Question 1

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 2

Consider an economic policy regime in which rules are well-known but frequently ignored.Which of these statements is true?

Accepted Answer

A) This regime might work in the long-run,but is unlikely to produce good outcomes in the short run. 
B) Policymakers in this regime might find that rules are being broken with increasing frequency. 
C) This regime is more likely to be supported by nonactivist,than by activist policymakers. 
D) This regime is more likely to result in high unemployment than in high inflation. 
E) This regime is unlikely to produce large government budget deficits.

Question 3

The term "business cycle" refers to ________.

Accepted Answer

A) the opening and eventual closing down of businesses 
B) the rising and later declining of the purchasing power of the dollar 
C) the acquiring of raw materials and ultimate selling of a finished product 
D) the tendency for rich economies to be inevitably out-paced by other economies 
E) the slowing and eventual accelerating of economic growth

Question 4

Looking at the U.S.personal saving rate over the last sixty years,we can say that ________.

Accepted Answer

A) it has always been low 
B) Americans used to spend a lot more than they have in recent years 
C) Americans used to save a lot more than they have in recent years 
D) it has always been fairly high 
E) Americans spend more when concerned about their future earnings

Question 5

From 1900 to 2013 real GDP per person in the U.S.has ________.

Accepted Answer

A) doubled 
B) grown by a factor of four 
C) grown by a factor of nine 
D) grown by a factor of twenty 
E) declined

Question 6

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 7

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 8

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

Question 9

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

Accepted Answer

A) activist policies can kick in at the wrong time and be counterproductive 
B) markets can take quite a bit of time to self-correct 
C) while households feel the hardship,firms typically benefit 
D) all of the above 
E) none of the above

Question 10

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

Question 11

An increase in interest rates might be an example of a ________ policy for the purpose of ________.

Accepted Answer

A) monetary;reducing inflation 
B) monetary;lowering unemployment 
C) monetary;increasing the quantity of money 
D) fiscal;reducing inflation 
E) fiscal;lowering unemployment

Question 12

The old adage "rules are made to be broken" would typically be associated with economists who might advocate ________.

Accepted Answer

A) stabilization policy 
B) monetary policy 
C) rule-determined policy 
D) discretionary policy 
E) fiscal policy

Question 13

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

Question 14

To compare the conclusions of a model with what actually happens,historical data are entered into the model as ________.

Accepted Answer

A) endogenous variables 
B) exogenous variables 
C) equations 
D) predictions 
E) policies

Question 15

Apart from the Great Depression of the 1930s,which decade saw the largest rise in unemployment in the U.S.?

Accepted Answer

A) 1950s 
B) 1970s 
C) 1980s 
D) 1990s 
E) 2000s

Question 16

Which of the following sequences best describes the five necessary steps to develop an economic model in the correct order?

Accepted Answer

A) (1): Identify the endogenous variables; (2): identify the exogenous variables; (3): develop a model; (4): compare the model with the data; (5): conduct prediction and policy analysis. 
B) (1): Develop a model; (2): identify the exogenous variables; (3): identify the endogenous variables; (4): compare the model with the data; (5): conduct prediction and policy analysis. 
C) (1): Conduct prediction and policy analysis; (2): develop a model; (3): identify the endogenous variables; (4): identify the exogenous variables; (5): compare the model with the data. 
D) (1): Conduct prediction and policy analysis; (2): compare the model with the data; (3):identify the endogenous variables; (4): identify the exogenous variables; (5): develop a model. 
E) none of the above

Question 17

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...

Question 18

In the Great Depression of the 1930s,the unemployment rate in the U.S.climbed to what percentage?

Accepted Answer

A) 5 
B) 10 
C) 15 
D) 20 
E) 25

Question 19

Fiscal policy involves ________.

Accepted Answer

A) taxes and government spending 
B) setting interest rates 
C) controlling the amount of money in the economy 
D) all of the above 
E) none of the above

Question 20

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

The answer of Figure 1.1 
-Figure 1.1 displays exogenous variables...

Exam 1: The Policy and Practice of Macroeconomics