Question 1

Consider the following model of the labor market:
Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$
Labor demand: $L ^ { d } = \bar { f } - w$
The values of the equilibrium quantity of labor, L, and wage, w, are:
A) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } ) ; w ^ { * } = ( \bar { f } - \bar { \ell } ) / ( \bar { \ell } + \bar { a } )$
B) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } ) ; w ^ { * } = ( \bar { f } - \bar { \ell } ) / ( \bar { \ell } - \bar { a } )$
C) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } ) ; w ^ { * } = ( \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } )$
D) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } - \bar { a } ) ; w ^ { * } = ( \bar { f } - \bar { \ell } ) / ( \bar { \ell } - \bar { a } )$
E) $L ^ { * } = \frac { \bar { a } \bar { f } + \bar { \ell } } { \bar { \ell } + \bar { a } } ; w ^ { * } = \frac { \bar { f } - \bar { \ell } } { \bar { \ell } - \bar { a } }$

Accepted Answer

The equilibrium quantity of labor and wage are found by solving the labor supply and demand equations simultaneously. Setting $L ^ { s } = L ^ { d }$, we get:$\bar { a } \times w + \bar { \ell } = \bar { f } - w$$\Rightarrow 2w = \bar { f } - \bar { \ell }$$\Rightarrow w ^ { * } = ( \bar { f } - \bar { \ell } ) / 2$Substituting this into the labor supply equation, we get:$\bar { a } \times w ^ { * } + \bar { \ell } = L ^ { * }$$\Rightarrow L ^ { * } = \bar { a } \times ( \bar { f } - \bar { \ell } ) / 2 + \bar { \ell }$$\Rightarrow L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / 2$

Question 2

Which of the following does macroeconomics endeavor to answer?
i. Why is the typical person in the United States today more than ten 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

Accepted Answer

Macroeconomics endeavors to answer all three questions: (i) the reasons for the increase in average income over time, (ii) the causes of differences in unemployment rates across countries, and (iii) the factors influencing the overall price level and inflation.

Question 3

Which of the following does macroeconomics NOT endeavor to answer?
i. Why is the typical person in the United States today more than ten 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

Accepted Answer

Macroeconomics does not endeavor to answer specific price changes such as the price of orange juice. It focuses on larger-scale economic issues such as inflation, unemployment, and economic growth.

Question 4

Macroeconomic is to microeconomic what ________ is to ________.
A) cosmology; particle physics
B) particle physics; cosmology
C) physics; biology
D) chemistry; organic chemistry
E) biology; zoology

Accepted Answer

The relationship between macroeconomics and microeconomics is similar to the relationship between cosmology and particle physics. Just as macroeconomics deals with the entire economy, cosmology deals with the entire universe, while microeconomics and particle physics deal with the specific parts of their respective fields.

Question 5

Consider the following model of the labor market: Labor supply: $L ^ { 5 } = 1 + w$ Labor demand: $L ^ { d } = 11 - w$ The value of the equilibrium quantity of labor, L, and wage, w, are: A) $L ^ { * }$ = 4^4/5; $w ^ { * }$ = 1/5 B) $L ^ { * }$ = 5; $w ^ { * }$ = 6 C) $L ^ { * }$ = 6; $w ^ { * }$ = 5 D) $L ^ { * }$ = 6; $w ^ { * }$ = 6 E) Not enough information is given.

Accepted Answer

To find the equilibrium, set labor supply equal to labor demand: $1 + w = 11 - w$. Solving for $w$, we get $w = 5$. Substituting $w = 5$ back into either equation gives $L = 6$.

Question 6

Macroeconomics is the study of ________ while microeconomics studies ________.
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

Accepted Answer

Macroeconomics focuses on the overall performance of an economy, including factors such as inflation, unemployment rates, and economic growth, while microeconomics studies the behavior of individual markets, including supply and demand, and the behavior of individual firms within those markets.

Question 7

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

Accepted Answer

Macroeconomics focuses on the overall performance of the economy, including issues such as inflation, employment, and financial crises. Therefore, option i, which concerns the behavior of a single dairy farmer, is not a macroeconomic question. Option ii concerns the performance of a single company's stock and is therefore also not a macroeconomic question. Option iii, on the other hand, is a question about the potential causes of financial crises, which is a topic of interest to macroeconomists.

Question 8

________ variables are parameters to the model and generally are fixed over time, while ________ variables are the outcome of the model.
A) Shocks; parameters
B) Endogenous; exogenous
C) Endogenous; shocks
D) Exogenous; endogenous
E) Parameters; system

Accepted Answer

Exogenous variables are parameters that are fixed over time and are not affected by the model, while endogenous variables are the outcome of the model and are affected by the model's parameters and other endogenous variables.

Question 9

Actual GDP is ________ to potential GDP.
A) rarely not equal
B) always equal
C) always not equal
D) rarely equal
E) Not enough information is given.

Accepted Answer

Actual GDP tends to fluctuate over time due to various factors such as changes in consumer spending, investment, government policies, and external factors like global trade and natural disasters. As a result, it rarely stays equal to potential GDP.

Question 10

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

Accepted Answer

The correct order is to first document the facts, then develop a model, compare the predictions of the model to the original facts, and finally use the model to make other predictions that may eventually be tested. Option A accurately lists the steps in this correct order.

Question 11

When we look at the ________ we are concerned with ________.
A) long run; money supply
B) long run; causes of economic fluctuations
C) long run; causes of economic growth
D) long run; causes of inflation
E) long run; unemployment

Accepted Answer

In the long run, economists are primarily concerned with the causes of economic growth, as it determines the increase in the standard of living over time.

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. 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

Accepted Answer

A successful model should be able to predict how changes in government policies affect the labor market, how money supply influences inflation, and the relationship between inflation and unemployment. These are fundamental economic relationships and dynamics that models aim to understand and predict.

Question 13

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

Accepted Answer

According to the passage, income per person began at $2,800 in 1870 and rose over a factor of 15 to $44,000 in 2012. Therefore, the best choice is B.

Question 14

Which of the following does macroeconomics endeavor to answer?
i. What role does the government play in recessions and booms and in 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

Accepted Answer

Macroeconomics focuses on large-scale economic factors, such as government roles in economic cycles and currency crises, rather than individual behaviors like a dairy farmer's reaction to price changes.

Question 15

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

Accepted Answer

A successful model should be able to predict and explain economic phenomena, including differences in income levels between regions (i), the impact of economic expansion on unemployment (ii), and differences in unemployment rates between regions or countries (iii).

Question 16

Consider the following model of the labor market:
Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$
Labor demand: $L ^ { d } = \bar { f } - w$
 
The endogenous variables are:
A) $\bar { f }$ and   $\bar { a }$
B) $\bar { a }$ and the equilibrium wage, w
C) $\bar { f }$ and the equilibrium wage, w
D) the equilibrium quantity of labor, L, and wage, w
E) $\bar { a }$ and the equilibrium quantity of labor, L

Accepted Answer

The endogenous variables in a labor market model are typically the equilibrium wage (w) and the equilibrium quantity of labor (L), as these are determined within the model.

Question 17

Which of the following does macroeconomics endeavor to answer?
i. What role does the government play in recessions and booms and in 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

Accepted Answer

Macroeconomics deals with the overall economic performance of a country or the world. It focuses on the study of the economy as a whole rather than individual markets or firms. Therefore, macroeconomics is concerned with questions about the role of government in controlling economic phenomena such as recessions, inflation, and booms. Questions about the behavior of individual companies or industries are part of microeconomics. Thus, options ii and iii are not part of macroeconomics.

Question 18

When we look at the ________ we are concerned with the ________.
A) short run; causes of economic fluctuations
B) long run; causes of economic fluctuations
C) short run; determinants of economic growth
D) long run; causes of inflation
E) long run; money supply

Accepted Answer

The short run is concerned with short-term economic fluctuations, such as business cycles and fluctuations in output and employment. Therefore, it is likely that we would be concerned with the causes of these fluctuations in the short run. The other choices are either focused on the long run or are about different economic concepts.

Question 19

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

Accepted Answer

A successful model should be able to predict the relationships between various economic factors and outcomes. All three questions are important economic relationships that a successful model should be able to predict.

Question 20

The three main variables we discuss in the short run are:
A) economic fluctuations; interest rates; unemployment
B) economic fluctuations; inflation; money
C) economic fluctuations; inflation; unemployment
D) interest rates; money supply; taxes
E) economic fluctuations; interest rates; money

Accepted Answer

The three main variables we discuss in the short run are economic fluctuations, inflation, and unemployment. These variables have a direct impact on the economy in the short run and are crucial for policy-making decisions. Option A is incorrect as interest rates are only a part of the short-run variables. Option B and D are incorrect as money supply and taxes are not the main variables discussed in the short run. Option E is incorrect as interest rates are mentioned, but money is not one of the three main variables we discuss in the short run.

Quiz 1: Introduction to Macroeconomics

Consider the following model of the labor market: Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$ Labor demand: $L ^ { d } = \bar { f } - w$ The values of the equilibrium quantity of labor, L, and wage, w, are:

Macroeconomic is to microeconomic what is to .

Consider the following model of the labor market: Labor supply: $L ^ { 5 } = 1 + w$ Labor demand: $L ^ { d } = 11 - w$ The value of the equilibrium quantity of labor, L, and wage, w, are:

Macroeconomics is the study of while microeconomics studies .

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?

variables are parameters to the model and generally are fixed over time, while variables are the outcome of the model.

Actual GDP is ________ to potential GDP.

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

When we look at the we are concerned with .

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?

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

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?

Consider the following model of the labor market: Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$ Labor demand: $L ^ { d } = \bar { f } - w$ The endogenous variables are:

Which of the following does macroeconomics endeavor to answer? i. What role does the government play in recessions and booms and in 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?

When we look at the we are concerned with the .

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?

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

Quiz 1: Introduction to Macroeconomics

Consider the following model of the labor market: Labor supply: L5=aˉ×w+ℓˉL ^ { 5 } = \bar { a } \times w + \bar { \ell }L5=aˉ×w+ℓˉ Labor demand: Ld=fˉ−wL ^ { d } = \bar { f } - wLd=fˉ​−w The values of the equilibrium quantity of labor, L, and wage, w, are:

Macroeconomic is to microeconomic what ________ is to ________.

Consider the following model of the labor market: Labor supply: L5=1+wL ^ { 5 } = 1 + wL5=1+w Labor demand: Ld=11−wL ^ { d } = 11 - wLd=11−w The value of the equilibrium quantity of labor, L, and wage, w, are:

Macroeconomics is the study of ________ while microeconomics studies ________.