Exam 1: The Science of Macroeconomics

The quantity of coffee demanded, Q^D, depends on the price of coffee, P , and the price of tea, P . The quantity of c T coffee supplied, Q^S, depends on the price of coffee, P , and the price of electricity, P , according to the following c E equation: Q^D = 17 - 2 P + 10 P c T Q^S = 2 + 3 P - 5 P c E a. If the price of tea is $1.00 and the price of electricity is $0.50, what is the equilibrium price and quantity of coffee? b. What is/are the endogenous variable(s) in this model? c. What is/are the exogenous variable(s) in this model?

Deflation occurs when:

All of the following are important macroeconomic variables except:

A severe recession is called a(n):

Variables that a model takes as given are called:

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

Macroeconomic models:

Assume that the equation for demand for bread at a small bakery is Q^d = 60 - 10P + 3Y, where Q^d is the quantity of b bread demanded in loaves and Y is the average income in the town in thousands of dollars. a. If the average income in the town is 10, state the equation for Qd in terms of P . b b. Draw a graph of the demand curve with Qd on the horizontal axis and P on the vertical axis. Label the b .curve DD.

Recessions are periods when real GDP:

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

During the period between 1900 and 2000, the unemployment rate in the United States was highest in the:

Endogenous variables are:

The inflation rate in the United States averaged about:

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

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

Macroeconomists cannot conduct controlled experiments, such as testing various tax and expenditure policies, because:

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

A typical trend during a recession is that:

Macroeconomic models are used to explain how variables influence _ variables.

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