Exam 1: Introduction to Macroeconomics

Which of the following does macroeconomics endeavor to answer? i. What role does the government play in recessions and booms and in determining the rate of inflation? ii. What caused the currency crises in Mexico in the mid-1990s and in many Asian economies at the end of the 1990s? iii. How does a dairy farmer react to rising milk prices?

In the long run, we are concerned about the causes of economic growth.

These four steps, and in the following order, are used to study macroeconomic behavior: (1) document the facts; (2) use the model to make other predictions that may eventually be tested; (3) compare the predictions of the model to the original facts; (4) develop a model.

Which of the following does macroeconomics NOT endeavor to answer? i. Why is the typical person in the United States today more than ten times richer than the typical person a century ago? ii. Why has the unemployment rate been nearly twice as high in Europe as in the United States in recent years? iii. Why has the price of orange juice risen sharply?

Consider the following model of the labor market: Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$ Labor demand: $L ^ { d } = \bar { f } - w$ The values of the equilibrium quantity of labor, L, and wage, w, are:

Macroeconomics is the study of an individual market.

What are at least four of the main concerns of the study of macroeconomics?

In the short run, we are concerned with the causes of economic growth.

Which of the following does macroeconomics endeavor to answer? i. What role does the government play in recessions and booms and in determining the rate of inflation? ii. What causes an increase in the price of Exxon stock? iii. How does a dairy farmer react to rising milk prices?

Consider the following model of the labor market: Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$ Labor demand: $L ^ { d } = \bar { f } - w$ The endogenous variables are:

Which of the following does macroeconomics endeavor to answer? i. How does a dairy farmer react to rising wheat prices? ii. What causes an increase in the price of Apple stock? iii. What are potential causes of financial crises?

Consider the following model of the labor market: Labor Supply: $L ^ { s } = 2 w + 2$ Labor Demand: $L ^ { d } = 3 - 3 w$ a. Identify the model's parameters. b. Identify the endogenous variables. c. Solve the model. d. In the labor supply equation, if the " $\bar { e }$ " increases to some constant $\bar { \ell } > 1$ , what would happen to the equilibrium wage and equilibrium labor?

Actual GDP is ________ to potential GDP.

Macroeconomic is to microeconomic what ________ is to ________.

Which of the following questions should a successful model predict? i. How do changes in government policies change the labor market? ii. How does money supply influence inflation? iii. How does investment affect economic growth?

The short run is concerned with ________ while the long run is concerned with ________.

________ variables are parameters to the model and generally are fixed over time, while ________ variables are the outcome of the model.

An endogenous variable is often called a parameter.

In the short run, we are concerned with the causes of economic fluctuations and how to fix them.

An economic model is an exact replica of the macroeconomy.