Question 1

For a competitive equilibrium in a two-period model, which of the following is TRUE?

Accepted Answer

A) The financial market clears. 
B) There must be an equal number of borrowers and lenders. 
C) The present value of government spending must be greater than the present value of taxes. 
D) Each consumer picks first- and second-period consumption given the real interest rate. 
E) All deficits are financed by issuing debt. 
A) The financial market clears. 
B) There must be an equal number of borrowers and lenders. 
C) The present value of government spending must be greater than the present value of taxes. 
D) Each consumer picks first- and second-period consumption given the real interest rate. 
E) All deficits are financed by issuing debt.

Question 2

In the data, which of the following is most volatile?

Accepted Answer

A) aggregate income 
B) real GDP 
C) consumption of services 
D) consumption of durables 
E) consumption of nondurables 
A) aggregate income 
B) real GDP 
C) consumption of services 
D) consumption of durables 
E) consumption of nondurables

Question 3

If the government reduces current taxes, government bonds increase, and according to Ricardian equivalence in the credit market

Accepted Answer

A) the supply curve of private savings shifts to the left to keep the real interest rate constant. 
B) the supply curve of private savings shifts right to keep the real interest rate constant. 
C) the real interest rate increases. 
D) the supply curve of private savings shifts to the right and the real interest rate increases. 
E) private savings decreases by an amount equal to the increase in government bonds. 
A) the supply curve of private savings shifts to the left to keep the real interest rate constant. 
B) the supply curve of private savings shifts right to keep the real interest rate constant. 
C) the real interest rate increases. 
D) the supply curve of private savings shifts to the right and the real interest rate increases. 
E) private savings decreases by an amount equal to the increase in government bonds.

Question 4

If people are finite-lived, Ricardian equivalence can fail because

Accepted Answer

A) lifetime wealth will change for those currently alive. 
B) there is intragenerational redistribution. 
C) people cannot predict the future. 
D) people make bequests. 
E) this implies taxes must be distorting. 
A) lifetime wealth will change for those currently alive. 
B) there is intragenerational redistribution. 
C) people cannot predict the future. 
D) people make bequests. 
E) this implies taxes must be distorting.

Question 5

A one-period bond is a promise to repay

Accepted Answer

A)  $r$ units of goods in the second period. 
B)  the original amount lent. 
C)  $\frac { 1 } { ( 1 + r ) }$ units of goods in the second period. 
D)  $( 1 + r )$ units of goods in the second period. 
E)  the real interest rate. 
A)  $r$ units of goods in the second period. 
B)  the original amount lent. 
C)  $\frac { 1 } { ( 1 + r ) }$ units of goods in the second period. 
D)  $( 1 + r )$ units of goods in the second period. 
E)  the real interest rate.

Question 6

The substitution effect of a change in the real interest rate is an example of

Accepted Answer

A) an intertemporal substitution effect. 
B) a permanent substitution effect. 
C) a positive substitution effect. 
D) a temporary substitution effect. 
E) a negative substitution effect. 
A) an intertemporal substitution effect. 
B) a permanent substitution effect. 
C) a positive substitution effect. 
D) a temporary substitution effect. 
E) a negative substitution effect.

Question 7

If we represents a two-period consumer's lifetime wealth and $r$ denotes the real rate of interest, the horizontal (current consumption) intercept of the consumer's budget line is equal to

Accepted Answer

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

Question 8

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

Accepted Answer

A) permanent income hypothesis. 
B) Friedman-Lucas theory. 
C) Ricardian equivalence theorem. 
D) intertemporal substitution effect. 
E) steady state theorem. 
A) permanent income hypothesis. 
B) Friedman-Lucas theory. 
C) Ricardian equivalence theorem. 
D) intertemporal substitution effect. 
E) steady state theorem.

Question 9

The endowment point is the consumption bundle in which

Accepted Answer

A) second-period consumption is equal to zero. 
B) consumption is equal to disposable income in each period. 
C) consumption is equal to savings in each period. 
D) first-period consumption is equal to zero. 
E) the consumer finds the most utility. 
A) second-period consumption is equal to zero. 
B) consumption is equal to disposable income in each period. 
C) consumption is equal to savings in each period. 
D) first-period consumption is equal to zero. 
E) the consumer finds the most utility.

For a competitive equilibrium in a two-period model, which of the following is TRUE?

In the data, which of the following is most volatile?

If the government reduces current taxes, government bonds increase, and according to Ricardian equivalence in the credit market

If people are finite-lived, Ricardian equivalence can fail because

A one-period bond is a promise to repay

The substitution effect of a change in the real interest rate is an example of

If we represents a two-period consumer's lifetime wealth and $r$ denotes the real rate of interest, the horizontal (current consumption) intercept of the consumer's budget line is equal to

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

The endowment point is the consumption bundle in which

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

For a competitive equilibrium in a two-period model, which of the following is TRUE?

In the data, which of the following is most volatile?

If the government reduces current taxes, government bonds increase, and according to Ricardian equivalence in the credit market

If people are finite-lived, Ricardian equivalence can fail because

A one-period bond is a promise to repay

The substitution effect of a change in the real interest rate is an example of

If we represents a two-period consumer's lifetime wealth and rrr denotes the real rate of interest, the horizontal (current consumption) intercept of the consumer's budget line is equal to

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

The endowment point is the consumption bundle in which

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 horizontal (current consumption) intercept of the consumer's budget line is equal to