Chapter 1

Question 1

What is Macroeconomics?

Answer 1

The study of the economy as a whole

Question 2

What’s Real GDP?

Answer 2

Ameasure for the total incoe of everyone in the economy (adjusted to levels of prices)

Question 3

Inflation and Deflation

Answer 3

Inflation= periods of rising prices =/= Deflation which is periods of falling prices

Question 4

Unemployment rate

Answer 4

it measures the fraction of the labor force that is out of work

Question 5

Recession

Answer 5

Mild periods of falling GDP (short)

Question 6

Depression

Answer 6

severe periods of falling GDP

Question 7

Models

Answer 7

Models are simplified theories that show the key relationships aong econoic variables.

Question 8

Endogenous Variables

Answer 8

Are those that the model explains [model’s output]

Question 9

Exogenous Variables

Answer 9

Are those that coe fro outside the model [model’s input]

Question 10

Market Clearing

Answer 10

Model that assumes markets are usually in equilibrium, so the price of any good or service is found where the supply and demand curves intersect

Question 11

Flexible and Sticky Prices

Answer 11

Flexible prices is an assuption of the market clearing model_ Long run
Sticky prices is an assumption better used in discussing short-run issues

Question 12

Microeconomics

Answer 12

It studies how households and firms make decisions and how they interact in the market