Question 1

Macroeconomic models particularly focus on the following three economic data series.

Accepted Answer

A)  endogenous variables,exogenous variables,and taxes
B)  inflation,unemployment,and business cycles
C)  nominal GDP,the employment rate,and budget deficits
D)  bankruptcies,the unemployment rate,and depressions
E)  none of the above E

Question 2

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 C

Question 3

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 investment in the U.S.above what it would be otherwise.But having savers in other countries finance our investment means that they own a portion of the resulting economic growth,leaving less for U.S.citizens to enjoy.Because capital inflow is an increase in the supply of savings,it can lower the return and thus incentive to save,discouraging U.S.citizens from ever consuming less and saving more.Capital inflow,also,may reflect a global imbalance in which the combination of high consumer demand and low return on saving fuels speculative activities (e.g. ,housing boom).As long as U.S.citizens consume so much and save so little,our trade deficit and corresponding indebtedness to other economies will persist.

Question 4

Activist policymakers,compared to nonactivists,are more likely to emphasize ________ considerations and to prefer ________.

Accepted Answer

A)  short-run;rule-determined
B)  long-run;discretionary policy
C)  short-run;discretionary policy
D)  long-run;rule determined
E)  business;flexible plans

Question 5

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

Question 6

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

Question 7

What explains the rise in income in the U.S.between 1900 and 2013?

Accepted Answer

A)  business cycles
B)  economic growth
C)  recessions
D)  depressions
E)  the purchasing power of the dollar

Question 8

Economists apply the term "Great Inflation" to which decade?

Accepted Answer

A)  1930s
B)  1940s
C)  1950s
D)  1960s
E)  1970s

Question 9

Raising taxes and cutting spending are examples of ________.

Accepted Answer

A)  fiscal policy tightening
B)  fiscal policy expansion
C)  monetary policy tightening
D)  monetary policy expansion
E)  none of the above

Question 10

The unemployment rate measures,at a point in time,the ________.

Accepted Answer

A)  percentage of workers who do not have a job
B)  percentage of workers who do not have a job but are looking for work
C)  percentage of workers who stop working
D)  percentage of workers who are looking for work
E)  none of the above

Question 11

Macroeconomics is the study of ________ while microeconomics studies ________.

Accepted Answer

A)  an individual firm;the overall economic performance of a nation
B)  the overall economic performance of the world;the economy of a single country
C)  the overall economic activity and prices;an individual firm,household,or market
D)  firm choices;market behavior
E)  consumer choices;government behavior

Question 12

If a macroeconomist studying the causes of unemployment asserts that a particular change in technology will cause the rate of unemployment to decrease by ten percent,then this macroeconomist is at which step in the process of developing an economic model?

Accepted Answer

A)  Identify the endogenous variables.
B)  Develop a model.
C)  Compare the model with the data.
D)  Identify the exogenous variables.
E)  Conduct prediction and policy analysis.

Question 13

An exogenous variable is typically ________.

Accepted Answer

A)  not considered in an economic model
B)  only used to conduct policy analysis
C)  taken as given
D)  explained inside the model
E)  explained by interest rates

Question 14

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

Question 15

In a macroeconomic model designed to explain why some countries grow faster than others,which of these variables is likely to be endogenous?

Accepted Answer

A)  investment
B)  economic policies
C)  geographic size
D)  population
E)  none of the above

Question 16

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

Question 17

Develop a simple model of inflation by identifying at least two exogenous variables and describing,briefly,how the value of these exogenous variables will impact the rate of increase in the overall level of prices in the economy.

Accepted Answer

The answer of Develop a simple model of inflation by...

Question 18

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

Question 19

Policies to encourage higher personal saving rates include ________.

Accepted Answer

A)  raising income taxes
B)  raising sales taxes
C)  lowering taxes on pension plans
D)  A and B but not C
E)  B and C but not A

Question 20

All governments face a budget constraint: none can spend more than the sum of current government revenues plus the amount that creditors are willing to lend.Why,then,do government budget deficits matter?

Accepted Answer

The answer of All governments face a budget constraint: none...

Exam 1: The Policy and Practice of Macroeconomics