CH 1

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 for fall in demand for rise in supply of fall in supply of

rise in demand for

Each statement about macroeconomic data is true EXCEPT: macroeconomic data provide the motivation for developing economic theories. macroeconomic data are obtained from controlled experiments. macroeconomic data differ over time and across countries. macroeconomic data are used to test theories about the economy.

macroeconomic data are obtained from controlled experiments.

During a recession, the price level: always increases. may increase or decrease. often decreases. always decreases.

may increase or decrease.

Real GDP is often plotted using a logarithmic scale. On such a scale, equal distances represent equal _____ changes. numerical arithmetic percentage econometric

percentage

Macroeconomists do NOT study changes in the: unemployment rate. overall price level. prices of individual stocks. growth rate of real GDP in the economy.

prices of individual stocks.

Suppose that the pizza demand function is D(P, Y) = 60 − 10P + 2Y, and the pizza supply function is S(P, Pm) = 20P − 20Pm, where P is the price of pizza, Y is aggregate income, and Pm is the price of materials. If Y = 70 and Pm = 5, then the equilibrium price is: 10. 20. 30. 40.

10

Suppose that the pizza demand function is D(P, Y) = 60 − 10P + 2Y and the pizza supply function is S(P, Pm) = 20P − 20Pm, where P is the price of pizza, Y is aggregate income, and Pm is the price of materials. If Y = 70 and Pm = 5, then the equilibrium price is: 5. 10. 20. 40.

10.

Suppose that the pizza demand function is D(P, Y) = 60 − 1P+2Y, and the pizza supply function is S(P, Pm) = 2P − 20Pm, where P is the price of pizza, Y is aggregate income, and Pm is the price of materials. If Y = 70 and Pm = 5, then the equilibrium quantity is: 20. 50. 100. 200.

100.

_____ is the field in economics that concerns the forces that affect the economy as a whole. Microeconomics Econometrics Poly-economics Macroeconomics

Macroeconomics

Which is TRUE if the assumption of continuous market clearing holds? Markets are normally in equilibrium. Exogenous variables determine endogenous variables. The inflation rate is zero. Prices are sticky.

Markets are normally in equilibrium.

_____ is the field of economics that studies specific economic sectors and markets. Macroeconomics Econometrics Microeconomics Subsideconomics

Microeconomics

_____ is the study of how firms and individuals make decisions and how decision-makers interact in markets. Econometrics Pan-economics Microeconomics Macroeconomics

Microeconomics

When the economy experiences a recession, there is usually: a high unemployment rate. a high inflation rate. a low unemployment rate. currency depreciation.

a high unemployment rate.

Economic models are are complete descriptions of the relationships among economic variables. include all aspects of the relationships among economic variables. are simplified explanations of relationships among economic variables. show how endogenous economic variables explain changes in exogenous variables.

are simplified explanations of relationships among economic variables.

Since the early 1980s, inflation in the United States has been relatively _____ and _____. high; unstable high; stable low; unstable low; stable

low; stable

The unemployment rate tends to: move independently of real GDP. decrease when GDP increases. decrease when the economy goes into recession. increase when GDP increases.

decrease when GDP increases.

When the general price level in the economy is decreasing, the economy is experiencing: disinflation. deflation. stagflation. inflation.

deflation

The field of macroeconomics does NOT study the: response of the Federal Reserve to a recession experienced in the United States. effects of increased government spending on the unemployment rate. effects of a tariff on imported steel on the prices of automobiles in the United States. effects of the slowdown of the Chinese economy on U.S. net exports.

effects of a tariff on imported steel on the prices of automobiles in the United States.

The variables that an economic model is trying to explain are called _____ variables. real exogenous nominal endogenous

endogenous

According to the text, the job of macroeconomists is to: advise individual companies on ways to make more profit. acquire as much grant money as possible. explain the workings of the economy as a whole. make economic policy.

explain the workings of the economy as a whole.

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 supply of rise in supply of fall in demand for rise in demand for

fall in demand for

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

fall in supply of

Exchange rates, or the price of one currency relative to another currency, adjust continuously to clear the market for foreign exchange. Exchange rates are considered _____ prices. supply disequilibrium flexible sticky

flexible

Recessions and depressions are usually associated with: currency depreciation. high unemployment. low unemployment. high inflation.

high unemployment.

Between 2000 and 2015, the number of cell phones in use in the United States increased dramatically, while the price of using a cell phone fell. This can be explained by a(n): increased supply of cell phones. increased demand for cell phones. rise in the price of using a landline. rise in aggregate income.

increased supply of cell phones.

When _____, the _____ rate tends to decrease. real GDP decreases; inflation unemployment decreases; inflation inflation decreases; unemployment inflation increases; unemployment

inflation increases; unemployment

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

rise in supply of

Because wages do not adjust continuously in order to keep the labor market in equilibrium, wages are considered _____ in the short run. sticky demand-driven market clearing flexible

sticky

Most macroeconomists believe that prices are _____ in the short run and _____ in the long run. flexible; flexible flexible; sticky sticky; sticky sticky; flexible

sticky; flexible

Most macroeconomists believe that price flexibility is a suitable assumption for studying the behavior of the economy in: the long run only. the short run only. both the long run and the short run. neither the long run nor the short run.

the long run only.

A simple model of the pizza restaurant market would NOT take into account: the price and quantity of pizza. the extent to which alternative restaurants, for example, hamburger joints, may be substitutes in consumption for pizza restaurants. the aggregate income of the local population. the prices of inputs used to make pizza.

the price and quantity of pizza.

In a supply-and-demand model, which is considered the endogenous variable? the aggregate income of buyers in the market the price of a substitute good the price of the input used in production the quantity of the product supplied or demanded

the quantity of the product supplied or demanded

Economic growth since 2009 has been lower than normal because: the price of oil has been very high. wages have been growing quickly. monetary policy has been restrictive. the recovery from the Great Recession has been very slow.

the recovery from the Great Recession has been very slow.

After 2009, the unemployment rate was generally higher than normal for several years because: the recovery from the Great Recession was very slow. the price of oil was very high. wages grew quickly. monetary policy was restrictive.

the recovery from the Great Recession was very slow.

Macroeconomists _____ to analyze the economy. use many models avoid the use of models use a single model distrust the use of models

use many models