Question 1

The substitution effect that results from a decrease in total factor productivity

Accepted Answer

A)  is a shift from the labour input to the capital input. 
B)  involves substitution of government spending for consumption. 
C)  substitutes lump sum taxes for taxes on firms. 
D)  is zero. 
E)  is the substitution of consumption for leisure. 
A)  is a shift from the labour input to the capital input. 
B)  involves substitution of government spending for consumption. 
C)  substitutes lump sum taxes for taxes on firms. 
D)  is zero. 
E)  is the substitution of consumption for leisure.

Question 2

A Pareto optimum is a point that

Accepted Answer

A)  a malevolent dictator would choose. 
B)  a cooperative coalition of some altruistic consumers would choose. 
C)  a cooperative coalition of some socially responsible firms would choose. 
D)  a social planner would choose. 
E)  is experienced at competitive equilibrium. 
A)  a malevolent dictator would choose. 
B)  a cooperative coalition of some altruistic consumers would choose. 
C)  a cooperative coalition of some socially responsible firms would choose. 
D)  a social planner would choose. 
E)  is experienced at competitive equilibrium.

Question 3

In the one-period competitive model we have been studying,

Accepted Answer

A)  both consumption and total factor productivity are exogenous. 
B)  consumption is exogenous and total factor productivity is endogenous. 
C)  consumption is endogenous and total factor productivity is exogenous. 
D)  both consumption and total factor productivity are endogenous. 
E)  consumption and taxes are exogenous. 
A)  both consumption and total factor productivity are exogenous. 
B)  consumption is exogenous and total factor productivity is endogenous. 
C)  consumption is endogenous and total factor productivity is exogenous. 
D)  both consumption and total factor productivity are endogenous. 
E)  consumption and taxes are exogenous.

Question 4

A Pareto optimum

Accepted Answer

A)  can be found in a closed and open economy. 
B)  is found where the budget line is tangent to the indifference curve. 
C)  is the same as a competitive equilibrium. 
D)  is where the consumption line is tangent to the PPF. 
E)  is the slope of the PPF. 
A)  can be found in a closed and open economy. 
B)  is found where the budget line is tangent to the indifference curve. 
C)  is the same as a competitive equilibrium. 
D)  is where the consumption line is tangent to the PPF. 
E)  is the slope of the PPF.

Question 5

A competitive equilibrium may fail to be Pareto-optimal due to

Accepted Answer

A)  inequality. 
B)  externalities. 
C)  social efficiency. 
D)  profit maximizing firms. 
E)  government intervention. 
A)  inequality. 
B)  externalities. 
C)  social efficiency. 
D)  profit maximizing firms. 
E)  government intervention.

Question 6

The presence of a distorting tax on wage income can result in

Accepted Answer

A)  MPn < MRTl,c . 
B)  MRTl,c < MRSl,c. 
C)  MPn < w. 
D)  MRSl,c < MPn. 
E)  MRSl,c = MPn. 
A)  MPn < MRTl,c . 
B)  MRTl,c < MRSl,c. 
C)  MPn < w. 
D)  MRSl,c < MPn. 
E)  MRSl,c = MPn.

Question 7

The production possibilities frontier in the one-period model is a

Accepted Answer

A)  behavioural relationship between consumption and leisure. 
B)  behavioural relationship between consumption and government spending. 
C)  technological relationship between consumption and leisure. 
D)  technological relationship between consumption and government spending. 
E)  technological relationship between consumption and the capital stock. 
A)  behavioural relationship between consumption and leisure. 
B)  behavioural relationship between consumption and government spending. 
C)  technological relationship between consumption and leisure. 
D)  technological relationship between consumption and government spending. 
E)  technological relationship between consumption and the capital stock.

Question 8

Examples of exogenous variables include

Accepted Answer

A)  real wages, consumption, and taxes. 
B)  real wages, aggregate output, and labour demand. 
C)  government spending, total factor productivity, and capital stock. 
D)  labour supply and labour demand. 
E)  consumption, government spending and capital stock. 
A)  real wages, consumption, and taxes. 
B)  real wages, aggregate output, and labour demand. 
C)  government spending, total factor productivity, and capital stock. 
D)  labour supply and labour demand. 
E)  consumption, government spending and capital stock.

Question 9

In the basic one-period model in Chapter 5, government spending is modelled as the acquisition of goods by the government, with the government simply throwing the goods away. Is this an accurate way to capture what the government does? If so, in what ways? If not, in what ways could we alter the model to make it capture the role of the government more accurately?

Accepted Answer

For some types of government spending, t

Question 10

The second fundamental theorem of welfare economics states that

Accepted Answer

A)  under certain conditions, a competitive equilibrium is Pareto-optimal. 
B)  a competitive equilibrium is always Pareto-optimal. 
C)  under certain conditions, a Pareto optimum is a competitive equilibrium. 
D)  a Pareto optimum is always a competitive equilibrium. 
E)  a Pareto optimum does not have to be a competitive equilibrium. 
A)  under certain conditions, a competitive equilibrium is Pareto-optimal. 
B)  a competitive equilibrium is always Pareto-optimal. 
C)  under certain conditions, a Pareto optimum is a competitive equilibrium. 
D)  a Pareto optimum is always a competitive equilibrium. 
E)  a Pareto optimum does not have to be a competitive equilibrium.

Question 11

An increase in total factor productivity shifts the production function

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)  upward, but reduces the marginal product of labour. 
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)  upward, but reduces the marginal product of labour.

Question 12

An externality is any activity for which an individual firm or consumer does not take into account all

Accepted Answer

A)  of the ramifications of its actions on others. 
B)  associated costs. 
C)  associated benefits. 
D)  associated costs and benefits. 
E)  negative impacts on the economy. 
A)  of the ramifications of its actions on others. 
B)  associated costs. 
C)  associated benefits. 
D)  associated costs and benefits. 
E)  negative impacts on the economy.

Question 13

The rate at which one good can be converted technologically into another is called

Accepted Answer

A)  the marginal rate of transformation. 
B)  the marginal rate of substitution. 
C)  the marginal product of labour. 
D)  rate of conversion. 
E)  the marginal product of capital. 
A)  the marginal rate of transformation. 
B)  the marginal rate of substitution. 
C)  the marginal product of labour. 
D)  rate of conversion. 
E)  the marginal product of capital.

Question 14

A competitive equilibrium is a state of affairs in which

Accepted Answer

A)  markets clear, and output is maximized. 
B)  output is maximized, and all agents are equally well-off. 
C)  all agents are equally well-off and agents are price-takers. 
D)  agents are price-takers, and markets clear. 
E)  output and total factor productivity are maximized. 
A)  markets clear, and output is maximized. 
B)  output is maximized, and all agents are equally well-off. 
C)  all agents are equally well-off and agents are price-takers. 
D)  agents are price-takers, and markets clear. 
E)  output and total factor productivity are maximized.

Question 15

Fiscal policy refers to a government's choices over its

Accepted Answer

A)  expenditures, taxes, transfers, and borrowing. 
B)  expenditures, taxes, issuance of money, and borrowing. 
C)  expenditures, foreign affairs, issuance of money, and borrowing. 
D)  issuance of money, taxes, environmental regulations, and foreign affairs. 
E)  changing the money supply, defense, and borrowing. 
A)  expenditures, taxes, transfers, and borrowing. 
B)  expenditures, taxes, issuance of money, and borrowing. 
C)  expenditures, foreign affairs, issuance of money, and borrowing. 
D)  issuance of money, taxes, environmental regulations, and foreign affairs. 
E)  changing the money supply, defense, and borrowing.

Question 16

Immunization from communicable diseases generate

Accepted Answer

A)  overproduction. 
B)  a Pareto optimum. 
C)  the provision of public goods. 
D)  negative externalities. 
E)  positive externalities. 
A)  overproduction. 
B)  a Pareto optimum. 
C)  the provision of public goods. 
D)  negative externalities. 
E)  positive externalities.

Question 17

Goods and services provided by the government are called

Accepted Answer

A)  government goods. 
B)  public goods. 
C)  free goods. 
D)  social goods. 
E)  national goods. 
A)  government goods. 
B)  public goods. 
C)  free goods. 
D)  social goods. 
E)  national goods.

Question 18

In an economic model, an endogenous 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 19

In a one-period economic model, the government budget constraint requires that government spending

Accepted Answer

A)  = taxes + transfers. 
B)  = taxes + borrowing. 
C)  > 0. 
D)  = taxes. 
E)  taxes + transfers + borrowing. 
A)  = taxes + transfers. 
B)  = taxes + borrowing. 
C)  > 0. 
D)  = taxes. 
E)  taxes + transfers + borrowing.

Question 20

An increase in total factor productivity shifts the production function

Accepted Answer

A)  upward and reduces the marginal product of labour. 
B)  upwards and increases the marginal product of labour. 
C)  downward and reduces the marginal product of labour. 
D)  downward and increases the marginal product of labour. 
E)  downward and also reduces its slope. 
A)  upward and reduces the marginal product of labour. 
B)  upwards and increases the marginal product of labour. 
C)  downward and reduces the marginal product of labour. 
D)  downward and increases the marginal product of labour. 
E)  downward and also reduces its slope.

The substitution effect that results from a decrease in total factor productivity

A Pareto optimum is a point that

In the one-period competitive model we have been studying,

A Pareto optimum

A competitive equilibrium may fail to be Pareto-optimal due to

The presence of a distorting tax on wage income can result in

The production possibilities frontier in the one-period model is a

Examples of exogenous variables include

The second fundamental theorem of welfare economics states that

An increase in total factor productivity shifts the production function

An externality is any activity for which an individual firm or consumer does not take into account all

The rate at which one good can be converted technologically into another is called

A competitive equilibrium is a state of affairs in which

Fiscal policy refers to a government's choices over its

Immunization from communicable diseases generate

Goods and services provided by the government are called

In an economic model, an endogenous variable is

In a one-period economic model, the government budget constraint requires that government spending

An increase in total factor productivity shifts the production function

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

The substitution effect that results from a decrease in total factor productivity

A Pareto optimum is a point that

In the one-period competitive model we have been studying,

A Pareto optimum

A competitive equilibrium may fail to be Pareto-optimal due to

The presence of a distorting tax on wage income can result in

The production possibilities frontier in the one-period model is a

Examples of exogenous variables include

The second fundamental theorem of welfare economics states that

An increase in total factor productivity shifts the production function

An externality is any activity for which an individual firm or consumer does not take into account all

The rate at which one good can be converted technologically into another is called

A competitive equilibrium is a state of affairs in which

Fiscal policy refers to a government's choices over its

Immunization from communicable diseases generate

Goods and services provided by the government are called

In an economic model, an endogenous variable is

In a one-period economic model, the government budget constraint requires that government spending

An increase in total factor productivity shifts the production function

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