Question 1

A good proxy for the flow of consumption services would be

Accepted Answer

A) consumption of services and consumption of durables. 
B) consumption of durables and consumption of nondurables. 
C) aggregate consumption. 
D) consumption of nondurables and consumption of services. 
E) consumption of durables and services. 
A) consumption of services and consumption of durables. 
B) consumption of durables and consumption of nondurables. 
C) aggregate consumption. 
D) consumption of nondurables and consumption of services. 
E) consumption of durables and services. D

Question 2

According to Friedman, a primary determinant of a consumer's current consumption is

Accepted Answer

A) rate of expected savings in the second period. 
B) temporary income. 
C) current levels of GDP. 
D) current employment. 
E) permanent income. 
A) rate of expected savings in the second period. 
B) temporary income. 
C) current levels of GDP. 
D) current employment. 
E) permanent income. E

Question 3

Supposing Ricardian equivalence holds, an increase in current taxes

Accepted Answer

A) increases government spending. 
B) reduces future aggregate consumption. 
C) increases current aggregate consumption. 
D) reduces current saving. 
E) reduces current aggregate consumption. 
A) increases government spending. 
B) reduces future aggregate consumption. 
C) increases current aggregate consumption. 
D) reduces current saving. 
E) reduces current aggregate consumption. D

Question 4

A key variable in intertemporal choice is

Accepted Answer

A) investment. 
B) real interest rate. 
C) total factor productivity. 
D) output per worker. 
E) consumption. 
A) investment. 
B) real interest rate. 
C) total factor productivity. 
D) output per worker. 
E) consumption.

Question 5

The government's future period budget constraint is

Accepted Answer

A)  $G ^ { \prime } + ( 1 + r ) B = T ^ { \prime }$. 
B)  $G ^ { \prime } = T ^ { \prime } + ( 1 + r ) B$. 
C)  $G ^ { \prime } + T ^ { \prime } = ( 1 + r ) B$. 
D)  $G + G ^ { \prime } = T - T ^ { \prime }$. 
E)  $B = G - T$. 
A)  $G ^ { \prime } + ( 1 + r ) B = T ^ { \prime }$. 
B)  $G ^ { \prime } = T ^ { \prime } + ( 1 + r ) B$. 
C)  $G ^ { \prime } + T ^ { \prime } = ( 1 + r ) B$. 
D)  $G + G ^ { \prime } = T - T ^ { \prime }$. 
E)  $B = G - T$.

Question 6

The Ricardian Equivalence Theorem implies that a change in the timing of taxes

Accepted Answer

A) has a positive effect on both consumption and the real interest rate. 
B) affects consumption negatively and the real interest rate positively. 
C) has a negative effect on both consumption and the real interest rate. 
D) affects consumption positively and the real interest rate negatively. 
E) has no effect on consumption or the real interest rate. 
A) has a positive effect on both consumption and the real interest rate. 
B) affects consumption negatively and the real interest rate positively. 
C) has a negative effect on both consumption and the real interest rate. 
D) affects consumption positively and the real interest rate negatively. 
E) has no effect on consumption or the real interest rate.

Question 7

What is consumption smoothing and how is it affected with an increase in temporary and permanent income?

Accepted Answer

Consumption smoothing is the process of

Question 8

An increase in the real interest rate

Accepted Answer

A) increases savings for lenders, but has an uncertain effect on the savings of borrowers. 
B) reduces savings for both borrowers and lenders. 
C) increases savings for borrowers, but has an uncertain effect on the savings of lenders. 
D) increases savings for both borrowers and lenders. 
E) has an uncertain effect on the savings of both borrowers and lenders. 
A) increases savings for lenders, but has an uncertain effect on the savings of borrowers. 
B) reduces savings for both borrowers and lenders. 
C) increases savings for borrowers, but has an uncertain effect on the savings of lenders. 
D) increases savings for both borrowers and lenders. 
E) has an uncertain effect on the savings of both borrowers and lenders.

Question 9

To ensure a well-defined solution to the consumers' intertemporal choice problems, we must assume that consumers' preferences exhibit the properties that

Accepted Answer

A) the consumer likes diversity and that more is sometimes preferred to less. 
B) they are all identical and that more is always preferred to less. 
C) more is sometimes preferred to less and that first-period consumption and second-period consumption are both normal goods. 
D) more is sometimes preferred to less and that first-period consumption and second-period consumption are both inferior goods. 
E) more is preferred to less and that the consumer prefers diversity. 
A) the consumer likes diversity and that more is sometimes preferred to less. 
B) they are all identical and that more is always preferred to less. 
C) more is sometimes preferred to less and that first-period consumption and second-period consumption are both normal goods. 
D) more is sometimes preferred to less and that first-period consumption and second-period consumption are both inferior goods. 
E) more is preferred to less and that the consumer prefers diversity.

Question 10

In the two-period model of the economy

Accepted Answer

A) there is only one real interest rate. 
B) borrowing rates of interest are less than lending rates of interest. 
C) borrowing rates of interest are equal to lending rates of interest. 
D) borrowing rates of interest are greater than lending rates of interest. 
E) there is only one nominal interest rate. 
A) there is only one real interest rate. 
B) borrowing rates of interest are less than lending rates of interest. 
C) borrowing rates of interest are equal to lending rates of interest. 
D) borrowing rates of interest are greater than lending rates of interest. 
E) there is only one nominal interest rate.

Question 11

The Ricardian equivalence theorem implies that

Accepted Answer

A) the timing of taxes collected by the government is neutral. 
B) an increase in government spending has no effect on the economy, as long as there is an equal change in taxes. 
C) government debt policy must be handled correctly for the economy to prosper. 
D) the present value of government spending must be equal to the present value of taxes. 
E) the amounts of government spending are neutral. 
A) the timing of taxes collected by the government is neutral. 
B) an increase in government spending has no effect on the economy, as long as there is an equal change in taxes. 
C) government debt policy must be handled correctly for the economy to prosper. 
D) the present value of government spending must be equal to the present value of taxes. 
E) the amounts of government spending are neutral.

Question 12

For a borrower, an increase in the real interest rate

Accepted Answer

A) definitely reduces current consumption and future consumption. 
B) has an uncertain effect on both current and future consumption. 
C) has an uncertain effect on current consumption and increases future consumption. 
D) definitely reduces current consumption and increases future consumption. 
E) reduces current consumption and has an uncertain effect on future consumption. 
A) definitely reduces current consumption and future consumption. 
B) has an uncertain effect on both current and future consumption. 
C) has an uncertain effect on current consumption and increases future consumption. 
D) definitely reduces current consumption and increases future consumption. 
E) reduces current consumption and has an uncertain effect on future consumption.

Question 13

If the consumer is a lender then

Accepted Answer

A)  $c = y - t$. 
B)  $s \leq 0$. 
C)  $c ^ { \prime } \leq y ^ { \prime } - t ^ { \prime }$. 
D)  $c \leq y - t$. 
E)  $c \geq y - t$. 
A)  $c = y - t$. 
B)  $s \leq 0$. 
C)  $c ^ { \prime } \leq y ^ { \prime } - t ^ { \prime }$. 
D)  $c \leq y - t$. 
E)  $c \geq y - t$.

Question 14

For all bonds to be indistinguishable

Accepted Answer

A) all consumers must never be expected to default on their debts. 
B) they must be traded through financial intermediaries. 
C) all consumers must be identical. 
D) the government must guarantee all bonds. 
E) only government can issue bonds. 
A) all consumers must never be expected to default on their debts. 
B) they must be traded through financial intermediaries. 
C) all consumers must be identical. 
D) the government must guarantee all bonds. 
E) only government can issue bonds.

Question 15

If we represents a two-period consumer's lifetime wealth and $r$ denotes the real rate of interest, the slope of the consumer's budget line is equal to

Accepted Answer

A)  $- \frac { 1 } { ( 1 + r ) }$. 
B)  $- \frac { r } { ( 1 + w e ) }$. 
C)  $r ( 1 + w e )$. 
D)  $r \times$ we. 
E)  $- ( 1 + r )$. 
A)  $- \frac { 1 } { ( 1 + r ) }$. 
B)  $- \frac { r } { ( 1 + w e ) }$. 
C)  $r ( 1 + w e )$. 
D)  $r \times$ we. 
E)  $- ( 1 + r )$.

Question 16

The property of diminishing marginal rate of substitution implies that

Accepted Answer

A) the less current consumption the consumer has, the less future consumption she is willing to give up for one more unit of current consumption. 
B) the more current consumption the consumer has, the less future consumption she is willing to give up for one more unit of current consumption. 
C) the indifference curves are bowed away from the origin. 
D) the indifference curves have a constant slope. 
E) the more current consumption the consumer has, the more future consumption she is willing to give up for one more unit of current consumption. 
A) the less current consumption the consumer has, the less future consumption she is willing to give up for one more unit of current consumption. 
B) the more current consumption the consumer has, the less future consumption she is willing to give up for one more unit of current consumption. 
C) the indifference curves are bowed away from the origin. 
D) the indifference curves have a constant slope. 
E) the more current consumption the consumer has, the more future consumption she is willing to give up for one more unit of current consumption.

Question 17

For the consumer to be at an optimum, it must be the case that

Accepted Answer

A)  $M R T _ { C , c ^ { \prime } } = ( 1 + r )$. 
B)  $M R S _ { C , c ^ { \prime } } = \frac { 1 } { ( 1 + r ) }$. 
C)  $M R S _ { C , c ^ { \prime } } = w e ( 1 + r )$. 
D)  $M R S _ { C , c ^ { \prime } } = ( 1 + r )$. 
E)  $M R T _ { \mathcal { C } , c ^ { \prime } } = \frac { 1 } { ( 1 + r ) }$. 
A)  $M R T _ { C , c ^ { \prime } } = ( 1 + r )$. 
B)  $M R S _ { C , c ^ { \prime } } = \frac { 1 } { ( 1 + r ) }$. 
C)  $M R S _ { C , c ^ { \prime } } = w e ( 1 + r )$. 
D)  $M R S _ { C , c ^ { \prime } } = ( 1 + r )$. 
E)  $M R T _ { \mathcal { C } , c ^ { \prime } } = \frac { 1 } { ( 1 + r ) }$.

Question 18

In our two-period model, the government must pay off all debt, in reality

Accepted Answer

A) this is approximately correct. 
B) governments rarely pay off all of their debt. 
C) only developing countries can perpetually run deficits. 
D) governments take longer than two-periods to pay off debt, but almost always do. 
E) only countries in the European Union are unlikely to ever pay off their debt. 
A) this is approximately correct. 
B) governments rarely pay off all of their debt. 
C) only developing countries can perpetually run deficits. 
D) governments take longer than two-periods to pay off debt, but almost always do. 
E) only countries in the European Union are unlikely to ever pay off their debt.

Question 19

The marginal rate of substitution of current consumption for future consumption is

Accepted Answer

A) minus the slope of the difference curve. 
B) the slope of the lifetime budget constraint. 
C) the slope of the indifference curve. 
D) the downward slope of the budget constraint. 
E) the endowment point. 
A) minus the slope of the difference curve. 
B) the slope of the lifetime budget constraint. 
C) the slope of the indifference curve. 
D) the downward slope of the budget constraint. 
E) the endowment point.

Question 20

The simplest device to analyze dynamic decisions is a

Accepted Answer

A) two-period model. 
B) one-period model. 
C) model that includes only the number of years of a typical consumer's lifetime. 
D) dynamic time model. 
E) continuous time model. 
A) two-period model. 
B) one-period model. 
C) model that includes only the number of years of a typical consumer's lifetime. 
D) dynamic time model. 
E) continuous time model.

A good proxy for the flow of consumption services would be

According to Friedman, a primary determinant of a consumer's current consumption is

Supposing Ricardian equivalence holds, an increase in current taxes

A key variable in intertemporal choice is

The government's future period budget constraint is

The Ricardian Equivalence Theorem implies that a change in the timing of taxes

What is consumption smoothing and how is it affected with an increase in temporary and permanent income?

An increase in the real interest rate

To ensure a well-defined solution to the consumers' intertemporal choice problems, we must assume that consumers' preferences exhibit the properties that

In the two-period model of the economy

The Ricardian equivalence theorem implies that

For a borrower, an increase in the real interest rate

If the consumer is a lender then

For all bonds to be indistinguishable

If we represents a two-period consumer's lifetime wealth and $r$ denotes the real rate of interest, the slope of the consumer's budget line is equal to

The property of diminishing marginal rate of substitution implies that

For the consumer to be at an optimum, it must be the case that

In our two-period model, the government must pay off all debt, in reality

The marginal rate of substitution of current consumption for future consumption is

The simplest device to analyze dynamic decisions is a

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

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 9: A Two-Period Model: the Consumptionsavings Decision and Credit Markets

A good proxy for the flow of consumption services would be

According to Friedman, a primary determinant of a consumer's current consumption is

Supposing Ricardian equivalence holds, an increase in current taxes

A key variable in intertemporal choice is

The government's future period budget constraint is

The Ricardian Equivalence Theorem implies that a change in the timing of taxes

What is consumption smoothing and how is it affected with an increase in temporary and permanent income?

An increase in the real interest rate

To ensure a well-defined solution to the consumers' intertemporal choice problems, we must assume that consumers' preferences exhibit the properties that

In the two-period model of the economy

The Ricardian equivalence theorem implies that

For a borrower, an increase in the real interest rate

If the consumer is a lender then

For all bonds to be indistinguishable

If we represents a two-period consumer's lifetime wealth and rrr denotes the real rate of interest, the slope of the consumer's budget line is equal to

The property of diminishing marginal rate of substitution implies that

For the consumer to be at an optimum, it must be the case that

In our two-period model, the government must pay off all debt, in reality

The marginal rate of substitution of current consumption for future consumption is

The simplest device to analyze dynamic decisions is a

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model With Investment

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

If we represents a two-period consumer's lifetime wealth and $r$ denotes the real rate of interest, the slope of the consumer's budget line is equal to