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