Question 1

Which of the following cannot be true when it is observed that government spending is causing crowding out?

Accepted Answer

A)  The government spending is decreasing. 
B)  The consumption spending is decreasing. 
C)  The net exports spending is decreasing. 
D)  The investment spending is decreasing. 
A)  The government spending is decreasing. 
B)  The consumption spending is decreasing. 
C)  The net exports spending is decreasing. 
D)  The investment spending is decreasing.

Question 2

Demonstrate graphically what happens to the production function if the capital stock decreases.

Accepted Answer

If the capital stock declines,

Question 3

According to the real business cycle theory, technological advances:

Accepted Answer

A)  increase the productivity of labor, which causes real wages and output to decline. 
B)  increase the productivity of labor, which causes real wages and output to increase. 
C)  increase the productivity of labor, which causes real wages to increase and output to decline. 
D)  decrease the productivity of labor, which causes real wages and output to increase. 
A)  increase the productivity of labor, which causes real wages and output to decline. 
B)  increase the productivity of labor, which causes real wages and output to increase. 
C)  increase the productivity of labor, which causes real wages to increase and output to decline. 
D)  decrease the productivity of labor, which causes real wages and output to increase.

Question 4

According to the International Monetary Fund statistics, the U.S.:

Accepted Answer

A)  invests a lower fraction of its GDP than China or France. 
B)  consumes a lower fraction of its GDP than China or Germany. 
C)  invests a higher fraction of its GDP than Germany. 
D)  government consumes a higher fraction of its GDP than Germany. 
A)  invests a lower fraction of its GDP than China or France. 
B)  consumes a lower fraction of its GDP than China or Germany. 
C)  invests a higher fraction of its GDP than Germany. 
D)  government consumes a higher fraction of its GDP than Germany.

Question 5

Recall Application 2, "A Nobel Laureate Explains Why Europeans Work Less than U.S. workers or the Japanese," to
answer the following questions:
-From the application, we can infer that one way to encourage Americans to further increase their hours worked per year would be to:

Accepted Answer

A)  decrease living standards. 
B)  decrease the effective tax rates experienced by workers. 
C)  increase the effective tax rates experienced by workers. 
D)  move to France. 
A)  decrease living standards. 
B)  decrease the effective tax rates experienced by workers. 
C)  increase the effective tax rates experienced by workers. 
D)  move to France.

Question 6

The production function describes the relationship between the quantities of which two variables?

Accepted Answer

A)  inputs and output 
B)  output and profit 
C)  output and revenue 
D)  inputs and cost 
A)  inputs and output 
B)  output and profit 
C)  output and revenue 
D)  inputs and cost

Question 7

What happens to the equilibrium wage rate in the US and Canada when more US and Canadian workers migrate to the Europe?

Accepted Answer

A)  The real wage in Canada and the US will increase. 
B)  The real wage in Canada will increase while the real wage in the US will decrease. 
C)  The real wage in Canada and the US will decrease. 
D)  The real wage in Canada will decrease while the real wage in the US will increase. 
A)  The real wage in Canada and the US will increase. 
B)  The real wage in Canada will increase while the real wage in the US will decrease. 
C)  The real wage in Canada and the US will decrease. 
D)  The real wage in Canada will decrease while the real wage in the US will increase.

Question 8

If the price of airline tickets rises during holidays, what will happen to the demand for flight attendants?

Accepted Answer

A)  It will increase and the equilibrium wages paid to flight attendants will fall. 
B)  It will decrease and the equilibrium wages paid to flight attendants will fall. 
C)  It will increase and the equilibrium wages paid to flight attendants will rise. 
D)  It will decrease and the equilibrium wages paid to flight attendants will rise. 
A)  It will increase and the equilibrium wages paid to flight attendants will fall. 
B)  It will decrease and the equilibrium wages paid to flight attendants will fall. 
C)  It will increase and the equilibrium wages paid to flight attendants will rise. 
D)  It will decrease and the equilibrium wages paid to flight attendants will rise.

Question 9

Suppose that the economy is currently at full employment. When the country ends its war in Afghanistan and reduces the military spending needed to support it, crowding in will take the form of:

Accepted Answer

A)  an increase in investment spending. 
B)  an increase in consumption spending. 
C)  A and B are both correct. 
D)  neither A nor B is correct. 
A)  an increase in investment spending. 
B)  an increase in consumption spending. 
C)  A and B are both correct. 
D)  neither A nor B is correct.

Question 10

The crowding in effect explains how a decrease in government expenditures can increase consumption.

Accepted Answer

A) True 
 B)False

Question 11

What is meant by full- employment output?

Accepted Answer

Full- employment output is the

Question 12

Labor supply curves are always upward- sloping.

Accepted Answer

A) True 
 B)False

Question 13

A tax on labor results in a shift in the labor

Accepted Answer

A)  demand curve to the left. 
B)  demand curve to the right. 
C)  supply curve to the left 
D)  supply curve to the right. 
A)  demand curve to the left. 
B)  demand curve to the right. 
C)  supply curve to the left 
D)  supply curve to the right.

Question 14

Which key principle in economics best explains crowding out?

Accepted Answer

A)  the principle of diminishing returns 
B)  the principle of opportunity cost 
C)  the principle of voluntary exchange 
D)  the marginal principle 
A)  the principle of diminishing returns 
B)  the principle of opportunity cost 
C)  the principle of voluntary exchange 
D)  the marginal principle

Question 15

An increase in the capital stock:

Accepted Answer

A)  can increase output, but only if it is accompanied by an increase in the labor force. 
B)  cannot increase output, even if it is accompanied by an increase in the labor force. 
C)  provides valuable services directly, but not indirectly. 
D)  can increase output, even if it is not accompanied by an increase in the labor force. 
A)  can increase output, but only if it is accompanied by an increase in the labor force. 
B)  cannot increase output, even if it is accompanied by an increase in the labor force. 
C)  provides valuable services directly, but not indirectly. 
D)  can increase output, even if it is not accompanied by an increase in the labor force.

Question 16

List two things that can lead to an increase in full- employment output.

Accepted Answer

(1) An increase in t

Question 17

Empirical evidence suggests that the labor supply curve for the economy is almost vertical. What does this imply about the effect of an increase in taxes on labor on employment, output, and real wages?

Accepted Answer

An increase in taxes on labor leads to a

Question 18

What happens to the equilibrium wage rate in the US and Canada when more American workers migrate to the Canada?

Accepted Answer

A)  The real wage in Canada will increase while the real wage in the US will decrease. 
B)  The real wage in Canada and the US will increase. 
C)  The real wage in Canada will decrease while the real wage in the US will increase. 
D)  The real wage in Canada and the US will decrease. 
A)  The real wage in Canada will increase while the real wage in the US will decrease. 
B)  The real wage in Canada and the US will increase. 
C)  The real wage in Canada will decrease while the real wage in the US will increase. 
D)  The real wage in Canada and the US will decrease.

Question 19

Recall Application 2, "A Nobel Laureate Explains Why Europeans Work Less than U.S. workers or the Japanese," to
answer the following questions:
-According to the application, the effective tax on labor for the U.S. is about:

Accepted Answer

A)  54 percent. 
B)  65 percent. 
C)  40 percent. 
D)  15 percent. 
A)  54 percent. 
B)  65 percent. 
C)  40 percent. 
D)  15 percent.

Question 20

If each additional worker hired contributes less to total output, then:

Accepted Answer

A)  economies of scale are present. 
B)  total output will fall if an extra worker is hired. 
C)  diminishing returns are occurring. 
D)  none of the above 
A)  economies of scale are present. 
B)  total output will fall if an extra worker is hired. 
C)  diminishing returns are occurring. 
D)  none of the above

Which of the following cannot be true when it is observed that government spending is causing crowding out?

Demonstrate graphically what happens to the production function if the capital stock decreases.

According to the real business cycle theory, technological advances:

According to the International Monetary Fund statistics, the U.S.:

Recall Application 2, "A Nobel Laureate Explains Why Europeans Work Less than U.S. workers or the Japanese," to answer the following questions: -From the application, we can infer that one way to encourage Americans to further increase their hours worked per year would be to:

The production function describes the relationship between the quantities of which two variables?

What happens to the equilibrium wage rate in the US and Canada when more US and Canadian workers migrate to the Europe?

If the price of airline tickets rises during holidays, what will happen to the demand for flight attendants?

Suppose that the economy is currently at full employment. When the country ends its war in Afghanistan and reduces the military spending needed to support it, crowding in will take the form of:

The crowding in effect explains how a decrease in government expenditures can increase consumption.

What is meant by full- employment output?

Labor supply curves are always upward- sloping.

A tax on labor results in a shift in the labor

Which key principle in economics best explains crowding out?

An increase in the capital stock:

List two things that can lead to an increase in full- employment output.

Empirical evidence suggests that the labor supply curve for the economy is almost vertical. What does this imply about the effect of an increase in taxes on labor on employment, output, and real wages?

What happens to the equilibrium wage rate in the US and Canada when more American workers migrate to the Canada?

Recall Application 2, "A Nobel Laureate Explains Why Europeans Work Less than U.S. workers or the Japanese," to answer the following questions: -According to the application, the effective tax on labor for the U.S. is about:

If each additional worker hired contributes less to total output, then:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

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Exam 7: The Economy at Full Employment

Which of the following cannot be true when it is observed that government spending is causing crowding out?

Demonstrate graphically what happens to the production function if the capital stock decreases.

According to the real business cycle theory, technological advances:

According to the International Monetary Fund statistics, the U.S.:

Recall Application 2, "A Nobel Laureate Explains Why Europeans Work Less than U.S. workers or the Japanese," to answer the following questions: -From the application, we can infer that one way to encourage Americans to further increase their hours worked per year would be to:

The production function describes the relationship between the quantities of which two variables?

What happens to the equilibrium wage rate in the US and Canada when more US and Canadian workers migrate to the Europe?

If the price of airline tickets rises during holidays, what will happen to the demand for flight attendants?

Suppose that the economy is currently at full employment. When the country ends its war in Afghanistan and reduces the military spending needed to support it, crowding in will take the form of:

The crowding in effect explains how a decrease in government expenditures can increase consumption.

What is meant by full- employment output?

Labor supply curves are always upward- sloping.

A tax on labor results in a shift in the labor

Which key principle in economics best explains crowding out?

An increase in the capital stock:

List two things that can lead to an increase in full- employment output.

Empirical evidence suggests that the labor supply curve for the economy is almost vertical. What does this imply about the effect of an increase in taxes on labor on employment, output, and real wages?

What happens to the equilibrium wage rate in the US and Canada when more American workers migrate to the Canada?

Recall Application 2, "A Nobel Laureate Explains Why Europeans Work Less than U.S. workers or the Japanese," to answer the following questions: -According to the application, the effective tax on labor for the U.S. is about:

If each additional worker hired contributes less to total output, then:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters