Deck 1: Introduction to Macroeconomics

Question 1

Consider the following model of the labor market:
Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$
Labor demand: $L ^ { d } = \bar { f } - w$
The values of the equilibrium quantity of labor, L, and wage, w, are:

A) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } ) ; w ^ { * } = ( \bar { f } - \bar { \ell } ) / ( \bar { \ell } + \bar { a } )$
B) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } ) ; w ^ { * } = ( \bar { f } - \bar { \ell } ) / ( \bar { \ell } - \bar { a } )$
C) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } ) ; w ^ { * } = ( \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } )$
D) $L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } - \bar { a } ) ; w ^ { * } = ( \bar { f } - \bar { \ell } ) / ( \bar { \ell } - \bar { a } )$
E) $L ^ { * } = \frac { \bar { a } \bar { f } + \bar { \ell } } { \bar { \ell } + \bar { a } } ; w ^ { * } = \frac { \bar { f } - \bar { \ell } } { \bar { \ell } - \bar { a } }$

Answer 1

$L ^ { * } = ( \bar { a } \bar { f } + \bar { \ell } ) / ( \bar { \ell } + \bar { a } ) ; w ^ { * } = ( \bar { f } - \bar { \ell } ) / ( \bar { \ell } + \bar { a } )$

Question 2

Which of the following does macroeconomics endeavor to answer?
I) Why is the typical person in the United States today more than ten 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) i only
B) i, ii, and iii
C) ii only
D) i and ii
E) ii and iii

Answer 2

B

Question 3

Which of the following does macroeconomics NOT endeavor to answer?
I) Why is the typical person in the United States today more than ten 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?

A) ii and iii
B) i only
C) ii only
D) i, ii, and iii
E) iii only

Answer 3

E

Question 4

Macroeconomic is to microeconomic what ________ is to ________.

A) cosmology; particle physics
B) particle physics; cosmology
C) physics; biology
D) chemistry; organic chemistry
E) biology; zoology

Question 5

Consider the following model of the labor market:
Labor supply: $L ^ { 5 } = 1 + w$
Labor demand: $L ^ { d } = 11 - w$
The value of the equilibrium quantity of labor, L, and wage, w, are:

A) $L ^ { * }$ = 4^4/5; $w ^ { * }$ = 1/5
B) $L ^ { * }$ = 5; $w ^ { * }$ = 6
C) $L ^ { * }$ = 6; $w ^ { * }$ = 5
D) $L ^ { * }$ = 6; $w ^ { * }$ = 6
E) Not enough information is given.

Question 6

Macroeconomics is the study of ________ while microeconomics studies ________.

A) the cosmos; particle physics
B) the overall performance of an economy; an individual market
C) an individual market; the overall performance of an economy
D) the overall performance of a single economy; the individual firm
E) consumer behavior; firm behavior

Question 7

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?

A) i only
B) ii only
C) iii only
D) i, ii, and iii
E) ii and iii

Question 8

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

A) Shocks; parameters
B) Endogenous; exogenous
C) Endogenous; shocks
D) Exogenous; endogenous
E) Parameters; system

Question 9

Actual GDP is ________ to potential GDP.

A) rarely not equal
B) always equal
C) always not equal
D) rarely equal
E) Not enough information is given.

Question 10

Which of the following lists the four steps we use to study macroeconomic behavior in the correct order?

A) (1) document the facts; (2) develop a model; (3) compare the predictions of the model to the original facts; (4) use the model to make other predictions that may eventually be tested
B) (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; (4) develop a model
C) (1) compare the predictions of the model to the original facts; (2) develop a model; (3) document the facts; (4) use the model to make other predictions that may eventually be tested
D) (1) develop a model; (2) document the facts; (3) compare the predictions of the model to the original facts; (4) use the model to make other predictions that may eventually be tested
E) None of the above answers are correct.

Question 11

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

A) long run; money supply
B) long run; causes of economic fluctuations
C) long run; causes of economic growth
D) long run; causes of inflation
E) long run; unemployment

Question 12

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?

A) iii only
B) ii only
C) i, ii, and iii
D) i and ii
E) i and iii

Question 13

Income per person began at ________ in 1870 and ________ over a factor of 15 to ________ in 2012.

A) $2,500; rose; $35,000
B) $2,800; rose; $44,000
C) $2,800; rose; $100,000
D) $44,000; fell; $3,500
E) $40,000; fell; $2,500

Question 14

Which of the following does macroeconomics endeavor to answer?
I) What role does the government play in recessions and booms and in determining the rate of inflation?
Ii) What caused the currency crises in Mexico in the mid-1990s and in many Asian economies at the end of the 1990s?
Iii) How does a dairy farmer react to rising milk prices?

A) iii only
B) ii only
C) i and ii
D) i, ii, and iii
E) i and iii

Question 15

Which of the following questions should a successful model predict?
I) Why, in general, do Americans have higher incomes than Africans?
Ii) How much less unemployment is there during an economic expansion?
Iii) Why does the United States have a lower unemployment rate than Europe?

A) i and ii
B) ii only
C) iii only
D) i, ii, and iii
E) i and iii

Question 16

Consider the following model of the labor market:
Labor supply: $L ^ { 5 } = \bar { a } \times w + \bar { \ell }$
Labor demand: $L ^ { d } = \bar { f } - w$

The endogenous variables are:

A) $\bar { f }$ and   $\bar { a }$
B) $\bar { a }$ and the equilibrium wage, w
C) $\bar { f }$ and the equilibrium wage, w
D) the equilibrium quantity of labor, L, and wage, w
E) $\bar { a }$ and the equilibrium quantity of labor, L

Question 17

Which of the following does macroeconomics endeavor to answer?
I) What role does the government play in recessions and booms and in determining the rate of inflation?
Ii) What causes an increase in the price of Exxon stock?
Iii) How does a dairy farmer react to rising milk prices?

A) i only
B) ii only
C) iii only
D) i, ii, and iii
E) ii and iii

Question 18

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

A) short run; causes of economic fluctuations
B) long run; causes of economic fluctuations
C) short run; determinants of economic growth
D) long run; causes of inflation
E) long run; money supply

Question 19

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?

A) ii only
B) i, ii, and iii
C) iii only
D) i and ii
E) i and iii

Question 20

The three main variables we discuss in the short run are:

A) economic fluctuations; interest rates; unemployment
B) economic fluctuations; inflation; money
C) economic fluctuations; inflation; unemployment
D) interest rates; money supply; taxes
E) economic fluctuations; interest rates; money

Question 21

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

Question 22

An endogenous variable is often called a parameter.

Question 23

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. In the labor supply equation, if the " " increases to some constant , what would happen to the equilibrium wage and equilibrium labor?

Question 24

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

A) inflation; unemployment
B) causes of economic fluctuations; inflation
C) causes of economic fluctuations; determinants of economic growth
D) determinants of economic growth; causes of economic fluctuations
E) causes of economic fluctuations; money supply

Question 25

Macroeconomics is the study of an individual market.

Question 26

In the short run, we are concerned with the causes of economic growth.

Question 27

In the long run, we are concerned about the causes of economic growth.

Question 28

These four steps, and 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;
(4) use the model to make other predictions that eventually may be tested.

Question 29

What are the steps macroeconomists use to analyze the economy?

Question 30

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

Question 31

An economic model is an exact replica of the macroeconomy.

Question 32

In the long run, we are concerned about the causes of economic fluctuations.

Question 33

In the short run, we are concerned with the causes of economic fluctuations and how to fix them.

Question 34

An exogenous variable is one that is taken as given, that is, a parameter.

Question 35

Describe the differences between the long and short run.