Question 1

One unit of money in the model of this chapter has a purchasing power of:

Accepted Answer

A) the price level time that one unit, P. 
B) the price level over the interest rate, (P/i). 
C) the interest rate, i. 
D) one over the price level, (1/P) 
A) the price level time that one unit, P. 
B) the price level over the interest rate, (P/i). 
C) the interest rate, i. 
D) one over the price level, (1/P)

Question 2

The maturity of a bond is:

Accepted Answer

A) the amount of interest paid each period. 
B) the amount borrowed. 
C) the amount of interest paid over the term of the bond. 
D) the time at which the lender must be paid back. 
A) the amount of interest paid each period. 
B) the amount borrowed. 
C) the amount of interest paid over the term of the bond. 
D) the time at which the lender must be paid back.

Question 3

In the model of this chapter the nominal rate of return on capital, (R/P) -   is greater than the nominal return on bonds, i, because capital is viewed by households as more risky than bonds.

Accepted Answer

A) True 
 B)False

Question 4

A bond that is traded in the bond market in the model of this chapter is piece of paper that:

Accepted Answer

A) is the lenders claim to the amount owed by the borrower. 
B) is the borrowers claim to the amount owed by the lender. 
C) is the lenders claim to ownership in the company. 
D) assures the person is who they say they are. 
A) is the lenders claim to the amount owed by the borrower. 
B) is the borrowers claim to the amount owed by the lender. 
C) is the lenders claim to ownership in the company. 
D) assures the person is who they say they are.

Question 5

If the rental price of a capital good is £100 and the price level is 25, then when renting the capital the owner's real earnings are:

Accepted Answer

A) 4 units of output per period. 
B) 2,500 units of output per period. 
C) seventy five units of output per period. 
D) one-fourth unit of output per period. 
A) 4 units of output per period. 
B) 2,500 units of output per period. 
C) seventy five units of output per period. 
D) one-fourth unit of output per period.

Question 6

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 only on consumption. 
C) households get income from profits from production, labour and interest on bonds and capital. 
D) households view bonds as riskier than capital. 
A) households get income only from labour. 
B) households can spend their income only on consumption. 
C) households get income from profits from production, labour and interest on bonds and capital. 
D) households view bonds as riskier than capital.

Question 7

The household real budget constraint shows that household real consumption is equal to household real income plus household real saving.

Accepted Answer

A) True 
 B)False

Question 8

The market clearing approach assumes that:

Accepted Answer

A) people are not able to affect prices that influence their decisions. 
B) prices change very slowly. 
C) firms are able to affect prices that influence their decisions. 
D) all of the above. 
A) people are not able to affect prices that influence their decisions. 
B) prices change very slowly. 
C) firms are able to affect prices that influence their decisions. 
D) all of the above.

Question 9

Bond holdings and interest income are zero for the whole economy.

Accepted Answer

A) True 
 B)False

Question 10

Over all household's bonds, B, must total zero because:

Accepted Answer

A) there are no bonds in the model. 
B) for every dollar loaned a dollar is borrowed in the bond market. 
C) bonds are not important in the model. 
D) bonds are illegal in most economies. 
A) there are no bonds in the model. 
B) for every dollar loaned a dollar is borrowed in the bond market. 
C) bonds are not important in the model. 
D) bonds are illegal in most economies.

Question 11

To maximize profit a firm should hire capital:

Accepted Answer

A) until it can produce no more of its product. 
B) until the marginal product of labour begins to fall. 
C) until the marginal product of capital equal the real rental price of capital. 
D) until the marginal product of capital is zero. 
A) until it can produce no more of its product. 
B) until the marginal product of labour begins to fall. 
C) until the marginal product of capital equal the real rental price of capital. 
D) until the marginal product of capital is zero.

Question 12

An investment in the model of this chapter is:

Accepted Answer

A) the purchase of a bond. 
B) the purchase of ownership in a firm. 
C) the purchase of a capital good used for production. 
D) all of the above. 
A) the purchase of a bond. 
B) the purchase of ownership in a firm. 
C) the purchase of a capital good used for production. 
D) all of the above.

Question 13

If a household this week produces 20 of its product at a cost of 50 cents each, sells them for €1, works 40 hours at £10 per hour, must pay £10 in interest owed on its borrowing and rents out 10 units of capital at £100 for the week, the household's, nominal income is:

Accepted Answer

A) £1,440 this week. 
B) £1,400 this week. 
C) £1,420 this week. 
D) none of the above. 
A) £1,440 this week. 
B) £1,400 this week. 
C) £1,420 this week. 
D) none of the above.

Question 14

What is the household real budget constraint and what does it tell us?

Accepted Answer

The household's real budget constraint i

Question 15

In the rental market in the model of this chapter, households buy and sell:

Accepted Answer

A) real estate. 
B) consumer durables like cars. 
C) the use of capital for one period. 
D) all of the above. 
A) real estate. 
B) consumer durables like cars. 
C) the use of capital for one period. 
D) all of the above.

Question 16

The market clearing approach assumes that:

Accepted Answer

A) people are able to affect prices that influence their decisions. 
B) prices change very slowly. 
C) firms are not 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 change very slowly. 
C) firms are not able to affect prices that influence their decisions. 
D) all of the above.

Question 17

The rental price of capital is:

Accepted Answer

A) a dollar (euro, etc.) amount per unit of capital. 
B) a real interest rate. 
C) a nominal interest rate 
D) profit. 
A) a dollar (euro, etc.) amount per unit of capital. 
B) a real interest rate. 
C) a nominal interest rate 
D) profit.

Question 18

In the market for capital services:

Accepted Answer

A) the supply of capital adjusts to create market clearing. 
B) the real rental price of capital adjusts to create market clearing. 
C) the demand for capital adjusts to create market clearing. 
D) all of the above. 
A) the supply of capital adjusts to create market clearing. 
B) the real rental price of capital adjusts to create market clearing. 
C) the demand for capital adjusts to create market clearing. 
D) all of the above.

Question 19

In the market clearing model:

Accepted Answer

A) households can owe pay interest. 
B) households can earn interest. 
C) for the whole economy interest income is zero. 
D) all of the above. 
A) households can owe pay interest. 
B) households can earn interest. 
C) for the whole economy interest income is zero. 
D) all of the above.

Question 20

The market clearing approach assumes that:

Accepted Answer

A) people are not able to affect prices that influence their decisions. 
B) prices adjust to clear markets. 
C) firms are not able to affect prices that influence their decisions. 
D) all of the above. 
A) people are not able to affect prices that influence their decisions. 
B) prices adjust to clear markets. 
C) firms are not able to affect prices that influence their decisions. 
D) all of the above.

One unit of money in the model of this chapter has a purchasing power of:

The maturity of a bond is:

In the model of this chapter the nominal rate of return on capital, (R/P) - is greater than the nominal return on bonds, i, because capital is viewed by households as more risky than bonds.

A bond that is traded in the bond market in the model of this chapter is piece of paper that:

If the rental price of a capital good is £100 and the price level is 25, then when renting the capital the owner's real earnings are:

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

The household real budget constraint shows that household real consumption is equal to household real income plus household real saving.

The market clearing approach assumes that:

Bond holdings and interest income are zero for the whole economy.

Over all household's bonds, B, must total zero because:

To maximize profit a firm should hire capital:

An investment in the model of this chapter is:

If a household this week produces 20 of its product at a cost of 50 cents each, sells them for €1, works 40 hours at £10 per hour, must pay £10 in interest owed on its borrowing and rents out 10 units of capital at £100 for the week, the household's, nominal income is:

What is the household real budget constraint and what does it tell us?

In the rental market in the model of this chapter, households buy and sell:

The market clearing approach assumes that:

The rental price of capital is:

In the market for capital services:

In the market clearing model:

The market clearing approach assumes that:

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

One unit of money in the model of this chapter has a purchasing power of:

The maturity of a bond is:

In the model of this chapter the nominal rate of return on capital, (R/P) - is greater than the nominal return on bonds, i, because capital is viewed by households as more risky than bonds.

A bond that is traded in the bond market in the model of this chapter is piece of paper that:

If the rental price of a capital good is £100 and the price level is 25, then when renting the capital the owner's real earnings are:

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

The household real budget constraint shows that household real consumption is equal to household real income plus household real saving.

The market clearing approach assumes that:

Bond holdings and interest income are zero for the whole economy.

Over all household's bonds, B, must total zero because:

To maximize profit a firm should hire capital:

An investment in the model of this chapter is:

If a household this week produces 20 of its product at a cost of 50 cents each, sells them for €1, works 40 hours at £10 per hour, must pay £10 in interest owed on its borrowing and rents out 10 units of capital at £100 for the week, the household's, nominal income is:

What is the household real budget constraint and what does it tell us?

In the rental market in the model of this chapter, households buy and sell:

The market clearing approach assumes that:

The rental price of capital is:

In the market for capital services:

In the market clearing model:

The market clearing approach assumes that:

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