CH 1

Real GDP is often plotted on a logarithmic scale. On such a scale, equal distances on the axis represent equal _____ changes.

percentage

In general, when firms optimize, they maximize _____ given their constraints.

profits

depression

real gdp falls, severe

When an economy experiences _____, the inflation rate usually decreases.

recession

The price of a good is observed to rise at the same time that the quantity purchased rises. This can be explained by a _____ the good.

rise in demand

In the supply and demand model, a change in an exogenous variable will result in a:

shift in either the supply curve or the demand curve.

Most macroeconomists believe that price stickiness is a suitable assumption for studying the behavior of the economy in:

short run only

models

simple representations of reality often using diagrams and equations

In the supply and demand model, a change in the price of the factors of production will result in a shift in:

supply curve

Real GDP measures

total income of everyone in the economy

endogenous

variables a model tries to explain

models two different variables are

endogenous and exogenous

The price of a good is observed to fall at the same time that the quantity purchased falls. This can be explained by a _____ the good.

fall in demand for

deflation

falling of prices

recession

real gdp falls and is mild

unemployment rate

the fraction that is in the labor force and out of work

exogenous

variables a model takes as given

inflation rate

how fast prices are rising

market clearing

An assumption that prices are flexible, adjust to equate supply and demand.

flexible prices

Prices that adjust quickly to equilibrate supply and demand

sticky prices

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.

All of the following statements about macroeconomic data are true EXCEPT that macroeconomic data:

are obtained from controlled experiments