Question

1. Macroeconomics does not try to answer the question of:

a. why do some countries experience rapid growth?

b. what is the rate of return on education?

c. why do some countries have high rates of inflation?

d. what causes recessions and depressions.

2. How does the distinction between flexible and sticky prices impact the study of macroeconomics?

a. The study of flexible prices is confined to microeconomics, while macroeconomics focuses on sticky prices.

b. Macroeconomists use flexible prices to explain inflation and sticky prices to explain unemployment.

c. Flexible prices are typically assumed in the study of the long run, while sticky prices are assumed in the study of the short run.

d. Endogenous variables are measured using flexible prices, while exogenous variables are measured using sticky prices.

3. Macroeconomic models are used to explain how variables influence variables.

a. endogenous; exogenous

b. exogenous; endogenous

c. microeconomic; macroeconomic

d. macroeconomic; microeconomic

4. All of the following are measures of GDP except the total:

a. expenditures of all businesses in the economy.

b. income from all production in the economy.

c. expenditures on all final goods and services produced.

d. value of all final production

5. Two equivalent ways to view GDP are as the:

a. total payments made to all workers in the economy or the total profits of all firms and businesses in the economy.

b. total expenditures on all goods produced in the economy or the total income earned from producing all services in the economy.

c. total profits of all firms and businesses in the economy or the total consumption of goods and services by all households in the economy.

d. total income of everyone in the economy or the total expenditure on the economy’s output of goods and services.

6. All of the following transactions that took place in 2009 would be included in GDP for 2009 except the purchase of :

a. book printed in 2009, entitled The Year 3000.

b. 2001 Jeep Cherokee.

c. year 2010 calendar printed in 2009.

d. ticket to see the movie 2001

Answer 1

1. (b) Macroeconomics is the study of the economy as a whole and deals with the forces affecting the economy. Thus Macroeconomics does not try to answer the question of: what is the rate of return on education?

2. (c) How does the distinction between flexible and sticky prices impact the study of macroeconomics? Flexible prices are typically assumed in the study of the long run, while sticky prices are assumed in the study of the short run. The concept of sticky prices in the economy was introduced by Keynes.

3. (a) Macroeconomic models are used to explain how endogenous variables influence exogeneous variables.

4. (a) All of the following are measures of GDP except the total: expenditures of all businesses in the economy as the total business only form a part of the economy and the economy involves many other expenditures carried out by other agents.

5. (d) Two equivalent ways to view GDP are as the: total income of everyone in the economy or the total expenditure on the economy’s output of goods and services.

6. (b) All of the following transactions that took place in 2009 would be included in GDP for 2009 except the purchase of : 2001 jeep Cherokee, as goods produced in the past year does not form the GDP of the current year.