Macro Ch. 1 Study Questions

Which of the combinations listed is not a U.S. president and an important economic issue of his administration? -President G.H.W. Bush, budget deficits -President Reagan, budget deficits -President Carter, inflation -President Clinton, inflation

President Clinton, inflation

The study of the economy as a whole is called

macroeconomics

Real GDP is often plotted on a logarithmic scale. On such a scale, equal distances on the axis represent equal _____ changes

percentage

All of the following are types of macroeconomics data except the: -inflation rate. -growth rate of real GDP. -unemployment rate. -price of an IBM computer.

price of an IBM computer.

The inflation rate is a measure of how fast

prices in the economy are rising.

The total income of everyone in the economy adjusted for the level of base year prices is called

real GDP

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) = 60−10P+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 quantity is

100

Which question would MOST likely be studied by macroeconomists? -Will prohibiting texting while driving reduce the profits of cellular phone companies? -Will more government spending reduce the unemployment rate? -Do large banks or small banks have lower average costs? -What is the impact of higher property taxes on housing construction?

Will more government spending reduce the unemployment rate?

Exogenous variables are those variables that

a model takes as a given

All of the following statements about macroeconomic data are true EXCEPT that macroeconomic data: -provide the motivation for developing economic theories. -are used to test theories about the economy. -are obtained from controlled experiments. -differ over time and across countries.

are obtained from controlled experiments

The assumption of continuous market clearing means that

at any given instant, buyers can buy all that they want and sellers can sell all that they want at the going price

Macroeconomists are like scientists because they both: -rely on data analyzed from experiments they set up in a laboratory. -collect data, develop hypotheses, and analyze the results. -design data and conduct controlled experiments to test their theories. -are unlimited in their use of controlled experiments.

collect data, develop hypotheses, and analyze the results.

Endogenous variables are

determined within the model

In the U.S. economy today, real GDP per person, compared with its level in 1900, is about

eight times as high

Since the early 1980s, inflation in the United States has been relatively _____ and relatively _____

low; stable

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

inflation increases; unemployment

In the relationship expressed in functional form Y= F(K,L), Y stands for real GDP, K stands for the amount of capital in the economy, and L stands for the amount of labor in the economy. In this case F( )

is the function telling how the variables in the parentheses determine real GDP

Economic expansions are usually associated with

low unemployment rates

A graph of the rate of inflation in the United States over the twentieth century shows

some periods of deflation in the first half of the century, but only positive rates of inflation in the second half of the century

Most macroeconomists believe that prices are _____ in the short run and _____ in the long run

sticky; flexible

All of the following are important macroeconomic variables except: -the inflation rate. -real GDP. -the unemployment rate. -the marginal rate of substitution.

the marginal rate of substitution.

Which of the following is the best example of a sticky price? -the price of a barrel of oil -the price of a soda in a vending machine -the price of a share of stock -the price of the U.S. dollar in terms of euros

the price of a soda in a vending machine

In a simple graphical model of the supply and demand for pizza with the price of pizza measured vertically and the quantity of pizza measured horizontally

the supply curve slopes upward and to the right

Macroeconomics does not try to answer the question of: -what is the rate of return on education. -what causes recessions and depressions. -why do some countries have high rates of inflation. -why do some countries experience rapid growth.

what is the rate of return on education.