1930s.
D) a constant rate of inflation in the first half of the century followed by an upward
trend in the second half.
22. A graph of the U.S. unemployment rate over the twentieth century shows:
A) an overall upward trend in the unemployment rate interrupted by a large upturn in
the 1930s.
B) an overall downward trend in the unemployment rate interrupted by a large upturn
in the 1930s.
C) rates of unemployment always greater than zero with substantial variations from
year to year.
D) alternating periods of positive and negative rates of unemployment.
23. During the period between 1900 and 2000, the unemployment rate in the United States
was highest in the:
A) 1920s.
B) 1930s.
C) 1970s.
D) 1980s.
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24. The unemployment rate:
A) was zero during the 1990s in the United States.
B) was zero on average between 1900 and 1950 in the United States.
C) has never been zero in the United States.
D) is usually zero when the economy is not in a recession or depression.
25. Exogenous variables are:
A) determined outside the model.
B) determined within the model.
C) the outputs of the model.
D) explained by the model.
26. Endogenous variables are:
A) fixed at the moment they enter the model.
B) determined within the model.
C) the inputs of the model.
D) from outside the model.
27. In an economic model:
A) exogenous variables and endogenous variables are both determined outside the
model.
B) endogenous variables and exogenous variables are both determined within the
model.
C) endogenous variables affect exogenous variables.
D) exogenous variables affect endogenous variables.
28. Variables that a model tries to explain are called:
A) endogenous.
B) exogenous.
C) market clearing.
D) fixed.
29. Variables that a model takes as given are called:
A) endogenous.
B) exogenous.
C) market clearing.
D) macroeconomic.
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30. Macroeconomic models are used to explain how ______ variables influence ______
variables.
A) endogenous; exogenous
B) exogenous; endogenous
C) microeconomic; macroeconomic
D) macroeconomic; microeconomic
31. Important characteristics of macroeconomic models include all of the following except:
A) simplifying assumptions.
B) functional relationships based on randomized control trials.
C) endogenous and exogenous variables.
D) implicit or explicit consistency with microeconomic foundations.
32. In a simple model of the supply and demand for pizza, the endogenous variables are:
A) the price of pizza and the price of cheese.
B) aggregate income and the quantity of pizza sold.
C) aggregate income and the price of cheese.
D) the price of pizza and the quantity of pizza sold.
33. In a simple model of the supply and demand for pizza, when buyers' income increases,
the price of pizza ______ and the quantity purchased ______.
A) increases; decreases
B) increases; increases
C) decreases; increases
D) decreases; decreases
34. In a simple model of the supply and demand for pizza, when the price of cheese
increases, the price of pizza ______ and the quantity purchased ______.
A) increases; increases
B) decreases; increases
C) decreases; decreases
D) increases; decreases
35. Which statement below best illustrates the “art,” rather than the “science,” of
macroeconomics?
A) Macroeconomic data provide the motivation for new macroeconomic theory.
B) Macroeconomic relationships can be expressed using symbols and equations.
C) Macroeconomists must determine which simplifying assumptions clarify our
thinking and which ones mislead us.
D) Graphs and charts can be used to illustrate the history of macroeconomic variables.
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36. In the relationship expressed in functional form Y = G(K, L), Y stands for real GDP, K
stands for the amount of capital in the economy, and L stands for the amount of labor in
the economy. In this case G( ):
A) is the growth rate of real GDP when the amount of capital and labor in the
economy is fixed.
B) indicates that the variables inside the parentheses are endogenous variables in the
model.
C) is the symbol that stands for government input into the production process.
D) is the function telling how the variables in the parentheses determine real GDP.
37. Which of the following statements about economic models is true?
A) There is only one correct economic model.
B) All economic models are based on the same assumptions.
C) The purpose of economic models is to show how endogenous variables affect
exogenous variables.
D) Economists use different models to address different economic phenomena.