Question 1

A relationship that shows the technological possibilities for an economy as a whole is called a

Accepted Answer

A)  production function. 
B)  utility possibilities frontier. 
C)  production possibilities frontier. 
D)  budget constraint. 
E)  competitive equilibrium. 
A)  production function. 
B)  utility possibilities frontier. 
C)  production possibilities frontier. 
D)  budget constraint. 
E)  competitive equilibrium. C

Question 2

An economy that has no interaction with the rest of the world is called

Accepted Answer

A)  an isolated economy. 
B)  a closed economy. 
C)  a parochial economy. 
D)  a rogue nation. 
E)  an interdependent economy. 
A)  an isolated economy. 
B)  a closed economy. 
C)  a parochial economy. 
D)  a rogue nation. 
E)  an interdependent economy. B

Question 3

An increase in total factor productivity involves

Accepted Answer

A)  a more educated workforce. 
B)  a reduced real wage. 
C)  a better technology for converting factor inputs into aggregate output. 
D)  an increase in the capital stock. 
E)  more government spending. 
A)  a more educated workforce. 
B)  a reduced real wage. 
C)  a better technology for converting factor inputs into aggregate output. 
D)  an increase in the capital stock. 
E)  more government spending. C

Question 4

According to the Laffer Curve

Accepted Answer

A)  there may exist two tax rates that deliver the same level of tax revenue. 
B)  lower tax rates always lead to higher tax revenue. 
C)  higher tax rates always lead to more tax revenue. 
D)  higher tax rates always lead to less tax revenue. 
E)  there is a unique tax rate for each level of revenue. 
A)  there may exist two tax rates that deliver the same level of tax revenue. 
B)  lower tax rates always lead to higher tax revenue. 
C)  higher tax rates always lead to more tax revenue. 
D)  higher tax rates always lead to less tax revenue. 
E)  there is a unique tax rate for each level of revenue.

Question 5

Points on the production possibilities frontier have the property that they

Accepted Answer

A)  are inherently unattainable. 
B)  show the maximum amount of leisure that can be consumed for given amounts of goods consumed. 
C)  show the maximum amount of goods that can be consumed for given amounts of government spending. 
D)  show the maximum amount of leisure that can be consumed for given amounts of hours worked. 
E)  show the maximum amount of goods that can be consumed in a competitive equilibrium. 
A)  are inherently unattainable. 
B)  show the maximum amount of leisure that can be consumed for given amounts of goods consumed. 
C)  show the maximum amount of goods that can be consumed for given amounts of government spending. 
D)  show the maximum amount of leisure that can be consumed for given amounts of hours worked. 
E)  show the maximum amount of goods that can be consumed in a competitive equilibrium.

Question 6

To choose the optimal level of government expenditures, G*, the government

Accepted Answer

A)  must know the preferences of all consumers over private and public goods. 
B)  needs only to balance the budget, as any level of G is Pareto-optimal. 
C)  must minimize the tax burden. 
D)  must know the preferences of all consumers and minimize the tax burden. 
E)  must obtain the correct balance between military spending and social programs. 
A)  must know the preferences of all consumers over private and public goods. 
B)  needs only to balance the budget, as any level of G is Pareto-optimal. 
C)  must minimize the tax burden. 
D)  must know the preferences of all consumers and minimize the tax burden. 
E)  must obtain the correct balance between military spending and social programs.

Question 7

What are three reasons for a competitive equilibrium not being Pareto-optimal? What two questions arise from these inefficiencies?

Accepted Answer

A competitive equilibrium may not be Par

Question 8

In the model where G = qT, when q increases, the income effect

Accepted Answer

A)  increases both C and G. 
B)  decreases G and increases C. 
C)  reduces C and increases G. 
D)  reduces both C and G. 
E)  increases C and decreases G. 
A)  increases both C and G. 
B)  decreases G and increases C. 
C)  reduces C and increases G. 
D)  reduces both C and G. 
E)  increases C and decreases G.

Question 9

Relative to the social optimum, monopoly power directly leads to

Accepted Answer

A)  underproduction. 
B)  overproduction. 
C)  too much leisure. 
D)  too little leisure. 
E)  social efficiency. 
A)  underproduction. 
B)  overproduction. 
C)  too much leisure. 
D)  too little leisure. 
E)  social efficiency.

Question 10

The real wage is determined by

Accepted Answer

A)  the competitive equilibrium. 
B)  -(slope of PPF). 
C)  +(slope of indifference curve). 
D)  the marginal product of capital. 
E)  the marginal rate of transformation. 
A)  the competitive equilibrium. 
B)  -(slope of PPF). 
C)  +(slope of indifference curve). 
D)  the marginal product of capital. 
E)  the marginal rate of transformation.

Question 11

An example of a negative externality is

Accepted Answer

A)  a chemical factory dumping waste in a river upstream from a popular fishing spot. 
B)  a chemical factory that enters a town and bids up wages, and, therefore, increases the cost of other firms. 
C)  a chemical factory producing fertilizers that kills plants, rather than help them as advertised. 
D)  a chemical factory producing fertilizers that do not, in fact, help plants grow. 
E)  a chemical factory that conducts research into the safe disposal if chemicals. 
A)  a chemical factory dumping waste in a river upstream from a popular fishing spot. 
B)  a chemical factory that enters a town and bids up wages, and, therefore, increases the cost of other firms. 
C)  a chemical factory producing fertilizers that kills plants, rather than help them as advertised. 
D)  a chemical factory producing fertilizers that do not, in fact, help plants grow. 
E)  a chemical factory that conducts research into the safe disposal if chemicals.

Question 12

In a one-period model, government is likely to run

Accepted Answer

A)  a deficit but not a surplus. 
B)  a surplus but not a deficit. 
C)  either a surplus or a deficit. 
D)  neither a surplus nor a deficit. 
E)  on a fiscal year basis. 
A)  a deficit but not a surplus. 
B)  a surplus but not a deficit. 
C)  either a surplus or a deficit. 
D)  neither a surplus nor a deficit. 
E)  on a fiscal year basis.

Question 13

An increase in government spending shifts the PPF

Accepted Answer

A)  upward, but does not change its slope. 
B)  upward, and also changes its slope. 
C)  downward, but does not change its slope. 
D)  downward, and also changes its slope. 
E)  downward and also the marginal rate of transformation. 
A)  upward, but does not change its slope. 
B)  upward, and also changes its slope. 
C)  downward, but does not change its slope. 
D)  downward, and also changes its slope. 
E)  downward and also the marginal rate of transformation.

Question 14

In the model where G = qt, when q increases, the substitution effect

Accepted Answer

A)  reduces C and increases G. 
B)  reduces both C and G. 
C)  decreases G and increases C. 
D)  increases both C and G. 
E)  increases C and decreases G. 
A)  reduces C and increases G. 
B)  reduces both C and G. 
C)  decreases G and increases C. 
D)  increases both C and G. 
E)  increases C and decreases G.

Question 15

Government spending in the one-period model acts to

Accepted Answer

A)  shift out the production possibilities frontier. 
B)  make consumers less productive. 
C)  reduce consumption. 
D)  reduce investment. 
E)  decrease hours of work. 
A)  shift out the production possibilities frontier. 
B)  make consumers less productive. 
C)  reduce consumption. 
D)  reduce investment. 
E)  decrease hours of work.

Question 16

In the production function, output is given by

Accepted Answer

A)  consumption and taxes. 
B)  consumption and government spending. 
C)  capital stock and employment. 
D)  capital stock and leisure. 
E)  production technology and the capital stock. 
A)  consumption and taxes. 
B)  consumption and government spending. 
C)  capital stock and employment. 
D)  capital stock and leisure. 
E)  production technology and the capital stock.

Question 17

Changes in total factor productivity are plausible causes of business cycles because productivity-induced business cycles correctly predict

Accepted Answer

A)  real wages and total hours must be procyclical. 
B)  real wages and consumption must be procyclical. 
C)  total hours worked and consumption must be procyclical. 
D)  consumption and government spending must be procyclical. 
E)  consumption and total factor productivity must be procyclical. 
A)  real wages and total hours must be procyclical. 
B)  real wages and consumption must be procyclical. 
C)  total hours worked and consumption must be procyclical. 
D)  consumption and government spending must be procyclical. 
E)  consumption and total factor productivity must be procyclical.

Question 18

The concept of Pareto optimality is a

Accepted Answer

A)  utopian concept. 
B)  useful concept because it guarantees economic equality. 
C)  useful concept because it guarantees economic efficiency. 
D)  useful concept that carefully balances a society's desires for equality and efficiency. 
E)  useful concept because it guarantees economic equity. 
A)  utopian concept. 
B)  useful concept because it guarantees economic equality. 
C)  useful concept because it guarantees economic efficiency. 
D)  useful concept that carefully balances a society's desires for equality and efficiency. 
E)  useful concept because it guarantees economic equity.

Question 19

In an economic model, an exogenous variable is

Accepted Answer

A)  a stand-in for more complicated variables. 
B)  determined by the model itself. 
C)  determined outside the model. 
D)  a variable that has no effect on the workings of the model. 
E)  closely linked to a closed economy. 
A)  a stand-in for more complicated variables. 
B)  determined by the model itself. 
C)  determined outside the model. 
D)  a variable that has no effect on the workings of the model. 
E)  closely linked to a closed economy.

Question 20

Changes in government spending are not likely causes of business cycles because government spending induced business cycles would, counterfactually predict

Accepted Answer

A)  countercyclical consumption. 
B)  procyclical consumption. 
C)  countercyclical employment. 
D)  procyclical employment. 
E)  countercyclical real wages. 
A)  countercyclical consumption. 
B)  procyclical consumption. 
C)  countercyclical employment. 
D)  procyclical employment. 
E)  countercyclical real wages.

A relationship that shows the technological possibilities for an economy as a whole is called a

An economy that has no interaction with the rest of the world is called

An increase in total factor productivity involves

According to the Laffer Curve

Points on the production possibilities frontier have the property that they

To choose the optimal level of government expenditures, G*, the government

What are three reasons for a competitive equilibrium not being Pareto-optimal? What two questions arise from these inefficiencies?

In the model where G = qT, when q increases, the income effect

Relative to the social optimum, monopoly power directly leads to

The real wage is determined by

An example of a negative externality is

In a one-period model, government is likely to run

An increase in government spending shifts the PPF

In the model where G = qt, when q increases, the substitution effect

Government spending in the one-period model acts to

In the production function, output is given by

Changes in total factor productivity are plausible causes of business cycles because productivity-induced business cycles correctly predict

The concept of Pareto optimality is a

In an economic model, an exogenous variable is

Changes in government spending are not likely causes of business cycles because government spending induced business cycles would, counterfactually predict

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 5: A Closed-Economy One-Period Macroeconomic Model

A relationship that shows the technological possibilities for an economy as a whole is called a

An economy that has no interaction with the rest of the world is called

An increase in total factor productivity involves

According to the Laffer Curve

Points on the production possibilities frontier have the property that they

To choose the optimal level of government expenditures, G*, the government

What are three reasons for a competitive equilibrium not being Pareto-optimal? What two questions arise from these inefficiencies?

In the model where G = qT, when q increases, the income effect

Relative to the social optimum, monopoly power directly leads to

The real wage is determined by

An example of a negative externality is

In a one-period model, government is likely to run

An increase in government spending shifts the PPF

In the model where G = qt, when q increases, the substitution effect

Government spending in the one-period model acts to

In the production function, output is given by

Changes in total factor productivity are plausible causes of business cycles because productivity-induced business cycles correctly predict

The concept of Pareto optimality is a

In an economic model, an exogenous variable is

Changes in government spending are not likely causes of business cycles because government spending induced business cycles would, counterfactually predict

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters