Chap 01 12e - Mankiw
Indicate the answer choice that best completes the statement or answers the question.
1. Deflation occurs when:
a. real gross domestic product (GD decreases.
b. the unemployment rate decreases.
c. prices fall.
d. prices increase but at a slower rate.
ANSWER: c
2. Which statement 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.
ANSWER: d
3. The assumption of continuous market clearing means that:
a. sellers can sell all that they want at the going price.
b. buyers can buy all that they want at the going price.
c. in any given month, buyers can buy all that they want and sellers can sell all that they want at the going
price.
d. at any given instant, buyers can buy all that they want and sellers can sell all that they want at the going
price.
ANSWER: d
4. Macroeconomics does NOT try to answer the question of:
a. why some countries experience rapid growth.
b. what is the rate of return on education.
c. why some countries have high rates of inflation.
d. what causes recessions and depressions.
ANSWER: b
5. A typical trend during a recession is that:
a. the unemployment rate falls.
b. the popularity of the incumbent president rises.
c. incomes fall.
d. the inflation rate rises.
ANSWER: c
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,Name: Class: Date:
Chap 01 12e - Mankiw
6. The annual inflation rate measures how the average level of prices has changed from one:
a. month to the next.
b. year to the previous year.
c. quarter to the next.
d. decade to the next.
ANSWER: b
7. An assumption of _____ is more plausible for studying the short-run behavior of the economy, while an
assumption of _____ is more plausible for studying the long-run, equilibrium behavior of the economy.
a. deflation; inflation
b. inflation; deflation
c. flexible prices; sticky prices
d. sticky prices; flexible prices
ANSWER: d
8. Why is macroeconomics often characterized as more of an "art" than a "science"?
a. Because macroeconomics relies exclusively on empirical data and mathematical models.
b. Because macroeconomics deals with human behavior and complex economic systems, often requiring
subjective judgment.
c. Because macroeconomics is a rapidly evolving field, constantly producing new scientific laws.
d. Because macroeconomics is primarily focused on examining graphs of economic variables.
ANSWER: b
9. Compared with real gross domestic product (GDP) during a recession, real GDP during a depression:
a. increases more rapidly.
b. increases at approximately the same rate.
c. decreases at approximately the same rate.
d. decreases more severely.
ANSWER: d
10. 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.
ANSWER: c
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,Name: Class: Date:
Chap 01 12e - Mankiw
11. Which branch of economics examines the overall performance of the economy?
a. microeconomics
b. macroeconomics
c. econometrics
d. forecasting
ANSWER: b
12. Which of these combinations is NOT a U.S. president and an important economic issue of his administration?
a. President Carter; inflation
b. President Reagan; budget deficits
c. President G. H. W. Bush; budget deficits
d. President Clinton; inflation
ANSWER: d
13. A measure of how fast the general level of prices is rising is called the:
a. growth rate of real gross domestic product (GDP).
b. inflation rate.
c. unemployment rate.
d. market-clearing rate.
ANSWER: b
14. 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.
ANSWER: b
15. Macroeconomists are like scientists in that they both:
a. design data and conduct controlled experiments to test their theories.
b. rely on data analyzed from experiments they set up in a laboratory.
c. are unlimited in their use of controlled experiments.
d. collect data, develop hypotheses, and analyze the results.
ANSWER: d
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, Name: Class: Date:
Chap 01 12e - Mankiw
16. Which statement 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.
ANSWER: c
17. 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.
a. inflation; unemployment
b. unemployment; inflation
c. flexible prices; sticky prices
d. sticky prices; flexible prices
ANSWER: d
18. The assumption of flexible prices is a more plausible assumption when applied to price changes that occur:
a. from minute to minute.
b. from year to year.
c. in the long run.
d. in the short run.
ANSWER: c
19. 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 gross domestic product (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.
ANSWER: d
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Indicate the answer choice that best completes the statement or answers the question.
1. Deflation occurs when:
a. real gross domestic product (GD decreases.
b. the unemployment rate decreases.
c. prices fall.
d. prices increase but at a slower rate.
ANSWER: c
2. Which statement 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.
ANSWER: d
3. The assumption of continuous market clearing means that:
a. sellers can sell all that they want at the going price.
b. buyers can buy all that they want at the going price.
c. in any given month, buyers can buy all that they want and sellers can sell all that they want at the going
price.
d. at any given instant, buyers can buy all that they want and sellers can sell all that they want at the going
price.
ANSWER: d
4. Macroeconomics does NOT try to answer the question of:
a. why some countries experience rapid growth.
b. what is the rate of return on education.
c. why some countries have high rates of inflation.
d. what causes recessions and depressions.
ANSWER: b
5. A typical trend during a recession is that:
a. the unemployment rate falls.
b. the popularity of the incumbent president rises.
c. incomes fall.
d. the inflation rate rises.
ANSWER: c
Page 1
,Name: Class: Date:
Chap 01 12e - Mankiw
6. The annual inflation rate measures how the average level of prices has changed from one:
a. month to the next.
b. year to the previous year.
c. quarter to the next.
d. decade to the next.
ANSWER: b
7. An assumption of _____ is more plausible for studying the short-run behavior of the economy, while an
assumption of _____ is more plausible for studying the long-run, equilibrium behavior of the economy.
a. deflation; inflation
b. inflation; deflation
c. flexible prices; sticky prices
d. sticky prices; flexible prices
ANSWER: d
8. Why is macroeconomics often characterized as more of an "art" than a "science"?
a. Because macroeconomics relies exclusively on empirical data and mathematical models.
b. Because macroeconomics deals with human behavior and complex economic systems, often requiring
subjective judgment.
c. Because macroeconomics is a rapidly evolving field, constantly producing new scientific laws.
d. Because macroeconomics is primarily focused on examining graphs of economic variables.
ANSWER: b
9. Compared with real gross domestic product (GDP) during a recession, real GDP during a depression:
a. increases more rapidly.
b. increases at approximately the same rate.
c. decreases at approximately the same rate.
d. decreases more severely.
ANSWER: d
10. 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.
ANSWER: c
Page 2
,Name: Class: Date:
Chap 01 12e - Mankiw
11. Which branch of economics examines the overall performance of the economy?
a. microeconomics
b. macroeconomics
c. econometrics
d. forecasting
ANSWER: b
12. Which of these combinations is NOT a U.S. president and an important economic issue of his administration?
a. President Carter; inflation
b. President Reagan; budget deficits
c. President G. H. W. Bush; budget deficits
d. President Clinton; inflation
ANSWER: d
13. A measure of how fast the general level of prices is rising is called the:
a. growth rate of real gross domestic product (GDP).
b. inflation rate.
c. unemployment rate.
d. market-clearing rate.
ANSWER: b
14. 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.
ANSWER: b
15. Macroeconomists are like scientists in that they both:
a. design data and conduct controlled experiments to test their theories.
b. rely on data analyzed from experiments they set up in a laboratory.
c. are unlimited in their use of controlled experiments.
d. collect data, develop hypotheses, and analyze the results.
ANSWER: d
Page 3
, Name: Class: Date:
Chap 01 12e - Mankiw
16. Which statement 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.
ANSWER: c
17. 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.
a. inflation; unemployment
b. unemployment; inflation
c. flexible prices; sticky prices
d. sticky prices; flexible prices
ANSWER: d
18. The assumption of flexible prices is a more plausible assumption when applied to price changes that occur:
a. from minute to minute.
b. from year to year.
c. in the long run.
d. in the short run.
ANSWER: c
19. 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 gross domestic product (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.
ANSWER: d
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