Chapter 1 Practice Questions
Variables that a model takes as given are called:
Exogenous variables
Macroeconomic models are used to explain how ____________ variables influence ______________ variables.
Exogenous; endogenous
Important characteristics of macroeconomic models include all of the following except:
Functional relationships based on controlled experiments.
The total output of the economy can be measure as:
GDP
The assumption of flexible prices is a more plausible assumption when applied to price changes that occur:
In the long run.
Math problem on sheet of paper (17 and 20)
Look on sheet
The study of the economy as a whole is called:
Macroeconomics
All of the following are types of macroeconomic data except:
The price of an IBM computer. (the price of a single good is a variable in micro, macro deals with aggregate/totals) - real GDP (good) - inflation rate (good)
Which of the following statements about economic models is true?
The purpose of economic models is to show how exogenous variables affect endogenous variables.
Exogeneous Variables are:
Variables with values 'given outside' an economic model.
When studying the short-run behavior of the economy, an assumption of _________ is more plausible, and hence, prices are assumed to be __________ in the short run.
sticky/rigid prices; exogenous
An assumption of how __________ is more plausible for studying the short-run behavior of the economy, while an assumption of __________ is more plausible for studying the long run, equilibrium behavior of the economy.
sticky/rigid prices; flexible prices
Macroeconomics is:
Based on microeconomic foundations
In an economic model:
Exogenous variables affect endogenous variables - the values of endogenous variables are determined by the equations and values of the exogenous variables.
Variables that a model tries to explain are called:
Endogenous variables
All of the following are important macroeconomic variables except:
The marginal rate of substitution. (marginal rate of substitution is a concept in micro) - real GDP (good) - interest rate (good) - inflation rate (good)
Endogenous Variables are:
Determined within the model.
Number of endogenous variables equals
Number of equations