Question 1

An increase in government spending

Accepted Answer

A)  increases consumption, increases hours worked, and increases the real wage. 
B)  reduces consumption, increases hours worked, and increases the real wage. 
C)  reduces consumption, increases hours worked, and reduces the real wage. 
D)  reduces consumption, reduces hours worked, and reduces the real wage. 
E)  increases consumption, reduces hours worked, and increases the real wage. 
A)  increases consumption, increases hours worked, and increases the real wage. 
B)  reduces consumption, increases hours worked, and increases the real wage. 
C)  reduces consumption, increases hours worked, and reduces the real wage. 
D)  reduces consumption, reduces hours worked, and reduces the real wage. 
E)  increases consumption, reduces hours worked, and increases the real wage.

Question 2

In the model where G = qT, when q increases, government spending, if chosen optimally, should

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  decrease at the same rate as taxes. 
E)  decrease faster than taxes. 
A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  decrease at the same rate as taxes. 
E)  decrease faster than taxes.

Question 3

A competitive equilibrium has the following property:

Accepted Answer

A)  MPN = slope of PPF. 
B)  MRS1,C = PPF. 
C)  MRT1,C = MPN. 
D)  MPn = t. 
E)  MRSl,c = TFP. 
A)  MPN = slope of PPF. 
B)  MRS1,C = PPF. 
C)  MRT1,C = MPN. 
D)  MPn = t. 
E)  MRSl,c = TFP.

Question 4

A decrease in total factor productivity could be caused by

Accepted Answer

A)  technological innovation. 
B)  an increase in regulation. 
C)  higher taxes. 
D)  consumer supplying less hours of work. 
E)  better organization of production. 
A)  technological innovation. 
B)  an increase in regulation. 
C)  higher taxes. 
D)  consumer supplying less hours of work. 
E)  better organization of production.

Question 5

Making use of an economic model is a process of

Accepted Answer

A)  solving hundreds of simultaneous equations. 
B)  running experiments to determine how changes in the endogenous variables will change the exogenous variables. 
C)  running experiments to determine how changes in the exogenous variables will change the endogenous variables. 
D)  resolving inconsistencies in the actions of economic agents. 
E)  determining how a closed economy is linked to an open economy. 
A)  solving hundreds of simultaneous equations. 
B)  running experiments to determine how changes in the endogenous variables will change the exogenous variables. 
C)  running experiments to determine how changes in the exogenous variables will change the endogenous variables. 
D)  resolving inconsistencies in the actions of economic agents. 
E)  determining how a closed economy is linked to an open economy.

Question 6

The Laffer Curve illustrates the relationship between

Accepted Answer

A)  the income effect and the substitution effect. 
B)  consumption and taxes. 
C)  investment and interest rates. 
D)  total factor productivity and wage rates. 
E)  tax revenue and income tax rates. 
A)  the income effect and the substitution effect. 
B)  consumption and taxes. 
C)  investment and interest rates. 
D)  total factor productivity and wage rates. 
E)  tax revenue and income tax rates.

Question 7

Real business cycle theory argues that the primary cause of business cycles is fluctuations in

Accepted Answer

A)  preferences. 
B)  government spending. 
C)  the importance of externalities. 
D)  total factor productivity. 
E)  monetary shocks. 
A)  preferences. 
B)  government spending. 
C)  the importance of externalities. 
D)  total factor productivity. 
E)  monetary shocks.

Question 8

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

Accepted Answer

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

Question 9

A Pareto optimum requires

Accepted Answer

A)  MPn = slope of PPF. 
B)  MRS1,c = MPK. 
C)  MRTL,C = MPN. 
D)  MPn = w. 
E)  MRSL,C = TFP. 
A)  MPn = slope of PPF. 
B)  MRS1,c = MPK. 
C)  MRTL,C = MPN. 
D)  MPn = w. 
E)  MRSL,C = TFP.

Question 10

The marginal rate of transformation is

Accepted Answer

A)  the rate at which hours worked can be converted into an economy's capital stock. 
B)  - (slope of the PPF). 
C)  equivalent to the marginal rates of substitution. 
D)  is derived from the marginal product of labour. 
E)  is equal to the wage rate * TFP. 
A)  the rate at which hours worked can be converted into an economy's capital stock. 
B)  - (slope of the PPF). 
C)  equivalent to the marginal rates of substitution. 
D)  is derived from the marginal product of labour. 
E)  is equal to the wage rate * TFP.

Question 11

Much of the writings of Adam Smith are in close agreement with

Accepted Answer

A)  the necessity of trade restrictions. 
B)  the first fundamental theorem of welfare economics. 
C)  the second theorem of welfare economics. 
D)  where competitive equilibrium is. 
E)  the relationship between the production function and the PPF. 
A)  the necessity of trade restrictions. 
B)  the first fundamental theorem of welfare economics. 
C)  the second theorem of welfare economics. 
D)  where competitive equilibrium is. 
E)  the relationship between the production function and the PPF.

Question 12

A competitive equilibrium is Pareto-optimal if there is no way to rearrange or to reallocate goods so that

Accepted Answer

A)  anyone can be made better off. 
B)  no one can be made worse off. 
C)  someone can be made better off without making someone else worse off. 
D)  someone can be made better off without making everyone else worse off. 
E)  everyone is made better off. 
A)  anyone can be made better off. 
B)  no one can be made worse off. 
C)  someone can be made better off without making someone else worse off. 
D)  someone can be made better off without making everyone else worse off. 
E)  everyone is made better off.

Question 13

An economy that engages in international trade is called

Accepted Answer

A)  a cooperative economy. 
B)  a modern economy. 
C)  an engaged economy. 
D)  an open economy. 
E)  an independent economy. 
A)  a cooperative economy. 
B)  a modern economy. 
C)  an engaged economy. 
D)  an open economy. 
E)  an independent economy.

Question 14

An increase in total factor productivity

Accepted Answer

A)  increases consumption, increases output, and increases the real wage. 
B)  reduces consumption, increases output, and increases the real wage. 
C)  reduces consumption, increases output and reduces the real wage. 
D)  reduces consumption, reduces output, and reduces the real wage. 
E)  increases consumption, reduces output, and increases the real wage. 
A)  increases consumption, increases output, and increases the real wage. 
B)  reduces consumption, increases output, and increases the real wage. 
C)  reduces consumption, increases output and reduces the real wage. 
D)  reduces consumption, reduces output, and reduces the real wage. 
E)  increases consumption, reduces output, and increases the real wage.

Question 15

In response to an increase in total factor productivity

Accepted Answer

A)  both the substitution effect and the income effect suggest that hours worked should increase. 
B)  the substitution effect suggests that hours worked should increase, while the income effect suggests that hours worked should decrease. 
C)  the substitution effect suggests that hours worked should decrease, while the income effect suggests that hours worked should increase. 
D)  both the substitution effect and the income effect suggest that hours worked should decrease. 
E)  the net effect is a reduction in the welfare of the representative consumer. 
A)  both the substitution effect and the income effect suggest that hours worked should increase. 
B)  the substitution effect suggests that hours worked should increase, while the income effect suggests that hours worked should decrease. 
C)  the substitution effect suggests that hours worked should decrease, while the income effect suggests that hours worked should increase. 
D)  both the substitution effect and the income effect suggest that hours worked should decrease. 
E)  the net effect is a reduction in the welfare of the representative consumer.

Question 16

In an economic model,

Accepted Answer

A)  endogenous variables determine exogenous variables. 
B)  exogenous variables determine endogenous variables. 
C)  the government budget constraint determines exogenous variables. 
D)  fiscal policy determines endogenous variables. 
E)  endogenous and exogenous variables are determined simultaneously. 
A)  endogenous variables determine exogenous variables. 
B)  exogenous variables determine endogenous variables. 
C)  the government budget constraint determines exogenous variables. 
D)  fiscal policy determines endogenous variables. 
E)  endogenous and exogenous variables are determined simultaneously.

Question 17

According to our model, increasing G during a recession,

Accepted Answer

A)  makes the economy worse off, since the equilibrium allocation of resources is Pareto-optimal. 
B)  will help the economy recover and increase economic welfare. 
C)  will increase consumption spending by consumers according to the multiplier effect. 
D)  has no effect. 
E)  had a multiplier much greater than one. 
A)  makes the economy worse off, since the equilibrium allocation of resources is Pareto-optimal. 
B)  will help the economy recover and increase economic welfare. 
C)  will increase consumption spending by consumers according to the multiplier effect. 
D)  has no effect. 
E)  had a multiplier much greater than one.

Question 18

In an economic model, government spending is assumed to be

Accepted Answer

A)  endogenous. 
B)  exogenous. 
C)  not included in a closed economy. 
D)  not included in an open economy. 
E)  only an public goods. 
A)  endogenous. 
B)  exogenous. 
C)  not included in a closed economy. 
D)  not included in an open economy. 
E)  only an public goods.

Question 19

The first 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 20

An example of a public good is

Accepted Answer

A)  national defence. 
B)  transfer payments. 
C)  government pension payments. 
D)  both A and C. 
E)  lump sum taxes. 
A)  national defence. 
B)  transfer payments. 
C)  government pension payments. 
D)  both A and C. 
E)  lump sum taxes.

An increase in government spending

In the model where G = qT, when q increases, government spending, if chosen optimally, should

A competitive equilibrium has the following property:

A decrease in total factor productivity could be caused by

Making use of an economic model is a process of

The Laffer Curve illustrates the relationship between

Real business cycle theory argues that the primary cause of business cycles is fluctuations in

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

A Pareto optimum requires

The marginal rate of transformation is

Much of the writings of Adam Smith are in close agreement with

A competitive equilibrium is Pareto-optimal if there is no way to rearrange or to reallocate goods so that

An economy that engages in international trade is called

An increase in total factor productivity

In response to an increase in total factor productivity

In an economic model,

According to our model, increasing G during a recession,

In an economic model, government spending is assumed to be

The first fundamental theorem of welfare economics states that

An example of a public good is

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

An increase in government spending

In the model where G = qT, when q increases, government spending, if chosen optimally, should

A competitive equilibrium has the following property:

A decrease in total factor productivity could be caused by

Making use of an economic model is a process of

The Laffer Curve illustrates the relationship between

Real business cycle theory argues that the primary cause of business cycles is fluctuations in

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

A Pareto optimum requires

The marginal rate of transformation is

Much of the writings of Adam Smith are in close agreement with

A competitive equilibrium is Pareto-optimal if there is no way to rearrange or to reallocate goods so that

An economy that engages in international trade is called

An increase in total factor productivity

In response to an increase in total factor productivity

In an economic model,

According to our model, increasing G during a recession,

In an economic model, government spending is assumed to be

The first fundamental theorem of welfare economics states that

An example of a public good is

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