Exam 5: Introduction to Macroeconomics

Is it possible for the prices of some goods to fall during a period of inflation? Explain.

Assume there are two managers that have very different ideas about how to deal with recessions. Mr. Nice Guy believes in keeping workers during an economic downturn and does so by getting all of his workers to agree to a wage cut. Mr. Tough Guy believes that the best policy is to lay off workers and keep the wages of the remaining workers unchanged. Compare and contrast these two methods of dealing with an economic downturn. Which is likely to be more profitable for the firm and why

The government releases GDP data on a quarterly basis. Explain why this would make it difficult for policy makers to determine what point in the business cycle the economy is at currently.

Draw a graph of a business cycle. Label and explain the phases of a business cycle.

Briefly explain what the circular flow diagram illustrates for a macroeconomy.

What event provided the impetus for the development of modern macroeconomics? Why did this event require a fundamental rethinking of how the macroeconomy operated?

Identify three macroeconomic and three microeconomic topics.

Explain the difference between macroeconomics and microeconomics.

Provide a brief history of the origins of macroeconomics.

What might be some Keynesian prescriptions to bring down the rate of inflation in the economy?

When there is unemployment there is an excess supply of workers. Describe how microeconomic theory explains the response to this phenomenon.

Explain why we should not expect to see zero percent unemployment.

Which school of thought would more likely make the following statements? a. The economy is in recession but we should leave it alone. b. Draft a piece of legislation subsidizing the hiring of recent college graduates. c. Let's fine-tune the economy. d. The market is self-correcting.

How would the duration of unemployment be different during an economic downturn if sticky wages (the counterpart to sticky prices) were not present in labor markets? Explain.

What are corporate bonds?

What was the Great Depression?

What is aggregate behavior?

List the three major concerns of macroeconomics.

Keynes argued that prices and wages don't determine the level of employment. Which determinant did he believe was important?

What is inflation?