Module 1: Introduction to Macroeconomics, the Data of Macroeconomics, and National Income

1. When studying the short-run behavior of the economy, an assumption of ______ is more plausible, whereas when studying the long-run equilibrium behavior of an economy, an assumption of ______ is more plausible.

1. flexible prices; sticky prices
2. sticky prices; flexible prices
3. unemployment; inflation
4. inflation; unemployment

1. Variables that a model tries to explain are called:

1. endogenous
2. market clearing
3. fixed
4. exogenous

1. A graph of the rate of inflation in the United States over the twentieth century shows:

1. some periods of deflation mixed with mostly positive rates of inflation before 1955 but only positive rates of inflation after 1955.
2. an overall upward trend interrupted by a large downturn in the 1930s.
3. a relatively steady, positive level throughout the century except for deflation in the 1930s.
4. a constant rate of inflation in the first half of the century followed by an upward trend in the second half.

Use the following information to answer questions 1-5. The quantity of tea demanded, QD, depends on the price of tea, PT, and the price of coffee, PC. The quantity of tea supplied, QS, depends on the price of tea, PT, and the price of electricity, PE, according to the following equations:

QD = 12 - 5PT + 3PC

QS = 30 + 2PT - 4PE

1. If the price of coffee is $4.00 and the price of electricity is $5.00,

1. the equilibrium price of tea is $3.00 and the equilibrium quantity is 9.
2. the equilibrium price of tea is $4.00 and the equilibrium quantity is 4.
3. the equilibrium price of tea is $2.00 and the equilibrium quantity is 14.
4. the equilibrium price of tea is $2.00 and the equilibrium quantity is 18.

1. The endogenous variables in this model are

1. Price of tea and price of coffee.
2. Quantity of tea and quantity of coffee.
3. Price of tea and quantity of tea.
4. Price of tea and price of electricity.

1. The exogenous variables in this model are

1. Price of tea and price of electricity.
2. Quantity of tea and price of electricity.
3. Quantity of tea and price of coffee.
4. Price of coffee and price of electricity.

1. If the demand equation becomes QD = 22 - 5PT + 3PC , it implies that

1. The demand curve has shifted to the right.
2. The demand curve has shifted to the left.
3. There is a movement upward along the demand curve.
4. There is a movement downward along the demand curve.

1. If the price of coffee increases and the price of electricity decreases,

1. The demand curve for tea shifts right and the supply curve for tea shifts left.
2. The demand curve for tea shifts right and the supply curve for tea shifts right.
3. The demand curve for tea shifts left and the supply curve for tea shifts right.
4. The demand curve for tea shifts left and the supply curve for tea shifts left.

1. Assume that apples cost $0.50 in 2015 and $1 in 2020, whereas oranges cost $1 in 2015 and $1.50 in 2020. Assume that 2015 is the base year. If 4 apples were produced in 2015 and 5 in 2020, whereas 3 oranges were produced in 2015 and 4 in 2020, then in 2020

1. Nominal GDP is $11, real GDP is $6.5, GDP deflator is 1.69, CPI is 1.7
2. Nominal GDP is $5, real GDP is $11, GDP deflator is 2.2, CPI is 1.7
3. Nominal GDP is $11, real GDP is $10, GDP deflator is 1.1, CPI is 1.5
4. Nominal GDP is $11, real GDP is $7.5, GDP deflator is 1.47, CPI is 1.5

1. If GDP measured in billions of current dollars is $5,465, consumption is $3,657, investment is $741, and government purchases are $1,098, then net exports are:

1. $131.
2. -$131
3. $31
4. -$31

1. If real GDP grew by 6 percent and population grew by 2 percent, then real GDP per person grew by approximately ______ percent.

1. 2
2. 3
3. 4
4. 8

1. If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately ______ percent.

1. 3.5
2. 4.7
3. 4.9
4. 7

1. If the adult population equals 250 million, of which 145 million are employed and 5 million are unemployed, the labor-force participation rate equals ______ percent.

1. 50
2. 58
3. 60
4. 67

1. An interviewer for the Current Population Survey has the following information. Jennifer Temple is working as a second-grade schoolteacher. Frank Peabody is attending college full-time to earn a degree in elementary education. Brenda Dewey does not currently have a job. She has sent her resume to several school districts in the past week in hope of finding a teaching position. Based on the information given,

1. Jennifer Temple is employed, Frank Peabody and Brenda Dewey are unemployed.
2. Jennifer Temple is employed, Frank Peabody and Brenda Dewey are out of the labor force.
3. Jennifer Temple and Frank Peabody are employed and Brenda Dewey is out of the labor force.
4. Jennifer Temple is employed, Frank Peabody is out of the labor force and Brenda Dewey is unemployed.

1. The household survey conducted by the Bureau of Labor Statistics provides estimates of the number of workers ______, while the establishment survey provides estimates of the number of workers ______.

1. self-employed; unemployed
2. unemployed; self-employed
3. with jobs; on firms' payrolls
4. on firms' payrolls; with jobs

1. In the long run, the level of national income in an economy is determined by its:

1. factors of production and production function.
2. real and nominal interest rate.
3. government budget surplus or deficit.
4. rate of economic and accounting profit.

1. If output is described by the production function Y = AK0.2L0.8, then the production function has:

1. constant returns to scale and the share of labor in GDP is 0.2.
2. increasing returns to scale and the share of labor in GDP is 0.2.
3. decreasing returns to scale and the share of labor in GDP is 0.8.
4. constant returns to scale and the share of labor in GDP is 0.8.

1. An increase in the supply of capital will:

1. increase the real rental price of capital.
2. decrease the real rental price of capital.
3. increase the productivity of capital.
4. increase the marginal product of capital.

1. An increase in the supply of capital will:

1. decrease the marginal product of labor.
2. increase the real wage rate.
3. decrease the demand for labor.
4. increase employment.

1. An increase in the supply of labor will:

1. increase the productivity of labor.
2. increase the marginal product of labor.
3. increase the real wage rate.
4. decrease the real wage rate.

1. An increase in the supply of labor will:

1. decrease the marginal product of capital.
2. increase the real wage rate.
3. increase the marginal product of capital.
4. decrease the real rental price of capital.

1. Technological progress

1. Increases the demand for labor.
2. Decreases the demand for labor.
3. Reduces the real wage rate.
4. Reduces the real rental price of capital.

1. Technological progress

1. Increases the supply of capital.
2. Decreases the marginal product of capital.
3. Decreases the real rental price of capital.
4. Increases the real rental price of capital.

Use the following information to answer questions 21-25. GDP (Y) is 10,000. Consumption (C). is given by the equation C = 1,000 + 0.75(Y - T). Investment (I) is given by the equation I = 1,000 - 100r, where r is the real interest rate in percent. Taxes (T) are 2,000 and government spending (G) is 2,200.

1. Equilibrium interest rate (r) can be found by setting:

1. S = I
2. Y = C + I + G
3. Both (a) and (b)
4. None of the above

1. Based on the information above, private saving is _____, public saving is _____, and the equilibrium interest is _____.

1. 800, -200, 1
2. 1000, -200, 2
3. 1000, 200, 2
4. 1800, -200, 4

1. If the government increases government spending (G), national saving (S) _____, r _____, I _____.

1. Decreases, increases, increases
2. Increases, decreases, increases
3. Increases, decreases, decreases
4. Decreases, increases, decreases

1. If the government increases G and T by the same amount, national saving (S) _____, r _____, C _____.

1. Does not change, does not change, does not change
2. Decreases, increases, decreases
3. Decreases, decreases, decreases
4. Decreases, does not change, decreases

1. According to the consumption function stated above, consumption is a function of disposable income. This implies that the saving schedule is _____. If consumption was a function of disposable income and the real interest rate, such that C = 1,000 + 0.75(Y - T) - 50r, the saving schedule would be _____.

1. Horizontal, vertical
2. Horizontal, upward sloping
3. Vertical, upward sloping
4. Vertical, downward sloping