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Chapter 1 - Thinking about Macroeconomics


True/False
Indicate whether the statement is true or false.
 

 1. 
Macroeconomists study the amount of employment and unemployment.
 

 2. 
Macroeconomists study the price of individual products like beer.
 

 3. 
When the gross domestic product is growing, it is called inflation.
 

 4. 
A recession is when GDP is falling toward a trough.
 

 5. 
If price is below equilibrium in a market, then quantity supplied will be less than quantity demanded.
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 6. 
Macroeconomics deals with:
a.
how individual markets work.
b.
the overall performance of the economy.
c.
relative prices in different markets.
d.
substitution of one good for another good.
 

 7. 
Macroeconomics includes the study of:
a.
the general price level.
b.
the price of individual goods.
c.
the relative price of goods.
d.
all of the above.
 

 8. 
Macroeconomists study:
a.
the determination of the economy’s total production.
b.
unemployment
c.
the general price level.
d.
all of the above.
 

 9. 
Macroeconomists study:
a.
the determination of real GDP.
b.
the production of specific goods.
c.
the relative production in different markets.
d.
all of the above.
 

 10. 
Among the prices that macroeconomist study are:
a.
the price of coffee.
b.
the price of tea.
c.
the interest rate.
d.
all of the above.
 

 11. 
Among the prices that macroeconomists study are:
a.
the wage rate.
b.
the interest rate.
c.
the exchange rate.
d.
all of the above.
 

 12. 
Monetary policy involves:
a.
the government’s expenditure.
b.
taxation.
c.
determining the quantity of money.
d.
the fiscal deficit.
 

 13. 
The unemployment rate is:
a.
the fraction of the population with no job.
b.
the fraction of those seeking work with no job.
c.
the rate of growth of those with no job.
d.
the rate of growth of those seeking work.
 

 14. 
Fiscal policy involves:
a.
determining exchange rates.
b.
government expenditures.
c.
interest rates.
d.
all of the above.
 

 15. 
The rate of growth of GDP for period t is:
a.
mc015-2.jpg
b.
mc015-3.jpg
c.
mc015-4.jpg
d.
mc015-5.jpg
 

 16. 
Variations in real GDP are called:
a.
inflation.
b.
deflation.
c.
economic fluctuations.
d.
all of the above.
 

 17. 
When GDP is expanding toward a high point it is called a[n]:
a.
depression.
b.
boom.
c.
recession.
d.
inflation.
 

 18. 
When real GDP falls toward a low point or trough it is called a[n]:
a.
boom.
b.
recession.
c.
inflation.
d.
expansion.
 

 19. 
During recessions the unemployment rate:
a.
declines.
b.
increases.
c.
is stable.
d.
is unmeasurable.
 

 20. 
The unemployment rate in the US was highest in the:
a.
1990s
b.
1930s
c.
1980s
d.
1950s
 

 21. 
The inflation rate for year t is:
a.
mc021-1.jpg
b.
mc021-2.jpg
c.
mc021-3.jpg
d.
mc021-4.jpg
 

 22. 
A variable that macroeconomists want to model is a[n]
a.
endogenous variable.
b.
ummy variable.
c.
exogenous variable.
d.
predetermined variable.
 

 23. 
A variable taken as given in a model is a[n]
a.
endogenous variable.
b.
dummy variable.
c.
exogenous variable.
d.
dichotomous variable.
 

 24. 
The dollar price paid to use capital is known as:
a.
the interest rate.
b.
the exchange rate.
c.
the rental price of capital.
d.
the general price level.
 

 25. 
The price of labor is the:
a.
exchange rate.
b.
wage rate.
c.
interest rate.
d.
the rental price.
 
 
 Figure1.1

Price

     nar001-1.jpg
 

 26. 
In Figure1.1 the equilibrium price is:
a.
2
b.
5
c.
7
d.
0
 

 27. 
In Figure1.1 the equilibrium quantity is
a.
5
b.
2
c.
7
d.
8
 

 28. 
In Figure1.1 if price is 7, then
a.
the market is in equilibrium.
b.
there is excess quantity supplied.
c.
there is excess quantity demanded.
d.
the market clears.
 

 29. 
In Figure1.1 if the price is 2, then:
a.
the market is in equilibrium.
b.
there is excess quantity supplied.
c.
there is excess quantity demanded.
d.
the market clears.
 

 30. 
In Figure1.1, if price is 7, then quantity demanded is:
a.
2.
b.
7.
c.
3.
d.
8.
 

 31. 
In Figure1.1, if price is 7, then quantity demanded is:
a.
2.
b.
7.
c.
3.
d.
8.
 

 32. 
In Figure1.1, if price is 7, then quantity supplied is:
a.
2.
b.
7.
c.
3.
d.
8.
 

 33. 
In Figure1.1, if price is 2, then quantity demanded is:
a.
2.
b.
7.
c.
3.
d.
8.
 

 34. 
In Figure1.1, if price is 2, then quantity supplied is:
a.
2.
b.
7.
c.
3.
d.
8.
 

 35. 
In Figure1.1, if price is 5, then quantity demanded is:
a.
2.
b.
7.
c.
3.
d.
5.
 

 36. 
In Figure1.1, if demand falls, then equilibrium:
a.
price and quantity fall.
b.
price and quantity rise.
c.
price falls and quantity rises.
d.
prices rises and quantity falls.
 

 37. 
In Figure1.1 if supply increases, then equilibrium:
a.
price and quantity fall.
b.
price and quantity rise.
c.
price rises and quantity falls.
d.
price falls and quantity rises.
 

 38. 
A possible order of events in an economy over time is:
a.
expansion, recession, peak, expansion.
b.
recession, trough, expansion, peak.
c.
expansion, peak, trough, recession.
d.
recession, trough, peak, expansion.
 

 39. 
A trough in an economy is when the economy:
a.
is growing.
b.
reaches a low point.
c.
is contracting.
d.
reaches a high point.
 

 40. 
A peak in an economy is when the economy:
a.
is growing.
b.
reaches a low point.
c.
is contracting.
d.
reaches a high point.
 

 41. 
A possible order of economic fluctuations is:
a.
recession, boom, expansion, trough.
b.
expansion, recession, boom, trough.
c.
recession, trough, expansion, peak.
d.
expansion, trough, recession, peak.
 

 42. 
If prices are sticky:
a.
the market quickly sticks at equilibrium.
b.
the market clears quickly.
c.
the market only slowly moves toward equilibrium.
d.
all of the above.
 

 43. 
In an economic model:
a.
endogenous variables feed into a model to affect exogenous variable.
b.
exogenous variables feed into a model to affect endogenous variables.
c.
exogenous and endogenous variables feed into the model.
d.
none of the above.
 

 44. 
A price taker:
a.
takes the price to the market.
b.
controls the market price.
c.
accepts the market price and decides whether and how much to buy or sell.
d.
accepts the market quantity and sets price.
 

 45. 
A macroeconomist would study the:
a.
price of cars.
b.
the market for shoes.
c.
the sales of beer.
d.
none of the above.
 

Short Answer
 

 46. 
What types of economic issues do macroeconomists study?
 

 47. 
How is the annual inflation rate calculated?
 

 48. 
What is the rate of growth of real GDP?
 

 49. 
Describe what happens when demand or supply increase in a market.
 

 50. 
What are exogenous and endogenous variables?
 



 
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