Transcript Review of Exam 1

Review of Exam 1
1. In a simple model of the supply and demand
for pizza, the endogenous variables are:
A) the price of pizza and the price of cheese.
B) aggregate income and the quantity of pizza sold.
C) aggregate income and the price of cheese.
D) the price of pizza and the quantity of pizza sold.
1. In a simple model of the supply and demand
for pizza, the endogenous variables are:
A) the price of pizza and the price of cheese.
B) aggregate income and the quantity of pizza sold.
C) aggregate income and the price of cheese.
D) the price of pizza and the quantity of pizza sold.
2. How does the distinction between flexible and sticky
prices impact the study of macroeconomics?
A) The study of flexible prices is confined to microeconomics,
while macroeconomics focuses on sticky prices.
B) Macroeconomists use flexible prices to explain inflation and
sticky prices to explain unemployment.
C) Flexible prices are typically assumed in the study of the
long run, while sticky prices are assumed in the study of the
short run.
D) Endogenous variables are measured using flexible prices,
while exogenous variables are measured using sticky prices.
2. How does the distinction between flexible and sticky
prices impact the study of macroeconomics?
A) The study of flexible prices is confined to microeconomics,
while macroeconomics focuses on sticky prices.
B) Macroeconomists use flexible prices to explain inflation and
sticky prices to explain unemployment.
C) Flexible prices are typically assumed in the study of the
long run, while sticky prices are assumed in the study of the
short run.
D) Endogenous variables are measured using flexible prices,
while exogenous variables are measured using sticky prices.
3. The total income of everyone in the
economy is exactly equal to the total:
A) expenditure on the economy's output of goods
and services.
B) consumption expenditures of everyone in the
economy.
C) expenditures of all businesses in the economy.
D) government expenditures.
3. The total income of everyone in the
economy is exactly equal to the total:
A) expenditure on the economy's output of goods
and services.
B) consumption expenditures of everyone in the
economy.
C) expenditures of all businesses in the economy.
D) government expenditures.
4. All of the following are a stock
except:
A) a consumer's wealth.
B) the government budget deficit.
C) the number of unemployed people.
D) the amount of capital in the economy.
4. All of the following are a stock
except:
A) a consumer's wealth.
B) the government budget deficit.
C) the number of unemployed people.
D) the amount of capital in the economy.
5. The CPI is determined by computing:
A) an average of prices of all goods and services.
B) the price of a basket of goods and services that
changes every year, relative to the same basket in a
base year.
C) the price of a fixed basket of goods and services,
relative to the price of the same basket in a base year.
D) nominal GDP relative to real GDP.
5. The CPI is determined by computing:
A) an average of prices of all goods and services.
B) the price of a basket of goods and services that
changes every year, relative to the same basket in a
base year.
C) the price of a fixed basket of goods and services,
relative to the price of the same basket in a base year.
D) nominal GDP relative to real GDP.
6. If the number of employed increases
while the number of unemployed does not
change, the unemployment rate:
A) will increase.
B) will decrease.
C) will not change.
D) may either increase or decrease.
6. If the number of employed increases
while the number of unemployed does not
change, the unemployment rate:
A) will increase.
B) will decrease.
C) will not change.
D) may either increase or decrease.
7. The two most important factors of
production are:
A) goods and services.
B) labor and energy.
C) capital and labor.
D) saving and investment.
7. The two most important factors of
production are:
A) goods and services.
B) labor and energy.
C) capital and labor.
D) saving and investment.
8. The property of diminishing marginal
product means that, after a point, when
additional quantities of:
A) a factor are added, output diminishes.
B) both labor and capital are added, output diminishes.
C) both labor and capital are added, the marginal product
of labor diminishes.
D) a factor are added when another factor remains fixed,
the marginal product of that factor diminishes.
8. The property of diminishing marginal
product means that, after a point, when
additional quantities of:
A) a factor are added, output diminishes.
B) both labor and capital are added, output diminishes.
C) both labor and capital are added, the marginal product
of labor diminishes.
D) a factor are added when another factor remains fixed,
the marginal product of that factor diminishes.
9. According to the neoclassical theory of
distribution, if firms are competitive and subject to
constant returns to scale, total income in the
economy is distributed:
A) only to the labor used in production.
B) between the labor and capital used in production,
according to their marginal productivities.
C) equally between the labor and capital used in
production.
D) partly between labor and capital used in production,
with the surplus going to the owners of the firm as
profits.
9. According to the neoclassical theory of
distribution, if firms are competitive and subject to
constant returns to scale, total income in the
economy is distributed:
A) only to the labor used in production.
B) between the labor and capital used in production,
according to their marginal productivities.
C) equally between the labor and capital used in
production.
D) partly between labor and capital used in production,
with the surplus going to the owners of the firm as
profits.
10. The demand for output in a closed
economy is the sum of:
A) public saving and private saving.
B) the quantity of capital and labor and production
technology.
C) consumption, investment, and government
spending.
D) government purchases and transfer payments
minus tax receipts.
10. The demand for output in a closed
economy is the sum of:
A) public saving and private saving.
B) the quantity of capital and labor and production
technology.
C) consumption, investment, and government
spending.
D) government purchases and transfer payments
minus tax receipts.
11. The real interest rate is the:
A) rate of interest actually paid by consumers.
B) rate of interest actually paid by banks.
C) rate of inflation minus the nominal interest rate.
D) nominal interest rate minus the rate of inflation.
11. The real interest rate is the:
A) rate of interest actually paid by consumers.
B) rate of interest actually paid by banks.
C) rate of inflation minus the nominal interest rate.
D) nominal interest rate minus the rate of inflation.
12. The equation Y = C(Y – T) + I(r) + G may be
solved for the equilibrium level of:
A) income.
B) consumption.
C) government purchases.
D) the interest rate.
12. The equation Y = C(Y – T) + I(r) + G may be
solved for the equilibrium level of:
A) income.
B) consumption.
C) government purchases.
D) the interest rate.
13. In a classical model with fixed factors of production and
flexible prices, the amount of consumption spending depends on
______, the amount of investment spending depends on
______, and the amount of government spending is determined
______.
A) disposable income; the interest rate; exogenously
B) the real wage; the real rental price of capital; by factor
prices
C) labor's share of output; capital's share of output; by
the interest rate
D) the interest rate; disposable income; by tax revenue
13. In a classical model with fixed factors of production and
flexible prices, the amount of consumption spending depends on
______, the amount of investment spending depends on
______, and the amount of government spending is determined
______.
A) disposable income; the interest rate; exogenously
B) the real wage; the real rental price of capital; by factor
prices
C) labor's share of output; capital's share of output; by
the interest rate
D) the interest rate; disposable income; by tax revenue
14. When f(k) is drawn on a graph with
increases in k noted along the horizontal
axis, the slope of the line denotes:
A) output per worker.
B) output per unit of capital.
C) the marginal product of labor.
D) the marginal product of capital.
14. When f(k) is drawn on a graph with
increases in k noted along the horizontal
axis, the slope of the line denotes:
A) output per worker.
B) output per unit of capital.
C) the marginal product of labor.
D) the marginal product of capital.
15. If the national saving rate
increases, the:
A) economy will grow at a faster rate forever.
B) capital-labor ratio will increase forever.
C) economy will grow at a faster rate until a new,
higher, steady-state capital-labor ratio is reached.
D) capital-labor ratio will eventually decline.
15. If the national saving rate
increases, the:
A) economy will grow at a faster rate forever.
B) capital-labor ratio will increase forever.
C) economy will grow at a faster rate until a new,
higher, steady-state capital-labor ratio is reached.
D) capital-labor ratio will eventually decline.
16. Assume two economies are identical in every way
except that one has a higher saving rate. According to
the Solow growth model, in the steady state the
country with the higher saving rate will have ______
level of total output and ______ rate of growth of
output per worker as/than the country with the lower
saving rate.
A) the same; the same
B) the same; a higher
C) a higher; the same
D) a higher; a higher
16. Assume two economies are identical in every way
except that one has a higher saving rate. According to
the Solow growth model, in the steady state the
country with the higher saving rate will have ______
level of total output and ______ rate of growth of
output per worker as/than the country with the lower
saving rate.
A) the same; the same
B) the same; a higher
C) a higher; the same
D) a higher; a higher
17. The Golden Rule level of the
steady-state capital stock:
A) will be reached automatically if the saving rate
remains constant over a long period of time.
B) implies a choice of a particular saving rate.
C) will be reached automatically if each person
saves enough to provide for his or her retirement.
D) should be avoided by an enlightened
government.
17. The Golden Rule level of the
steady-state capital stock:
A) will be reached automatically if the saving rate
remains constant over a long period of time.
B) implies a choice of a particular saving rate.
C) will be reached automatically if each person
saves enough to provide for his or her retirement.
D) should be avoided by an enlightened
government.
18. The efficiency of labor:
A) is the marginal product of labor.
B) is the rate of growth of the labor force.
C) includes the knowledge, health, and skills of
labor.
D) equals output per worker.
18. The efficiency of labor:
A) is the marginal product of labor.
B) is the rate of growth of the labor force.
C) includes the knowledge, health, and skills of
labor.
D) equals output per worker.
19. In the Solow growth model with
population growth and technological
change, the steady-state growth rate of
income per person depends on:
A) the rate of population growth.
B) the saving rate.
C) the rate of technological progress.
D) the rate of population growth plus the rate of
technological progress.
19. In the Solow growth model with
population growth and technological
change, the steady-state growth rate of
income per person depends on:
A) the rate of population growth.
B) the saving rate.
C) the rate of technological progress.
D) the rate of population growth plus the rate of
technological progress.
20. In a Solow model with technological
change, if population grows at a 2 percent
rate and the efficiency of labor grows at a 3
percent rate, then in the steady state, total
output grows at a ______ percent rate.
A) 0
B) 2
C) 3
D) 5
20. In a Solow model with technological
change, if population grows at a 2 percent
rate and the efficiency of labor grows at a 3
percent rate, then in the steady state, total
output grows at a ______ percent rate.
A) 0
B) 2
C) 3
D) 5
21. Endogenous growth theory rejects
the assumption of exogenous:
A) production functions.
B) rates of depreciation.
C) population growth rates.
D) technological change.
21. Endogenous growth theory rejects
the assumption of exogenous:
A) production functions.
B) rates of depreciation.
C) population growth rates.
D) technological change.
22. Money that has no value other
than as money is called ______ money.
A)fiat
B) intrinsic
C) commodity
D) government
22. Money that has no value other
than as money is called ______ money.
A)fiat
B) intrinsic
C) commodity
D) government
23. Consider the money demand function that takes
the form (M/P)d = kY, where M is the quantity of
money, P is the price level, and Y is real output. If the
money supply is growing at a 10 percent rate, real
output is growing at a 3 percent rate, and k is constant,
what is the rate of inflation in this country?
A) 3 percent
B) 7 percent
C) 10 percent
D) 13 percent
23. Consider the money demand function that takes
the form (M/P)d = kY, where M is the quantity of
money, P is the price level, and Y is real output. If the
money supply is growing at a 10 percent rate, real
output is growing at a 3 percent rate, and k is constant,
what is the rate of inflation in this country?
A) 3 percent
B) 7 percent
C) 10 percent
D) 13 percent
24. According to the Fisher effect, the
nominal interest rate moves one-forone with changes in the:
A) inflation rate.
B) expected inflation rate.
C) ex ante real interest rate.
D) ex post real interest rate.
24. According to the Fisher effect, the
nominal interest rate moves one-forone with changes in the:
A) inflation rate.
B) expected inflation rate.
C) ex ante real interest rate.
D) ex post real interest rate.
25. If the money supply is held constant, then an
increase in the nominal interest rate will ______
the demand for money and ______ the price
level.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
25. If the money supply is held constant, then an
increase in the nominal interest rate will ______
the demand for money and ______ the price
level.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease