,
,
,
,
, ANS: B DIF: Easy REF: 1.3 TOP: III.A.
MSC: Remembering
18. Actual gross domestic product (GDP) is equal to potential GDP.
a. rarely not d. rarely
b. always e. Not enough information is given.
c. always not
ANS: D DIF: Easy REF: 1.3 TOP: III.A. | III.B.
MSC: Understanding
19. When we look at the run, we are concerned with the .
a. short; causes of economic fluctuations
b. long; causes of economic fluctuations
c. short; determinants of economic growth
d. long; causes of inflation
e. long; money supply
ANS: A DIF: Easy REF: 1.3 TOP: III.A. | III.B.
MSC: Understanding
20. When we look at the run, we are concerned with .
a. long; the money supply
b. long; the causes of economic fluctuations
c. long; the causes of economic growth
d. long; the causes of inflation
e. long; unemployment
ANS: C DIF: Easy REF: 1.3 TOP: III.A.
MSC: Understanding
21. The short run is concerned with , while the long run is concerned with .
a. inflation; unemployment
b. the causes of economic fluctuations; inflation
c. the causes of economic fluctuations; the determinants of economic growth
d. the determinants of economic growth; the causes of economic fluctuations
e. the causes of economic fluctuations; the money supply
ANS: C DIF: Easy REF: 1.3 TOP: III.B.
MSC: Understanding
TRUE/FALSE
1. Macroeconomics is the study of an individual market.
ANS: F DIF: Easy REF: 1.1 TOP: I.
MSC: Remembering
NOT: It is the study of the overall performance of an economy.
2. These four steps, 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; and
(4) use the model to make other predictions that eventually may be tested.
, ANS: T DIF: Easy REF: 1.2 TOP: II.
MSC: Applying
3. These four steps, 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; and
(4) develop a model.
ANS: F DIF: Easy REF: 1.2 TOP: II.
MSC: Applying
NOT: They are (1) document the facts; (2) develop a model; (3) compare the predictions of the
model to the original facts; and (4) use the model to make other predictions that eventually may be
tested.
4. A main concern of long-run macroeconomics is the causes of economic growth.
ANS: T DIF: Easy REF: 1.3 TOP: III.A.
MSC: Applying
5. A main concern of long-run macroeconomics is the causes of economic fluctuations.
ANS: F DIF: Easy REF: 1.3 TOP: III.A.
MSC: Understanding NOT: We are concerned with economic growth.
6. A main concern of short-run macroeconomics is the causes of economic fluctuations and how to
fix them.
ANS: T DIF: Moderate REF: 1.3 TOP: III.B.
MSC: Applying
7. A main concern of short-run macroeconomics is the causes of economic growth.
ANS: F DIF: Easy REF: 1.3 TOP: III.B.
MSC: Understanding
NOT: We are concerned with the causes of economic fluctuations.
8. An economic model is an exact replica of the economy.
ANS: F DIF: Moderate REF: 1.2 TOP: II.
MSC: Analyzing
NOT: It is a very simplified version of the economy that gives us insight into how the economy
functions.
9. An endogenous variable is often called a parameter.
ANS: F DIF: Moderate REF: 1.2 TOP: II.
MSC: Understanding
NOT: It is a variable that is predicted by the model; the parameter is chosen by the economist.
10. An exogenous variable is one that is taken as given (what the text refers to as parameters).
, ANS: T DIF: Easy REF: 1.2 TOP: II.
MSC: Remembering
SHORT ANSWER
1. What are at least four of the main concerns of the study of macroeconomics?
ANS:
Here are a handful of options:
(a) Why does the average person today have 10 times more income than the typical person 100
years ago?
(b) What determines the rate of inflation, and how do we control it?
(c) How can we minimize the number of people unemployed?
(d) What role, if any, does the government and/or central bank have in promoting economic
well-being?
(e) Why do unemployment rates differ across countries?
(f) Why are some countries richer than others, and how can we promote development in
lower-income countries?
(g) What are the causes, and fixes, for economic crises?
DIF: Moderate REF: 1.1 TOP: I. MSC: Understanding
2. What are the steps macroeconomists use to analyze the economy?
ANS:
(a) Document the facts;
(b) Develop a framework for analysis (a model);
(c) Test the model using empirical analysis or some other comparable analysis and compare to
the observed facts; and
(d) Use the model to make other predictions that may eventually be tested
DIF: Easy REF: 1.2 TOP: II. MSC: Remembering
3. Describe the differences between the short run and the long run.
ANS:
In the short run, we are concerned with the causes of economic fluctuations, or the business cycle.
In the long run, we are concerned with the determinants of economic growth. Thus, the long run is
the trend of output, and the short run represents the fluctuations around the trend.
DIF: Moderate REF: 1.3 TOP: III.A. | III.B. MSC: Understanding
4. 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) What must the relationship between and be?
(e) If the supply and demand for labor were given as
, and
what are the equilibrium wage and labor force?
ANS:
(a) Using the notation in the text, the parameters are and .
(b) They are the wage, w, and the labor in the market, L.
(c) Setting supply equal to demand, we get
Solving this for w* and L*, we get
.
(d) To ensure the wage is positive, it must be that .
(e) Using the above equation we get 1/5 and 12/5.
DIF: Difficult REF: 1.2 TOP: II. MSC: Applying
, CHAPTER 2: Measuring the Macroeconomy
MULTIPLE CHOICE
1. Who led the team that created the original National Income and Product Accounts in the 1930s?
a. John M. Keynes d. Simon Kuznets
b. Paul A. Samuelson e. Milton Friedman
c. William D. Nordhaus
ANS: D DIF: Easy REF: 2.1 TOP: I.
MSC: Remembering
2. Which measure of overall economic activity was NOT available in the 1930s?
a. stock prices d. steel production
b. GDP e. gold prices
c. industrial production
ANS: B DIF: Easy REF: 2.1 TOP: I.
MSC: Understanding
3. The National Income and Product Accounts provides a system for aggregating the production of:
a. all goods and services into a single measure of economic activity.
b. all goods into a single measure of economic activity.
c. all services into a single measure of economic activity.
d. most goods and services into a single measure of economic activity.
e. all goods and services into two measures of economic activity.
ANS: A DIF: Easy REF: 2.1 TOP: I.
MSC: Understanding
4. In 2015, U.S. national output was equal to about:
a. $17.9 billion. d. $13.1 trillion.
b. $17.9 trillion. e. $13.1 million.
c. $13.1 billion.
ANS: B DIF: Easy REF: 2.2 TOP: II.
MSC: Remembering
5. In 2015, U.S. national output per person was equal to about:
a. $15.7 billion. d. $12,000.
b. $43,000. e. $80,000.
c. $56,000.
ANS: C DIF: Easy REF: 2.2 TOP: II.
MSC: Remembering
6. The National Income and Product Accounts allows us to relate to to
.
a. household income; government income; firm income
b. total output; total spending; inflation
c. total output; inflation; total income
d. household income; household expenditure; total output
e. total output; total spending; total income
,
,
,
, ANS: B DIF: Easy REF: 1.3 TOP: III.A.
MSC: Remembering
18. Actual gross domestic product (GDP) is equal to potential GDP.
a. rarely not d. rarely
b. always e. Not enough information is given.
c. always not
ANS: D DIF: Easy REF: 1.3 TOP: III.A. | III.B.
MSC: Understanding
19. When we look at the run, we are concerned with the .
a. short; causes of economic fluctuations
b. long; causes of economic fluctuations
c. short; determinants of economic growth
d. long; causes of inflation
e. long; money supply
ANS: A DIF: Easy REF: 1.3 TOP: III.A. | III.B.
MSC: Understanding
20. When we look at the run, we are concerned with .
a. long; the money supply
b. long; the causes of economic fluctuations
c. long; the causes of economic growth
d. long; the causes of inflation
e. long; unemployment
ANS: C DIF: Easy REF: 1.3 TOP: III.A.
MSC: Understanding
21. The short run is concerned with , while the long run is concerned with .
a. inflation; unemployment
b. the causes of economic fluctuations; inflation
c. the causes of economic fluctuations; the determinants of economic growth
d. the determinants of economic growth; the causes of economic fluctuations
e. the causes of economic fluctuations; the money supply
ANS: C DIF: Easy REF: 1.3 TOP: III.B.
MSC: Understanding
TRUE/FALSE
1. Macroeconomics is the study of an individual market.
ANS: F DIF: Easy REF: 1.1 TOP: I.
MSC: Remembering
NOT: It is the study of the overall performance of an economy.
2. These four steps, 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; and
(4) use the model to make other predictions that eventually may be tested.
, ANS: T DIF: Easy REF: 1.2 TOP: II.
MSC: Applying
3. These four steps, 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; and
(4) develop a model.
ANS: F DIF: Easy REF: 1.2 TOP: II.
MSC: Applying
NOT: They are (1) document the facts; (2) develop a model; (3) compare the predictions of the
model to the original facts; and (4) use the model to make other predictions that eventually may be
tested.
4. A main concern of long-run macroeconomics is the causes of economic growth.
ANS: T DIF: Easy REF: 1.3 TOP: III.A.
MSC: Applying
5. A main concern of long-run macroeconomics is the causes of economic fluctuations.
ANS: F DIF: Easy REF: 1.3 TOP: III.A.
MSC: Understanding NOT: We are concerned with economic growth.
6. A main concern of short-run macroeconomics is the causes of economic fluctuations and how to
fix them.
ANS: T DIF: Moderate REF: 1.3 TOP: III.B.
MSC: Applying
7. A main concern of short-run macroeconomics is the causes of economic growth.
ANS: F DIF: Easy REF: 1.3 TOP: III.B.
MSC: Understanding
NOT: We are concerned with the causes of economic fluctuations.
8. An economic model is an exact replica of the economy.
ANS: F DIF: Moderate REF: 1.2 TOP: II.
MSC: Analyzing
NOT: It is a very simplified version of the economy that gives us insight into how the economy
functions.
9. An endogenous variable is often called a parameter.
ANS: F DIF: Moderate REF: 1.2 TOP: II.
MSC: Understanding
NOT: It is a variable that is predicted by the model; the parameter is chosen by the economist.
10. An exogenous variable is one that is taken as given (what the text refers to as parameters).
, ANS: T DIF: Easy REF: 1.2 TOP: II.
MSC: Remembering
SHORT ANSWER
1. What are at least four of the main concerns of the study of macroeconomics?
ANS:
Here are a handful of options:
(a) Why does the average person today have 10 times more income than the typical person 100
years ago?
(b) What determines the rate of inflation, and how do we control it?
(c) How can we minimize the number of people unemployed?
(d) What role, if any, does the government and/or central bank have in promoting economic
well-being?
(e) Why do unemployment rates differ across countries?
(f) Why are some countries richer than others, and how can we promote development in
lower-income countries?
(g) What are the causes, and fixes, for economic crises?
DIF: Moderate REF: 1.1 TOP: I. MSC: Understanding
2. What are the steps macroeconomists use to analyze the economy?
ANS:
(a) Document the facts;
(b) Develop a framework for analysis (a model);
(c) Test the model using empirical analysis or some other comparable analysis and compare to
the observed facts; and
(d) Use the model to make other predictions that may eventually be tested
DIF: Easy REF: 1.2 TOP: II. MSC: Remembering
3. Describe the differences between the short run and the long run.
ANS:
In the short run, we are concerned with the causes of economic fluctuations, or the business cycle.
In the long run, we are concerned with the determinants of economic growth. Thus, the long run is
the trend of output, and the short run represents the fluctuations around the trend.
DIF: Moderate REF: 1.3 TOP: III.A. | III.B. MSC: Understanding
4. 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) What must the relationship between and be?
(e) If the supply and demand for labor were given as
, and
what are the equilibrium wage and labor force?
ANS:
(a) Using the notation in the text, the parameters are and .
(b) They are the wage, w, and the labor in the market, L.
(c) Setting supply equal to demand, we get
Solving this for w* and L*, we get
.
(d) To ensure the wage is positive, it must be that .
(e) Using the above equation we get 1/5 and 12/5.
DIF: Difficult REF: 1.2 TOP: II. MSC: Applying
, CHAPTER 2: Measuring the Macroeconomy
MULTIPLE CHOICE
1. Who led the team that created the original National Income and Product Accounts in the 1930s?
a. John M. Keynes d. Simon Kuznets
b. Paul A. Samuelson e. Milton Friedman
c. William D. Nordhaus
ANS: D DIF: Easy REF: 2.1 TOP: I.
MSC: Remembering
2. Which measure of overall economic activity was NOT available in the 1930s?
a. stock prices d. steel production
b. GDP e. gold prices
c. industrial production
ANS: B DIF: Easy REF: 2.1 TOP: I.
MSC: Understanding
3. The National Income and Product Accounts provides a system for aggregating the production of:
a. all goods and services into a single measure of economic activity.
b. all goods into a single measure of economic activity.
c. all services into a single measure of economic activity.
d. most goods and services into a single measure of economic activity.
e. all goods and services into two measures of economic activity.
ANS: A DIF: Easy REF: 2.1 TOP: I.
MSC: Understanding
4. In 2015, U.S. national output was equal to about:
a. $17.9 billion. d. $13.1 trillion.
b. $17.9 trillion. e. $13.1 million.
c. $13.1 billion.
ANS: B DIF: Easy REF: 2.2 TOP: II.
MSC: Remembering
5. In 2015, U.S. national output per person was equal to about:
a. $15.7 billion. d. $12,000.
b. $43,000. e. $80,000.
c. $56,000.
ANS: C DIF: Easy REF: 2.2 TOP: II.
MSC: Remembering
6. The National Income and Product Accounts allows us to relate to to
.
a. household income; government income; firm income
b. total output; total spending; inflation
c. total output; inflation; total income
d. household income; household expenditure; total output
e. total output; total spending; total income
