Question 1

Figure 6.1  
In Figure 6.1 an increase in real income is shown by:

Accepted Answer

A) a shift of the curve up and to the right. 
B) rotating the curve out the real consumption axis. 
C) a shift of the curve inward and to the left. 
D) rotating the curve up the real saving axis. 
A) a shift of the curve up and to the right. 
B) rotating the curve out the real consumption axis. 
C) a shift of the curve inward and to the left. 
D) rotating the curve up the real saving axis. A

Question 2

What causes the labour and capital markets to clear in the model of this chapter?

Accepted Answer

The model is a market clearing model in which prices, w/P and R/P, adjust so that the labour and capital market clear where L^D= L^Sin the labour market and K^D= K^S in the capital market.

Question 3

In the market clearing model, nominal saving is:

Accepted Answer

A) always zero. 
B) nominal income less nominal consumption. 
C) nominal income - depreciation of capital. 
D) all of the above. 
A) always zero. 
B) nominal income less nominal consumption. 
C) nominal income - depreciation of capital. 
D) all of the above. B

Question 4

What is real profit in the model of this chapter?

Accepted Answer

Real profit in equilibrium is

Question 5

Individual household nominal income includes:

Accepted Answer

A) nominal interest income, iB. 
B) nominal net rental income, [(R/P) -   PK]•PK. 
C) nominal wage income, wL. 
D) all of the above. 
A) nominal interest income, iB. 
B) nominal net rental income, [(R/P) -   PK]•PK. 
C) nominal wage income, wL. 
D) all of the above.

Question 6

In the market clearing model, the demand for capital and labour come from:

Accepted Answer

A) the tastes of people. 
B) rental and labour markets. 
C) the objective of profit maximizing. 
D) all of the above. 
A) the tastes of people. 
B) rental and labour markets. 
C) the objective of profit maximizing. 
D) all of the above.

Question 7

How is profit calculated in the model?

Accepted Answer

Profit is: @#IMG-DLM& = PY - ( wL^d + RK^d) or @#IMG-DLM& = P•A•

Question 8

The rate of return from owning capital is:

Accepted Answer

A) the rental price of capital, R. 
B) the value of depreciation,   PK. 
C) the net nominal rental income, (R/P)•PK -   PK. 
D) the real rental price less depreciation, (R/P) -   . 
A) the rental price of capital, R. 
B) the value of depreciation,   PK. 
C) the net nominal rental income, (R/P)•PK -   PK. 
D) the real rental price less depreciation, (R/P) -   .

Question 9

In the market clearing model, depreciation,   , is:

Accepted Answer

A) the rate at which capital disappears. 
B) the rate at which money loses value. 
C) the rate at which bonds lose value. 
D) all of the above. 
A) the rate at which capital disappears. 
B) the rate at which money loses value. 
C) the rate at which bonds lose value. 
D) all of the above.

Question 10

In the model the nominal interest rate equals the nominal net return on capital, i = (R/P) -   , because:

Accepted Answer

A) other than rates of return bonds and capital look the same to households as assets. 
B) capital is riskier than bonds. 
C) bonds are riskier than capital. 
D) bonds are zero in the aggregate. 
A) other than rates of return bonds and capital look the same to households as assets. 
B) capital is riskier than bonds. 
C) bonds are riskier than capital. 
D) bonds are zero in the aggregate.

Question 11

In the market clearing model, nominal saving is:

Accepted Answer

A) the change in money + the change in bonds + the change in the nominal value of capital. 
B) nominal income plus nominal saving. 
C) always zero. 
D) all of the above. 
A) the change in money + the change in bonds + the change in the nominal value of capital. 
B) nominal income plus nominal saving. 
C) always zero. 
D) all of the above.

Question 12

Interest income is:

Accepted Answer

A) positive for net bond holders. 
B) zero for the whole economy. 
C) negative for net bond issuers. 
D) all of the above. 
A) positive for net bond holders. 
B) zero for the whole economy. 
C) negative for net bond issuers. 
D) all of the above.

Question 13

In the goods market in the model of this chapter households can buy:

Accepted Answer

A) bonds. 
B) goods to increase their stock of capital. 
C) labour services. 
D) all of the above. 
A) bonds. 
B) goods to increase their stock of capital. 
C) labour services. 
D) all of the above.

Question 14

According to the household nominal budget constraint, PC+   B+P•   K =   + wL + i(B + PK), households can use their income to:

Accepted Answer

A) hire more workers. 
B) acquire more money. 
C) purchase capital goods. 
D) all of the above. 
A) hire more workers. 
B) acquire more money. 
C) purchase capital goods. 
D) all of the above.

Question 15

The household real budget constraint C + (   B/P) +   K = (   /P)+ (w/P)•L + i•((B/P) + K). shows that in our model:

Accepted Answer

A) households get income only from labour. 
B) households can spend their income on consumption or acquiring more capital and bonds. 
C) households can spend their income only on consumption. 
D) households view bonds as riskier than capital. 
A) households get income only from labour. 
B) households can spend their income on consumption or acquiring more capital and bonds. 
C) households can spend their income only on consumption. 
D) households view bonds as riskier than capital.

Question 16

The market clearing approach assumes that:

Accepted Answer

A) people are able to affect prices that influence their decisions. 
B) prices adjust to clear markets. 
C) firms are able to affect prices that influence their decisions. 
D) all of the above. 
A) people are able to affect prices that influence their decisions. 
B) prices adjust to clear markets. 
C) firms are able to affect prices that influence their decisions. 
D) all of the above.

Question 17

The real wage is:

Accepted Answer

A) hourly earning after taxes. 
B) wages plus fringe benefits. 
C) the value of a worker's time in goods received. 
D) the price level divided by the nominal wage rate. 
A) hourly earning after taxes. 
B) wages plus fringe benefits. 
C) the value of a worker's time in goods received. 
D) the price level divided by the nominal wage rate.

Question 18

In the market clearing model, nominal saving is:

Accepted Answer

A) the change in money + the change in bonds + the change in the nominal value of capital. 
B) nominal income less nominal consumption. 
C)    + wL + i(B + PK) - PC. 
D) all of the above. 
A) the change in money + the change in bonds + the change in the nominal value of capital. 
B) nominal income less nominal consumption. 
C)    + wL + i(B + PK) - PC. 
D) all of the above.

Question 19

In the market clearing model, for the whole economy interest income is:

Accepted Answer

A) bonds minus the interest rate. 
B) zero. 
C) the interest rate divided by bonds. 
D) bonds divided by the interest rate. 
A) bonds minus the interest rate. 
B) zero. 
C) the interest rate divided by bonds. 
D) bonds divided by the interest rate.

Question 20

If the nominal wage rate is £10 per hour and the price level is 2, then the real wage a worker earns is:

Accepted Answer

A) five units of goods per hour. 
B) eight units of goods per hour. 
C) twenty units of goods per hour. 
D) one-fifth unit of goods per hour. 
A) five units of goods per hour. 
B) eight units of goods per hour. 
C) twenty units of goods per hour. 
D) one-fifth unit of goods per hour.

Figure 6.1 In Figure 6.1 an increase in real income is shown by:

What causes the labour and capital markets to clear in the model of this chapter?

In the market clearing model, nominal saving is:

What is real profit in the model of this chapter?

Individual household nominal income includes:

In the market clearing model, the demand for capital and labour come from:

How is profit calculated in the model?

The rate of return from owning capital is:

In the market clearing model, depreciation, , is:

In the model the nominal interest rate equals the nominal net return on capital, i = (R/P) - , because:

In the market clearing model, nominal saving is:

Interest income is:

In the goods market in the model of this chapter households can buy:

According to the household nominal budget constraint, PC+ B+P• K = + wL + i(B + PK), households can use their income to:

The household real budget constraint C + ( B/P) + K = ( /P)+ (w/P)•L + i•((B/P) + K). shows that in our model:

The market clearing approach assumes that:

The real wage is:

In the market clearing model, nominal saving is:

In the market clearing model, for the whole economy interest income is:

If the nominal wage rate is £10 per hour and the price level is 2, then the real wage a worker earns is:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Macroeconomics Without Microeconomic Foundations

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Inflation, Money Growth, and Interest Rates

Government Expenditure

Taxes

Public Debt

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters

Exam 7: Markets, Prices, Supply, and Demand

Figure 6.1 In Figure 6.1 an increase in real income is shown by:

What causes the labour and capital markets to clear in the model of this chapter?

In the market clearing model, nominal saving is:

What is real profit in the model of this chapter?

Individual household nominal income includes:

In the market clearing model, the demand for capital and labour come from:

How is profit calculated in the model?

The rate of return from owning capital is:

In the market clearing model, depreciation, , is:

In the model the nominal interest rate equals the nominal net return on capital, i = (R/P) - , because:

In the market clearing model, nominal saving is:

Interest income is:

In the goods market in the model of this chapter households can buy:

According to the household nominal budget constraint, PC+ B+P• K = + wL + i(B + PK), households can use their income to:

The household real budget constraint C + ( B/P) + K = ( /P)+ (w/P)•L + i•((B/P) + K). shows that in our model:

The market clearing approach assumes that:

The real wage is:

In the market clearing model, nominal saving is:

In the market clearing model, for the whole economy interest income is:

If the nominal wage rate is £10 per hour and the price level is 2, then the real wage a worker earns is:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Macroeconomics Without Microeconomic Foundations

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Inflation, Money Growth, and Interest Rates

Government Expenditure

Taxes

Public Debt

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters