Exam 1: Introduction to Macroeconomics

Which of the following does macroeconomics endeavor to answer? i. Why is the typical person in the United States today more than 10 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. What determines the rate of inflation? What determines how rapidly the overall price level in an economy increases?

A main concern of short-run macroeconomics is the causes of economic fluctuations and how to fix them.

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

When we look at the ________ run, we are concerned with ________.

Consider the following model of the labor market: Labor supply: Labor demand: The endogenous variables are:

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

Consider the following model of the labor market: Labor supply: Labor demand: The value of the equilibrium quantity of labor, L, and wage, w, are:

An economic model is an exact replica of the economy.

A main concern of long-run macroeconomics is the causes of economic fluctuations.

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?

Macroeconomics is to microeconomics 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?

When we look at the ________ run, we are concerned with the ________.

Describe the differences between the short run and the long run.

Which of the following does macroeconomics NOT endeavor to answer? i. Why is the typical person in the United States today more than 10 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?

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

These four steps, 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; and (4) develop a model.

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

Consider the following model of the labor market: Labor Supply: Labor Demand: (a) Identify the model's parameters. (b) Identify the endogenous variables. (c) Solve the model. (d) What must the relationship between and be? (e) If the supply and demand for labor were given as and what are the equilibrium wage and labor force?

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. What is the relationship between inflation and unemployment?