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: Easy 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: Easy REF: 1.2 TOP: II.
MSC: Analyzing
NOT: It is a very simplified version of the economy that gives us insight into how it 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 a given when constructing a model.
ANS: T DIF: Easy REF: 1.2 TOP: II.
MSC: Remembering
11. A main concern of long-run macroeconomics is to provide insight into how low-income countries, such as Haiti, can have the same standard of living as a high-income country, such as New Zealand.
ANS: T DIF: Easy REF: 1.3 TOP: III.A.
MSC: Applying
SHORT ANSWER
1. What are 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 that macroeconomists typically 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