Introduction

Question 1

Macro analyses what?

Answer 1

aggregate economic activities & problems

Question 2

What does aggregate mean?

Answer 2

economic-wide or even global level

Question 3

3 things Macro does

Answer 3

explain economic fluctuations
design economic policies
predict economic developments

Question 4

What does Ceteris paribus mean?

Answer 4

‘all other things being equal’
- indication on the effect one variable has on another, if all other variables remain the same.

Question 5

What is the challenge of ceteris paribus?

Answer 5

Holding all other variables constant to isolate what is driving change
(in reality, all other things being equal never occurs)

Question 6

What phrase describes models that are simplified descriptions of the complex world & isolate all other variables?

Answer 6

Ceteris paribus

Question 7

What is an exogenous & endogenous variable?

Answer 7

Exogenous: variable that exists outside of the model
eg weather or crop-eating pests for crops. They are affected by it, but can’t affect them itself.

Endogenous: variable that is changed by other variables in the model. It exists in the model
eg when looking at the production of something, other variables such as price, demand, etc are considered

Question 8

So what do the economic models reveal?

Answer 8

the key relationships among economic variables

Question 9

What is Ceteris paribus used for?

Answer 9

• used to describe relative tendencies in markets & build/ test economic models