Chapter 1

Question 1

What macroeconomists do

Answer 1

• data development
• macroeconomic research
• macroeconomic analysis
• macroeconomic forecast

Question 2

Few economists make macroeconomic ________

Answer 2

Forecast

Question 3

What Macroeconomic forecasters do

Answer 3

Combine alternative scenarios for their forecast

Question 4

Macroeconomic analysis

Answer 4

To monitor the economy and think about the implications of current economic events

Question 5

For the private sector, Macroeconomic analysts assess the _________ on their entity

Answer 5

Impact of general economic trends

Question 6

For the public sector, Macroeconomic analysts try to _____

Answer 6

Assist in policy making

Question 7

What is the objective of macroeconomic research

Answer 7

To make general statements about how the economy works

Question 8

Macroeconomic analysis and forecasting are based on

Answer 8

Macroeconomic research

Question 9

Define economic theory

Answer 9

A set of ideas about the economy, Organised in a logical framework

Question 10

Define economic model

Answer 10

A simplified description of some aspect of the economy is usually expressed in a mathematical form

Question 11

The steps for data development

Answer 11

1. Assess the current state of the economy
2. Test macroeconomic theories
3. Analyze policy alternatives
4. Make forecasts

Question 12

Steps to develop and test a theory

Answer 12

1. State the research question
2. Make provisional assumptions
3. Workout implications of the theory
4. conduct an imperical analysis
5. Evaluate the results

Question 13

Usefulness of economic theory or models Depends on

Answer 13

1. Reasonableness of assumptions
2. Being understandable and manageable to be applied to real-life problems
3. Empirically testable implications
4. Theoretical results consistent with real-world data

Question 14

What examines the economic consequences of assaulting policy, Regardless of its desirability

Answer 14

Positive analysis

Question 15

“Tax cut will raise disposable income” is an example of

Answer 15

positive analysis

Question 16

Payroll taxes are too high is an example of

Answer 16

Normative analyses

Question 17

Why few economists make forecasts?

Answer 17

Because economic systems are complex and predicting their behaviour is difficult.

Question 18

Define empirical analysis

Answer 18

It is implications evaluated by comparing them with data obtained in the real world

Question 19

The idea of the invisible hand is that

Answer 19

if there are free markets and individuals conduct their economic affairs in their own best interests, the overall economy will work well.

Question 20

The classical approach to macroeconomics builds on Smith’s basic assumptions these are

Answer 20

people pursue their own economic self-interests and that prices adjust reasonably quickly to achieve equilibrium in all markets.

Question 21

In
the Keynesian theory, unemployment can persist because

Answer 21

Wages and prices don’t
adjust to equalize the number of people that firms want to employ with the number of people who want to work.