Macroeconomics ch 1

which of the combinations listed is not a US president and an important economic issue of his administration? a) President Carter; inflation b) President Reagan; budget deficits c) President GHW Bush; budget deficits d) President Clinton; inflation

d) President Clinton; inflation

A typical trend during recession is that: A) the unemployment rate falls B) the popularity of the incumbent president rises C) income falls D) the inflation rate rises

C) income falls

Macroeconomics does NOT try to answer the question of: A) why do some countries experience rapid growth B) what is the rate of return on education C) why do some countries have high rates of inflation D) what causes recessions and depressions

B) what is the rate of return on education

The study of the economy as a whole is called: a) household economics b) business economics c) microeconomics d) macroeconomics

d) macroeconomics

macroeconomics is a) based on microeconomic foundations b) completely separate from microeconomics c) explicitly based on microeconomic behavior d) a subsidiary branch of microeconomics

a) based on microeconomic foundations

a period of falling prices is called a) deflation b) inflation c) a depression d) a recession

a) deflation

a severe recession is called a(n) a) depression b) deflation c) exogenous event d) market-clearing assumption

a) depression

variables that a model tries to explain are called: a) endogenous b) exogenous c) market clearing d) fixed

a) endogenous

exogenous variables are a) fixed at the moment they enter the model b) determined within the model c) the outputs of the model d) explained by the model

a) fixed at the moment they enter the model

Real GDP _____ over time and the growth rate of real GDP _________ a) grows; fluctuates b) is steady; is steady c) grows; is steady d) is steady; fluctuates

a) grows; fluctuates

The ability of macroeconomists to predict the future course of economic events: a) is no better than the meteorologist's ability to predict next month's weather b) is much better than the meteorologist's ability to predict next month's weather c) has gotten worse over time d) is less precise than it was in the 1920s

a) is no better than the meteorologist's ability to predict next month's weather

the inflation rate in the US averaged about a) nearly zero between 1900 and 1950 b) nearly zero between 1950 and 2000 c) 10 percent between 1900 and 1950 d) 10 percent between 1950 and 2000

a) nearly zero between 1900 and 1950

two striking features of a graph of US real GDP per capita over the twentieth century are the: a) overall upward trend uninterrupted by a large downturn in economic depression in the 1930s b) nearly constant level with a large downturn in the 1930s c) downward trend in the first half of the century followed by the upward trend in the second half d) constant level in the first half of the century followed by the upward trend in the second half

a) overall upward trend uninterrupted in the 1930s

ALL of the following are types of macroeconomics data except the: a) price of an IBM computer b) growth rate of real GDP c) inflation rate d) unemployment rate

a) price of an IBM computer

in a simple graphical model of the supply and demand for pizza with the price of pizza measured vertically and the quantity of pizza measured horizontally a) the supply curve slopes upward and to the right b) the demand curve slopes upward and to the right c) the supply curve slopes downward and to the right d) the equilibrium price, the supply of pizza exceeds the demand for pizza

a) the supply curve slopes upward and to the right

during the period between 1900 and 2000 the unemployment rate in the US was highest in the a) 1920s b) 1930s c) 1970s d) 1980s

b) 1930s

endogenous variables are a) fixed at the moment they enter the model b) determined within the model c) the inputs of the model d) from outside the model

b) determined within the model

variables that a model takes as given are called a) endogenous b) exogenous c) market clearing d) macroeconomic

b) exogenous

macroeconomic models are used to explain how _____ variables influence ______ variables a) endogenous; exogenous b) exogenous; endogenous c) microeconomic; macroeconomic d) macroeconomic; microeconomic

b) exogenous; endogenous

important characteristics of macroeconomic models include ALL of the following EXCEPT a) simplifying assumptions b) functional relationships based on controlled experiments c) endogenous and exogenous variables d) implicit or explicit consistency with microeconomic foundations

b) functional relationships based on controlled experiments

in a simple model of the supply and demand for pizza, when aggregate income increases, the price of pizza ____ and the quantity purchased _______ a) increases; decreases b) increases; increases c) decreases; increases d) decreases; decreases

b) increases; increases

A measure of how fast the general level of prices is rising is called the: a) growth rate of real GDP b) inflation rate c) unemployment rate d) market-clearing rate

b) inflation rate

a graph of the rate of inflation in the US over the twentieth century shows a) an overall upward trend interrupted by a large downturn in the 1930s b) some periods of deflation in the first half of the century but only positive rates of inflation in the second half of the century c) a relatively steady, positive level throughout the century except for deflation in the 1930s d) a constant rate of inflation in the first half of the century followed by an upward trend in the second half

b) some periods of deflation in the first half of the century but only positive rates of inflation in the second half of the century

which of the following is the best example of a flexible price? a) the price of a cup of coffee in a coffee shop b) the price of gasoline at a service station c) the price of a ticket at a movie theater d) the price of a book in a bookstore

b) the price of gasoline at a service station

ALL of the following statements about sticky prices are true EXCEPT a) in the short run, some wages and prices are sticky b) the sticky-price model describes the equilibrium toward which the economy slowly gravitates c) for studying year-to-year fluctuations, most macroeconomists believe that price stickiness is a better assumption than is price flexibility

b) the sticky-price model describes the equilibrium toward which the economy slowly gravitates

recessions are periods when real GDP a) increases slowly b) increases rapidly c) decreases mildly d) decreases severely

c) decreases mildly

Macroeconomics is the study of the: a) activities of individual units of the economy b) decision making by households and firms c) economy as a whole d) interaction of firms and households in the marketplace

c) economy as a whole

how does the distinction between flexible and sticky prices impact the study of macroeconomics? a) the study of flexible prices is confined to microeconomics, while macroeconomics focuses on sticky prices b) macroeconomists use flexible prices to explain inflation and sticky prices to explain unemployment c) flexible prices are typically assumed in the study of the long run, while sticky prices are assumed in the study of the short run d) endogenous variables are measured using flexible prices while exogenous variables are measured using sticky prices

c) flexible prices are typically assumed in the study of the long run, while sticky prices are assumed in the study of the short run

the unemployment rate a) was zero during the 1990s in the US b) was zero on average between 1900 and 1950 in the US c) has never been zero in the US d) is usually zero when the economy is not in a recession or depression

c) has never been zero in the US

the assumption of flexible prices is a more plausible assumption when applied to price changes that occur a) from minute to minute b) from year to year c) in the long run d) in the short run

c) in the long run

macroeconomics is based on microeconomics for ALL of the following reasons EXCEPT a) when we study the economy as a whole, we must consider the decisions of individual economic actors b) aggregate variables are simply the sum of variables describing many individual decisions c) macroeconomic decision makers, when they make their choices, are required to maximize utility functions d) to understand the determinants of aggregate investment, we must think about a firm's deciding whether to build a new factory

c) macroeconomic decision makers, when they make their choices, are required to maximize utility functions

which statement below best illustrates the "art", rather than the "science" of macroeconomics? a) macroeconomics data provides the motivation for new macroeconomic theory b) macroeconomic relationships can be expressed using symbols and equations c) macroeconomists must determine which simplifying assumptions clarify our thinking and which mislead us d) graphs and charts can be used to illustrate the history of macroeconomic variables

c) macroeconomics must determine which simplifying assumptions clarify our thinking and which mislead us

macroeconomic models: a) assume all wages and prices are sticky b) assume all wages and prices are flexible c) make different assumptions to explain different aspects of the macroeconomy d) focus primarily on the optimizing behavior of households and firms

c) make different assumptions to explain different aspects of the macroeconomy

deflation occurs when a) real GDP decreases b) unemployment rate decreases c) prices fall d) prices increase, but at a slower rate

c) prices fall

a graph of the US unemployment rate over the twentieth century shows a) an overall upward trend in the unemployment rate interrupted by a large upturn in the 1930s b) an overall downward trend in the unemployment rate interrupted by a large upturn in the 1930s c) rates of unemployment always greater than zero with substantial variations from year to year d) alternating periods of positive and negative rates of unemployment

c) rates of unemployment always greater than zero with substantial variations from year to year

the total income of everyone in the economy adjusted for the level of base year prices is called: a) a recession b) an inflation c) real GDP d) a business fluctuation

c) real GDP

The inflation rate is a measure of how fast a) the total income of the economy is growing b) unemployment in the economy is increasing c) the general level of prices in the economy is rising d) the number of jobs in the economy is expanding

c) the general level of prices in the economy is rising

ALL of the following are important macroeconomic variables EXCEPT a) real GDP b) the unemployment rate c) the marginal rate of substitution d) the inflation rate

c) the marginal rate of substitution

Macroeconomists cannot conduct controlled experiments such as testing various tax and expenditure policies because: a) it is against the law b) they tried it once and it did not work c) they must make use of the data history gives them d) economists already know the answers that would come out of the experiments

c) they must make use of the data history gives them

The assumption of continuous market clearing means that a) sellers can sell all they want at the going price b) buyers can buy all that they want at the going price c) in any given month, buyers can buy all that they want and sellers can sell all that they want at the going price d) at any given instant, buyers can buy all that they want and sellers can sell all that they want at the going price

d) at any given instant, buyers can buy all that they want and sellers can sell all that they want at the going price

macroeconomists are like scientists because they both: a) design data and conduct controlled experiments to test their theories b) rely on data analyzed from experiments they set up in a lab c) are unlimited in their use of controlled experiments d) collect data, develop hypotheses, and analyze results

d) collect data, develop hypotheses, and analyze results

compared with a recession, real GDP during a depression a) increases more rapidly b) increases at approximately the same rate c) decreases at approximately the same rate d) decreases more severely

d) decreases more severely

which of the following statements about economic models is TRUE? a) there is only one correct economic model b) all economic models are based on the same assumptions c) the purpose of economic models is to show how endogenous variables affect exogenous variables d) economists use different models to address different economic phenomenon

d) economists use different models to address different economic phenomenon

In the US economy today, real GDP per person, compared with its level in 1900, is about a) 50 percent higher b) twice as high c) three times as high d) eight times as high

d) eight times as high

in an economic model a) exogenous variables and endogenous variables are both fixed when they enter the model b) endogenous variables and exogenous variables are both determined within the model c) endogenous variables affect exogenous variables d) exogenous variables affect endogenous variables

d) exogenous variables affect endogenous variables

in a simple model of the supply and demand for pizza, when the price of cheese increases, the price of pizza ______ and the quantity of purchased _____ a) increases; increases b) decreases; increases c) decreases; decreases d) increases; decreases

d) increases; decreases

in the relationship expressed in functional form Y=G(K,L), Y stands for real GDP, K stands for the amount of capital in the economy, and L stands for the amount of labor in the economy. in this case G( ): a) is the growth rate of real GDP when the amount of capital and labor in the economy is fixed b) indicates that the variables inside the parentheses are endogenous variables in the model c) is the symbol that stands for government input into the production process d) is the function telling how the variables in the parentheses determine real GDP

d) is the function telling how the variables in the parentheses determine real GDP

an assumption of ______ is more plausible for studying the short-run behavior of the economy, while an assumption of ______ is more plausible for studying the long-run equilibrium behavior of the economy a) deflation; inflation b) inflation; deflation c) flexible prices; sticky prices d) sticky prices; flexible prices

d) sticky prices; flexible prices

when studying the short-run behavior of the economy, an assumption of ______ is more plausible, in contract to studying the long-run equilibrium behavior of an economy, when an assumption of ______ is more plausible a) inflation; unemployment b) unemployment; inflation c) flexible prices; sticky prices d) sticky prices; flexible prices

d) sticky prices; flexible prices

which of the following is the best example of a sticky price? a) the price of a barrel of oil b) the price of the US dollar in terms of euros c) the price of a share of stock d) the price of a soda in a vending machine

d) the price of a soda in a vending machine

in a simple model of the supply and demand for pizza, the endogenous variables are a) the price of pizza and the price of cheese b) aggregate income and the quantity of pizza sold c) aggregate income and the price of cheese d) the price of pizza and the quantity of pizza sold

d) the price of pizza and the quantity of pizza sold

using a market-clearing model to analyze the demand for haircuts is _______ because the price of a haircut usually changes a) realistic; frequently b) realistic; infrequently c) unrealistic; frequently d) unrealistic; infrequently

d) unrealistic; infrequently