Question 1

In a simple model of the supply and demand for pizza, when the price of cheese increases, the price of pizza and the quantity purchased .

Accepted Answer

A) increases; increases 
B) decreases; increases 
C) decreases; decreases 
D) increases; decreases 
A) increases; increases 
B) decreases; increases 
C) decreases; decreases 
D) increases; decreases

Question 2

The production function for an economy can be expressed as Y = F(K,L), where Y is real
GDP, K is the quantity of capital in the economy, and L is the quantity of labor in the economy. a. If F( ) = 100 + 3K + 9L, what is real GDP if the quantity of capital is 200 and the quantity of labor is 500?
b. What is/are the endogenous variable(s) in this model?
c. What is/are the exogenous variable(s) in this model?

Accepted Answer

a. Y = 100

Question 3

Important characteristics of macroeconomic models include all of the following except:

Accepted Answer

A) simplifying assumptions. 
B) functional relationships based on controlled experiments. 
C) endogenous and exogenous variables. 
D) implicit or explicit consistency with microeconomic foundations. 
A) simplifying assumptions. 
B) functional relationships based on controlled experiments. 
C) endogenous and exogenous variables. 
D) implicit or explicit consistency with microeconomic foundations.

Question 4

Real GDP over time and the growth rate of real GDP .

Accepted Answer

A) grows; fluctuates 
B) is steady; is steady 
C) grows; is steady 
D) is steady; fluctuates 
A) grows; fluctuates 
B) is steady; is steady 
C) grows; is steady 
D) is steady; fluctuates

Question 5

A measure of how fast prices are rising is called the:

Accepted Answer

A) growth rate of real GDP. 
B) inflation rate. 
C) unemployment rate. 
D) market-clearing rate. 
A) growth rate of real GDP. 
B) inflation rate. 
C) unemployment rate. 
D) market-clearing rate.

Question 6

Assume that the equation for demand for bread at a small bakery is Qd = 60 - 10Pb + 3Y, where Qd is the quantity of bread demanded in loaves, Pb is the price of bread in dollars per loaf, and Y is the average income in the town in thousands of dollars. Assume also that the equation for supply of bread is Qs = 30 + 20Pb - 30 Pf , where Qs is the quantity supplied and Pf is the price of flour in dollars per pound. Assume finally that markets clear, so that Qd = Qs.
a. If Y is 10 and Pf is $1, solve mathematically for equilibrium Q and Pb .
b. If the average income in the town increases to 15, solve for the new equilibrium Q and Pb .

Accepted Answer

a. Q = 60 loaves, Pb

Question 7

Deflation occurs when:

Accepted Answer

A) real GDP decreases. 
B) the unemployment rate decreases. 
C) prices fall. 
D) prices increase, but at a slower rate. 
A) real GDP decreases. 
B) the unemployment rate decreases. 
C) prices fall. 
D) prices increase, but at a slower rate.

Question 8

A severe recession is called a(n):

Accepted Answer

A) depression. 
B) deflation. 
C) exogenous event. 
D) market-clearing assumption. 
A) depression. 
B) deflation. 
C) exogenous event. 
D) market-clearing assumption.

Question 9

Endogenous variables are:

Accepted Answer

A) fixed at the moment they enter the model. 
B) determined within the model. 
C) the inputs of the model. 
D) from outside the model. 
A) fixed at the moment they enter the model. 
B) determined within the model. 
C) the inputs of the model. 
D) from outside the model.

Question 10

A typical trend during a recession is that:

Accepted Answer

A) the unemployment rate falls. 
B) the popularity of the incumbent president rises. 
C) incomes fall. 
D) the inflation rate rises. 
A) the unemployment rate falls. 
B) the popularity of the incumbent president rises. 
C) incomes fall. 
D) the inflation rate rises.

Question 11

Which of the combinations below is not a U.S. President and an important economic issue of his administration?

Accepted Answer

A) President Carter-inflation President 
B) Reagan-budget deficits President 
C) G.H.W. Bush-budget deficits President 
D) Clinton-inflation 
A) President Carter-inflation President 
B) Reagan-budget deficits President 
C) G.H.W. Bush-budget deficits President 
D) Clinton-inflation

Question 12

Macroeconomics does not try to Answer the question of:

Accepted Answer

A) why do some countries experience rapid growth. 
B) what is the rate of return on education. 
C) why do some countries have high rates of inflation. 
D) what causes recessions and depressions. 
A) why do some countries experience rapid growth. 
B) what is the rate of return on education. 
C) why do some countries have high rates of inflation. 
D) what causes recessions and depressions.

Question 13

Exogenous variables are:

Accepted Answer

A) fixed at the moment they enter the model. 
B) determined within the model. 
C) the outputs of the model. 
D) explained by the model. 
A) fixed at the moment they enter the model. 
B) determined within the model. 
C) the outputs of the model. 
D) explained by the model.

Question 14

The ability of macroeconomists to predict the future course of economic events:

Accepted Answer

A) is no better than the meteorologist's ability to predict the next month's weather. 
B) is much better than the meteorologist's ability to predict the next month's weather. 
C) has gotten worse over time. 
D) is less precise than it was in the 1920s. 
A) is no better than the meteorologist's ability to predict the next month's weather. 
B) is much better than the meteorologist's ability to predict the next month's weather. 
C) has gotten worse over time. 
D) is less precise than it was in the 1920s.

Question 15

Variables that a model takes as given are called:

Accepted Answer

A) endogenous. 
B) exogenous. 
C) market clearing. 
D) macroeconomic. 
A) endogenous. 
B) exogenous. 
C) market clearing. 
D) macroeconomic.

Question 16

Macroeconomics is the study of the:

Accepted Answer

A) activities of individual units of the economy. 
B) decision making by households and firms. 
C) economy as a whole. 
D) interaction of firms and households in the marketplace. 
A) activities of individual units of the economy. 
B) decision making by households and firms. 
C) economy as a whole. 
D) interaction of firms and households in the marketplace.

Question 17

Variables that a model tries to explain are called:

Accepted Answer

A) endogenous. 
B) exogenous. 
C) market clearing. 
D) fixed. 
A) endogenous. 
B) exogenous. 
C) market clearing. 
D) fixed.

Question 18

All of the following statements about sticky prices are true except:

Accepted Answer

A) in the short run, some wages and prices are sticky. 
B) the sticky-price model describes the equilibrium toward which the economy slowly gravitates. 
C) for studying year-to-year fluctuations, most macroeconomists believe that price stickiness is a better assumption than is price flexibility. 
D) magazine publishers tend to change their newsstand prices only every three or four years. 
A) in the short run, some wages and prices are sticky. 
B) the sticky-price model describes the equilibrium toward which the economy slowly gravitates. 
C) for studying year-to-year fluctuations, most macroeconomists believe that price stickiness is a better assumption than is price flexibility. 
D) magazine publishers tend to change their newsstand prices only every three or four years.

Question 19

In the relationship expressed in functional form, Y = G(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 G( ):

Accepted Answer

A) is the growth rate of real GDP when the amount of capital and labor in the economy is fixed. 
B) indicates that the variables inside the parentheses are endogenous variables in the model. 
C) is the symbol that stands for government input into the production process. 
D) is the function telling how the variables in the parentheses determine real GDP. 
A) is the growth rate of real GDP when the amount of capital and labor in the economy is fixed. 
B) indicates that the variables inside the parentheses are endogenous variables in the model. 
C) is the symbol that stands for government input into the production process. 
D) is the function telling how the variables in the parentheses determine real GDP.

Question 20

All of the following are important macroeconomic variables except:

Accepted Answer

A) real GDP. 
B) the unemployment rate. 
C) the marginal rate of substitution. 
D) the inflation rate. 
A) real GDP. 
B) the unemployment rate. 
C) the marginal rate of substitution. 
D) the inflation rate.

In a simple model of the supply and demand for pizza, when the price of cheese increases, the price of pizza and the quantity purchased .

Important characteristics of macroeconomic models include all of the following except:

Real GDP over time and the growth rate of real GDP .

A measure of how fast prices are rising is called the:

Deflation occurs when:

A severe recession is called a(n):

Endogenous variables are:

A typical trend during a recession is that:

Which of the combinations below is not a U.S. President and an important economic issue of his administration?

Macroeconomics does not try to Answer the question of:

Exogenous variables are:

The ability of macroeconomists to predict the future course of economic events:

Variables that a model takes as given are called:

Macroeconomics is the study of the:

Variables that a model tries to explain are called:

All of the following statements about sticky prices are true except:

In the relationship expressed in functional form, Y = G(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 G( ):

All of the following are important macroeconomic variables except:

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand II: Applying the Is-Lm Model

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Stabilization Policy

Government Debt and Budget Deficits

Introduction to the Financial System

Asset Prices and Interest Rates

Securities Markets

Banking

Financial Crises

Filters

Exam 1: The Science of Macroeconomics

In a simple model of the supply and demand for pizza, when the price of cheese increases, the price of pizza and the quantity purchased .

Important characteristics of macroeconomic models include all of the following except:

Real GDP over time and the growth rate of real GDP .

A measure of how fast prices are rising is called the:

Deflation occurs when:

A severe recession is called a(n):

Endogenous variables are:

A typical trend during a recession is that:

Which of the combinations below is not a U.S. President and an important economic issue of his administration?

Macroeconomics does not try to Answer the question of:

Exogenous variables are:

The ability of macroeconomists to predict the future course of economic events:

Variables that a model takes as given are called:

Macroeconomics is the study of the:

Variables that a model tries to explain are called:

All of the following statements about sticky prices are true except:

In the relationship expressed in functional form, Y = G(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 G( ):

All of the following are important macroeconomic variables except:

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

Money and Inflation

The Open Economy

Unemployment

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand II: Applying the Is-Lm Model

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

Stabilization Policy

Government Debt and Budget Deficits

Introduction to the Financial System

Asset Prices and Interest Rates

Securities Markets

Banking

Financial Crises

Filters