CH 1 Quiz

What is one endogenous variable in a model of supply and demand for houses? a. the level of housing prices b. the level of income c. the number of real estate agents d. the level of unemployment

The level of housing prices.

In part, macroeconomists study individual behavior and microeconomic theories to create theories of aggregate economic activity. T/F

True

One reason economic activity fluctuates is that the central bank leads the economy into a recession in order to bring down inflation. T/F

True

Which of the following questions would a macroeconomist be most interested in answering? a. Why do monopolies set higher prices? b. Why did prices rise in many countries in the 1970s? c. Why do individuals substitute across goods when prices rise? d. Why is a single firm's stock price rising?

Why did prices rise in many countries in the 1970s?

The difference between a parameter and an exogenous variable is that a. a parameter is fixed over time, while an exogenous variable is allowed to change over time. b. a parameter is an outcome of the model, while an exogenous variable is an input to the model. c. a parameter is allowed to change over time, while an exogenous variable is fixed over time. d. a parameter is an input to the model, while an exogenous variable is an output of the model.

a parameter is fixed over time, while an exogenous variable is allowed to change over time.

In a simple model of supply and demand the equation for the demand curve is given by Q = 20 - 10P and the equation for the supply curve is given by Q = 5 + 5P. The solution of the model is: a. Q=10; P=10 b. Q=10; P=1 c. Q=1; P=10 d. Q=1; P=1

20 - 10P = 5 + 5P -5 + 10P = -5 + 10P 15 = 15P P = 1 Q = 5 + 5(1) or Q = 20 - 10(1) = 10 = 10 Q=10; P=1

We can solve a model for all the endogenous variables if it has five equations and six unknowns. T/F

False

Potential output is a measure of per capita GDP in the future. T/F

False In economics, potential output refers to the highest level of real gross domestic product that can be sustained over the long term. Actual output happens in real life while potential output shows the level that could be achieved.

The difference between an exogenous and an endogenous variable is that: a. an exogenous variable is an outcome of the model, while an endogenous variable is an input to the model. b. an exogenous variable is fixed over time, while an endogenous varies over time. c. an exogenous variable is an input to the model, while an endogenous variable changes over time as determined by the model builder. d. an exogenous variable is an input to the model, while an endogenous variable is an outcome of the model.

an exogenous variable is an input to the model, while an endogenous variable is an outcome of the model.

The unemployment rate in the United States has historically been a. lower than Europe until 1980 and since then, higher than Europe. b. lower than Europe. c. higher than Europe. d. higher than Europe until 1980 and since then, lower than Europe.

higher than Europe until 1980 and since then, lower than Europe.