of tea, P T . The quantity of coffee supplied, Q s , depends on the price of coffee, P c , and
the price of electricity, P E , according to the following equation:
Q d = 17 – 2P c + 10P T
Q s = 2 + 3P c – 5P E
a. If the price of tea is $1.00 and the price of electricity is $0.50, what are the equilibrium price
and quantity of coffee?
b. What is/are the endogenous variable(s) in this model?
c
. What is/are the exogenous variable(s) in this model?
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52. What is the difference between recession and depression in an economy? Provide an
example of depression from the real world that has hit the global economy.
Use the following to answer question 53:
53. Refer to the following graph and identify the years for which Country A and Country B
experienced recession.
54. Why do we call macroeconomics an imperfect science? Explain.
55. Are the terms “market clearing” and “equilibrium” one and the same? Explain.
56. Do you agree with the statement “macroeconomics rests on the foundation of
microeconomics”? Explain.
57. Give two examples of macroeconomic variables and microeconomic variables.
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58. Refer the following table, which shows the quantity of tubes of toothpaste that are
demanded at different prices. Identify the price (as shown in the first column below in
the table) that represents the market clearing.
Price
(US$/tube)
Quantity demanded
(thousands of tubes)
Quantity supplied
(thousands of tubes)
20 5 20
16 8 16
13 12 12
8 15 8
5 17 5
4 18 3
59. What is the difference between sticky prices and flexible prices? Explain.
60. What is an exogenous variable? Illustrate with graphs the effect of a change in the
exogenous variable on a demand and supply relationship. Mark the x-axis and y-axis
clearly.
61. Column A below lists the names of four U.S. presidents, and Column B lists four
economic events that occurred during the tenures of those U.S. presidents. Match each
president to the economic event that occurred during his tenure.
Column A Column B
1. Jimmy Carter a. budget surplus
2. Ronald Regan b. inflation
3. Bill Clinton c. steep rise in mortgage defaults
4
. Barack Obama
d. budget deficit
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Answer Key
1. B
2. C
3. C
4. D
5. A
6. D
7. A
8. C
9. C
10. B
11. C
12. A
13. A
14. D
15. C
16. D
17. A
18. A
19. C
20. A
21. B
22. C
23. B
24. C
25. A
26. B
27. D
28. A
29. B
30. B
31. B
32. D
33. B
34. D
35. C
36. D
37. D
38. C
39. D
40. B
41. C
42. D
43. D
44. D
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Page 13
45. B
46. D
47. D
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.