Question 1

An endogenous variable is typically ________.

Accepted Answer

A)  taken as given 
B)  strictly explained outside the model 
C)  strictly explained inside the model 
D)  strictly explained by data 
E)  strictly explained by graphical analysis 
A)  taken as given 
B)  strictly explained outside the model 
C)  strictly explained inside the model 
D)  strictly explained by data 
E)  strictly explained by graphical analysis C

Question 2

A simple macroeconomic model might explain how an increase in the demand for new housing would lead to a decrease in the rate of unemployment. In such a model, which of these variables is likely to be exogenous?

Accepted Answer

A)  the quantity sold of home furnishings 
B)  the degree of unionization of the construction industry 
C)  the wage rate for unskilled workers 
D)  the level of tax revenues 
E)  the demand for concrete 
A)  the quantity sold of home furnishings 
B)  the degree of unionization of the construction industry 
C)  the wage rate for unskilled workers 
D)  the level of tax revenues 
E)  the demand for concrete B

Question 3

Historically, the U.S. government seems to have ________.

Accepted Answer

A)  run budget surpluses as often as budget deficits 
B)  generally spent less than what it collected in taxes each year 
C)  had difficulty running budget surpluses 
D)  not needed to borrow to finance wars 
E)  none of the above 
A)  run budget surpluses as often as budget deficits 
B)  generally spent less than what it collected in taxes each year 
C)  had difficulty running budget surpluses 
D)  not needed to borrow to finance wars 
E)  none of the above C

Question 4

Policies to encourage higher personal saving rates include ________.

Accepted Answer

A)  lowering income taxes 
B)  lowering sales taxes 
C)  increasing the quantity of money 
D)  raising asset prices 
E)  reducing interest rates 
A)  lowering income taxes 
B)  lowering sales taxes 
C)  increasing the quantity of money 
D)  raising asset prices 
E)  reducing interest rates

Question 5

When households increase their personal savings ________.

Accepted Answer

A)  investment decreases 
B)  they are better able to cope with severe economic downturns 
C)  interest rates are likely to rise, as well 
D)  all of the above 
E)  none of the above 
A)  investment decreases 
B)  they are better able to cope with severe economic downturns 
C)  interest rates are likely to rise, as well 
D)  all of the above 
E)  none of the above

Question 6

Macroeconomics is the study of ________ while microeconomics studies ________.

Accepted Answer

A)  large business enterprises; small business ventures 
B)  the overall household economic activity; market behavior 
C)  an individual firm; the overall economic performance of a nation 
D)  the overall economic performance of the world; the economy of a single country 
E)  none of the above 
A)  large business enterprises; small business ventures 
B)  the overall household economic activity; market behavior 
C)  an individual firm; the overall economic performance of a nation 
D)  the overall economic performance of the world; the economy of a single country 
E)  none of the above

Question 7

The low saving rate in the United States is no cause for concern, so long as people in other countries are saving and are willing to send their savings into the U.S. economy by buying our assets. Comment.

Accepted Answer

Capital inflow does help to sustain inve

Question 8

Figure 1.1  
-Figure 1.1 displays exogenous variables entering a model from which emerge endogenous variables. Yet, in the five-step process to develop an economic model, the macroeconomist specifies the endogenous variables first, then the exogenous variables. Which is the correct sequence? Explain.

Accepted Answer

Both are correct. The figure displays a

Question 9

Policies to reduce the likelihood of financial crises might include ________.

Accepted Answer

A)  enlarging government budget deficits 
B)  reducing imbalances in global trade and capital flows 
C)  keeping the inflation rate near or below zero 
D)  more aggressive use of stabilization policy 
E)  all of the above 
A)  enlarging government budget deficits 
B)  reducing imbalances in global trade and capital flows 
C)  keeping the inflation rate near or below zero 
D)  more aggressive use of stabilization policy 
E)  all of the above

Question 10

Activists believe ________.

Accepted Answer

A)  the self-correcting mechanism in the economy is very slow 
B)  in the adoption of policies to eliminate excessive unemployment 
C)  doing nothing will leave too many people out of work for too long 
D)  all of the above 
E)  none of the above 
A)  the self-correcting mechanism in the economy is very slow 
B)  in the adoption of policies to eliminate excessive unemployment 
C)  doing nothing will leave too many people out of work for too long 
D)  all of the above 
E)  none of the above

Question 11

An increase in government spending might be an example of a ________ policy for the purpose of ________.

Accepted Answer

A)  monetary; lowering unemployment 
B)  monetary; reducing inflation 
C)  monetary; increasing saving 
D)  fiscal; reducing inflation 
E)  fiscal; lowering unemployment 
A)  monetary; lowering unemployment 
B)  monetary; reducing inflation 
C)  monetary; increasing saving 
D)  fiscal; reducing inflation 
E)  fiscal; lowering unemployment

Question 12

Common sense suggests (and macroeconomists agree!) that sustained economic growth over extended time periods is more important than the economy's short-term fluctuations. Why, then, do macroeconomists (and policymakers, and the general public) care so much about the business cycle?

Accepted Answer

One reason is impatience. Periods of hig

Question 13

The necessary ingredients for economic growth and poverty reduction are no mystery, really: education, favorable and efficient institutions, research and development, etc. Macroeconomists are unlikely to have anything useful to say. Comment.

Accepted Answer

The ingredients are familiar, but implem

Question 14

Real GDP measures ________.

Accepted Answer

A)  the total amount of income of every person and firm in the economy 
B)  the percentage of income produced by workers and firms 
C)  how rapidly the overall level of prices is rising. 
D)  how many hours the average U.S. citizen works a year 
E)  how many automobiles are produced in a month 
A)  the total amount of income of every person and firm in the economy 
B)  the percentage of income produced by workers and firms 
C)  how rapidly the overall level of prices is rising. 
D)  how many hours the average U.S. citizen works a year 
E)  how many automobiles are produced in a month

Question 15

Assume that a high proportion of recent college graduates decides to stay in school seeking advanced degrees, rather than confront the challenge of landing a good job in the midst of generally high unemployment. What is the direct impact of this behavior on the unemployment rate? In the longer term, what indirect impacts might there be on the unemployment rate?

Accepted Answer

Staying in school means that these gradu

Question 16

In a model of the saving rate, which of these relationships is most crucial?

Accepted Answer

A)  the effect of the saving rate on government spending 
B)  the effect of government spending on the saving rate 
C)  the effect of the saving rate on taxes 
D)  the effect of taxes on the saving rate 
E)  the effect of the saving rate on the real wage 
A)  the effect of the saving rate on government spending 
B)  the effect of government spending on the saving rate 
C)  the effect of the saving rate on taxes 
D)  the effect of taxes on the saving rate 
E)  the effect of the saving rate on the real wage

Question 17

A good example of a policy to increase an economy's saving rate is ________.

Accepted Answer

A)  to reduce poverty 
B)  to increase the economic growth rate 
C)  to increase government spending 
D)  to reduce interest rates 
E)  to increase sales taxes 
A)  to reduce poverty 
B)  to increase the economic growth rate 
C)  to increase government spending 
D)  to reduce interest rates 
E)  to increase sales taxes

Question 18

Raising household savings could be beneficial because ________.

Accepted Answer

A)  it translates into higher investment 
B)  severe economic downturns can be "better-weathered" 
C)  it provides a cushion to avoid bankruptcies 
D)  all of the above 
E)  none of the above 
A)  it translates into higher investment 
B)  severe economic downturns can be "better-weathered" 
C)  it provides a cushion to avoid bankruptcies 
D)  all of the above 
E)  none of the above

Question 19

An exogenous variable is typically ________.

Accepted Answer

A)  calculated by the model 
B)  only used to conduct policy analysis 
C)  explained inside the model 
D)  disregarded in economic models 
E)  none of the above 
A)  calculated by the model 
B)  only used to conduct policy analysis 
C)  explained inside the model 
D)  disregarded in economic models 
E)  none of the above

Question 20

Nonactivists propose doing nothing in the face of economic hardship because ________.

Accepted Answer

A)  markets can take quite a bit of time to self-correct 
B)  excessive unemployment tends to disappear on its own accord 
C)  while households feel the hardship, firms typically benefit 
D)  all of the above 
E)  none of the above 
A)  markets can take quite a bit of time to self-correct 
B)  excessive unemployment tends to disappear on its own accord 
C)  while households feel the hardship, firms typically benefit 
D)  all of the above 
E)  none of the above

Exam 1: The Policy and Practice of Macroeconomics

An endogenous variable is typically ________.

A simple macroeconomic model might explain how an increase in the demand for new housing would lead to a decrease in the rate of unemployment. In such a model, which of these variables is likely to be exogenous?

Historically, the U.S. government seems to have ________.

Policies to encourage higher personal saving rates include ________.

When households increase their personal savings ________.

Macroeconomics is the study of ________ while microeconomics studies ________.

The low saving rate in the United States is no cause for concern, so long as people in other countries are saving and are willing to send their savings into the U.S. economy by buying our assets. Comment.

Figure 1.1 -Figure 1.1 displays exogenous variables entering a model from which emerge endogenous variables. Yet, in the five-step process to develop an economic model, the macroeconomist specifies the endogenous variables first, then the exogenous variables. Which is the correct sequence? Explain.

Policies to reduce the likelihood of financial crises might include ________.

Activists believe ________.

An increase in government spending might be an example of a ________ policy for the purpose of ________.

Common sense suggests (and macroeconomists agree!) that sustained economic growth over extended time periods is more important than the economy's short-term fluctuations. Why, then, do macroeconomists (and policymakers, and the general public) care so much about the business cycle?

The necessary ingredients for economic growth and poverty reduction are no mystery, really: education, favorable and efficient institutions, research and development, etc. Macroeconomists are unlikely to have anything useful to say. Comment.

Real GDP measures ________.

In a model of the saving rate, which of these relationships is most crucial?

A good example of a policy to increase an economy's saving rate is ________.

Raising household savings could be beneficial because ________.

An exogenous variable is typically ________.

Nonactivists propose doing nothing in the face of economic hardship because ________.

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, Policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, Employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters

Macroeconomics is the study of while microeconomics studies .

An increase in government spending might be an example of a policy for the purpose of .