
(1) document the facts;
(2) use the model to make other predictions that may eventually be tested;
(3) compare the predictions of the model to the original facts; and
(4) develop a model.

Question 35

Describe the differences between the short run and the long run.