Intermediate Macro Week 1
The study of the response of the Federal Reserve to higher inflation rates lies in the realm of:
macroeconomics
In general, when firms optimize, they maximize _____, given their constraints.
profits
After 2009, the unemployment rate was generally higher than normal for several years because:
the recovery from the Great Recession was very slow.
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
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:
100
Which U.S. recession is considered to be the worst economic downturn since the Great Depression in the 1930s?
2008-2009
Economists use models because they
Clarify our thinking show how exogenous variables influence endogenous variables, and are fun
In the supply-and-demand model for pizzas, the prices of inputs such as tomatoes and pepperoni are examples of _____ variables and are determined _____ the model.
exogenous; outside
Recessions are periods of
falling incomes
Market-clearing models assume that prices are ________ and are best applied to understand the economy in the _____________.
flexible, long run
When _____, the _____ rate tends to decrease.
inflation increases; unemployment
In U.S. history, deflation
is rare now but has occurred at times in the past
The unemployment rate measures the fraction of the
labor force that is not working
Since the early 1980s, inflation in the United States has been relatively _____ and _____.
low & stable