Question 1

The Laffer Curve illustrates the relationship between

Accepted Answer

A) tax revenue and income tax rates. 
B) the income effect and the substitution effect. 
C) total factor productivity and wage rates. 
D) consumption and taxes. 
E) investment and interest rates. 
A) tax revenue and income tax rates. 
B) the income effect and the substitution effect. 
C) total factor productivity and wage rates. 
D) consumption and taxes. 
E) investment and interest rates.

Question 2

An increase in total factor productivity shifts the production function

Accepted Answer

A) downward, and also changes its slope. 
B) upward, but does not change its slope. 
C) downward, but does not change its slope. 
D) upward, and also changes its slope. 
E) upward, but reduces the marginal product of labour. 
A) downward, and also changes its slope. 
B) upward, but does not change its slope. 
C) downward, but does not change its slope. 
D) upward, and also changes its slope. 
E) upward, but reduces the marginal product of labour.

Question 3

A Pareto optimum requires

Accepted Answer

A)  $M R T _ { L , C } = M P _ { N }$. 
B)  $M R S _ { L , C } =$ TFP. 
C)  $M P _ { \mathrm { n } } = w$. 
D)  $M P _ { \mathrm { n } } =$ slope of $P P F$. 
E)  $M R S _ { 1 , \mathrm { c } } = M P _ { K }$. 
A)  $M R T _ { L , C } = M P _ { N }$. 
B)  $M R S _ { L , C } =$ TFP. 
C)  $M P _ { \mathrm { n } } = w$. 
D)  $M P _ { \mathrm { n } } =$ slope of $P P F$. 
E)  $M R S _ { 1 , \mathrm { c } } = M P _ { K }$.

Question 4

In a one-period economic model, the government budget constraint requires that government spending

Accepted Answer

A) = taxes + borrowing. 
B) > 0. 
C) = taxes. 
D) = taxes + transfers. 
E) taxes + transfers + borrowing. 
A) = taxes + borrowing. 
B) > 0. 
C) = taxes. 
D) = taxes + transfers. 
E) taxes + transfers + borrowing.

Question 5

Examples of exogenous variables include

Accepted Answer

A) labour supply and labour demand. 
B) consumption, government spending and capital stock. 
C) government spending, total factor productivity, and capital stock. 
D) real wages, aggregate output, and labour demand. 
E) real wages, consumption, and taxes. 
A) labour supply and labour demand. 
B) consumption, government spending and capital stock. 
C) government spending, total factor productivity, and capital stock. 
D) real wages, aggregate output, and labour demand. 
E) real wages, consumption, and taxes.

Question 6

A competitive equilibrium has the following property

Accepted Answer

A)  $M P _ { \mathrm { n } } = t$. 
B)  $M R S l , c = T F P$. 
C)  $M P _ { N } =$ slope of $P P F$. 
D)  $M R T _ { 1 , C } = M P _ { N }$. 
E)  $M R S _ { 1 , C } = P P F$. 
A)  $M P _ { \mathrm { n } } = t$. 
B)  $M R S l , c = T F P$. 
C)  $M P _ { N } =$ slope of $P P F$. 
D)  $M R T _ { 1 , C } = M P _ { N }$. 
E)  $M R S _ { 1 , C } = P P F$.

Question 7

An increase in total factor productivity

Accepted Answer

A) increases consumption, reduces output, and increases the real wage. 
B) reduces consumption, reduces output, and reduces the real wage. 
C) increases consumption, increases output, and increases the real wage. 
D) reduces consumption, increases output, and increases the real wage. 
E) reduces consumption, increases output and reduces the real wage. 
A) increases consumption, reduces output, and increases the real wage. 
B) reduces consumption, reduces output, and reduces the real wage. 
C) increases consumption, increases output, and increases the real wage. 
D) reduces consumption, increases output, and increases the real wage. 
E) reduces consumption, increases output and reduces the real wage.

Question 8

In the long run in the model with Keynesian sticky wages and prices

Accepted Answer

A) the representative consumer is working too much. 
B) the First Welfare Theorem holds. 
C) the First Welfare Theorem does not hold. 
D) the representative consumer is working too little. 
E) the representative firm is hiring too much labour. 
A) the representative consumer is working too much. 
B) the First Welfare Theorem holds. 
C) the First Welfare Theorem does not hold. 
D) the representative consumer is working too little. 
E) the representative firm is hiring too much labour.

Question 9

In the basic one-period model in Chapter 5, government spending is modelled as the acquisition of goods by
the government, with the government simply throwing the goods away. Is this an accurate way to capture
what the government does? If so, in what ways? If not, in what ways could we alter the model to make it
capture the role of the government more accurately?

Accepted Answer

For some types of government spending, t

Question 10

A competitive equilibrium is Pareto-optimal if there is no way to rearrange or to reallocate goods so that

Accepted Answer

A) no one can be made worse off. 
B) someone can be made better off without making everyone else worse off. 
C) anyone can be made better off. 
D) someone can be made better off without making someone else worse off. 
E) everyone is made better off. 
A) no one can be made worse off. 
B) someone can be made better off without making everyone else worse off. 
C) anyone can be made better off. 
D) someone can be made better off without making someone else worse off. 
E) everyone is made better off.

Question 11

What are three reasons for a competitive equilibrium not being Pareto-optimal? What two questions arise
from these inefficiencies?

Accepted Answer

A competitive equilibrium may not be Par

Question 12

Changes in government spending are NOT likely causes of business cycles because government spending induced business cycles would, counterfactually predict

Accepted Answer

A) procyclical real wages. 
B) countercyclical employment. 
C) countercyclical consumption. 
D) procyclical employment. 
E) countercyclical real wages. 
A) procyclical real wages. 
B) countercyclical employment. 
C) countercyclical consumption. 
D) procyclical employment. 
E) countercyclical real wages.

Question 13

An increase in government spending

Accepted Answer

A) reduces consumption, increases hours worked, and reduces the real wage. 
B) reduces consumption, increases hours worked, and increases the real wage. 
C) increases consumption, reduces hours worked, and increases the real wage. 
D) increases consumption, increases hours worked, and increases the real wage. 
E) reduces consumption, reduces hours worked, and reduces the real wage. 
A) reduces consumption, increases hours worked, and reduces the real wage. 
B) reduces consumption, increases hours worked, and increases the real wage. 
C) increases consumption, reduces hours worked, and increases the real wage. 
D) increases consumption, increases hours worked, and increases the real wage. 
E) reduces consumption, reduces hours worked, and reduces the real wage.

Question 14

In the model with Keynesian sticky wages and prices, a decrease in government spending may decrease output more than one-for-one because

Accepted Answer

A) the decrease in government spending may worsen inefficiency. 
B) more government spending is always desirable. 
C) the First Welfare Theorem holds. 
D) government spending changes the behaviour of the monetary authority. 
E) consumption increases. 
A) the decrease in government spending may worsen inefficiency. 
B) more government spending is always desirable. 
C) the First Welfare Theorem holds. 
D) government spending changes the behaviour of the monetary authority. 
E) consumption increases.

Question 15

The marginal rate of transformation is

Accepted Answer

A) is equal to the wage rate * TFP. 
B) equivalent to the marginal rates of substitution. 
C) the rate at which hours worked can be converted into an economy's capital stock. 
D) is derived from the marginal product of labour. 
E) - (slope of the PPF). 
A) is equal to the wage rate * TFP. 
B) equivalent to the marginal rates of substitution. 
C) the rate at which hours worked can be converted into an economy's capital stock. 
D) is derived from the marginal product of labour. 
E) - (slope of the PPF).

Question 16

An increase in total factor productivity shifts the production function

Accepted Answer

A) downward and increases the marginal product of labour. 
B) upward and reduces the marginal product of labour. 
C) downward and reduces the marginal product of labour. 
D) upwards and increases the marginal product of labour. 
E) downward and also reduces its slope. 
A) downward and increases the marginal product of labour. 
B) upward and reduces the marginal product of labour. 
C) downward and reduces the marginal product of labour. 
D) upwards and increases the marginal product of labour. 
E) downward and also reduces its slope.

Question 17

A competitive equilibrium is a state of affairs in which

Accepted Answer

A) markets clear, and output is maximized. 
B) agents are price-takers, and markets clear. 
C) all agents are equally well-off and agents are price-takers. 
D) output and total factor productivity are maximized. 
E) output is maximized, and all agents are equally well-off. 
A) markets clear, and output is maximized. 
B) agents are price-takers, and markets clear. 
C) all agents are equally well-off and agents are price-takers. 
D) output and total factor productivity are maximized. 
E) output is maximized, and all agents are equally well-off.

Question 18

Points on the production possibilities frontier have the property that they

Accepted Answer

A) show the maximum amount of goods that can be consumed in a competitive equilibrium. 
B) show the maximum amount of goods that can be consumed for given amounts of government spending. 
C) are inherently unattainable. 
D) show the maximum amount of leisure that can be consumed for given amounts of hours worked. 
E) show the maximum amount of leisure that can be consumed for given amounts of goods consumed. 
A) show the maximum amount of goods that can be consumed in a competitive equilibrium. 
B) show the maximum amount of goods that can be consumed for given amounts of government spending. 
C) are inherently unattainable. 
D) show the maximum amount of leisure that can be consumed for given amounts of hours worked. 
E) show the maximum amount of leisure that can be consumed for given amounts of goods consumed.

Question 19

The substitution effect that results from a decrease in total factor productivity

Accepted Answer

A) substitutes lump sum taxes for taxes on firms. 
B) is the substitution of consumption for leisure. 
C) involves substitution of government spending for consumption. 
D) is zero. 
E) is a shift from the labour input to the capital input. 
A) substitutes lump sum taxes for taxes on firms. 
B) is the substitution of consumption for leisure. 
C) involves substitution of government spending for consumption. 
D) is zero. 
E) is a shift from the labour input to the capital input.

Question 20

According to the Laffer Curve

Accepted Answer

A) higher tax rates always lead to more tax revenue. 
B) higher tax rates always lead to less tax revenue. 
C) lower tax rates always lead to higher tax revenue. 
D) there may exist two tax rates that deliver the same level of tax revenue. 
E) there is a unique tax rate for each level of revenue. 
A) higher tax rates always lead to more tax revenue. 
B) higher tax rates always lead to less tax revenue. 
C) lower tax rates always lead to higher tax revenue. 
D) there may exist two tax rates that deliver the same level of tax revenue. 
E) there is a unique tax rate for each level of revenue.

The Laffer Curve illustrates the relationship between

An increase in total factor productivity shifts the production function

A Pareto optimum requires

In a one-period economic model, the government budget constraint requires that government spending

Examples of exogenous variables include

A competitive equilibrium has the following property

An increase in total factor productivity

In the long run in the model with Keynesian sticky wages and prices

A competitive equilibrium is Pareto-optimal if there is no way to rearrange or to reallocate goods so that

What are three reasons for a competitive equilibrium not being Pareto-optimal? What two questions arise from these inefficiencies?

Changes in government spending are NOT likely causes of business cycles because government spending induced business cycles would, counterfactually predict

An increase in government spending

In the model with Keynesian sticky wages and prices, a decrease in government spending may decrease output more than one-for-one because

The marginal rate of transformation is

An increase in total factor productivity shifts the production function

A competitive equilibrium is a state of affairs in which

Points on the production possibilities frontier have the property that they

The substitution effect that results from a decrease in total factor productivity

According to the Laffer Curve

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

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

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 5: A Closed-Economy One-Period Macroeconomic Model

The Laffer Curve illustrates the relationship between

An increase in total factor productivity shifts the production function

A Pareto optimum requires

In a one-period economic model, the government budget constraint requires that government spending

Examples of exogenous variables include

A competitive equilibrium has the following property

An increase in total factor productivity

In the long run in the model with Keynesian sticky wages and prices

A competitive equilibrium is Pareto-optimal if there is no way to rearrange or to reallocate goods so that

What are three reasons for a competitive equilibrium not being Pareto-optimal? What two questions arise from these inefficiencies?

Changes in government spending are NOT likely causes of business cycles because government spending induced business cycles would, counterfactually predict

An increase in government spending

In the model with Keynesian sticky wages and prices, a decrease in government spending may decrease output more than one-for-one because

The marginal rate of transformation is

An increase in total factor productivity shifts the production function

A competitive equilibrium is a state of affairs in which

Points on the production possibilities frontier have the property that they

The substitution effect that results from a decrease in total factor productivity

According to the Laffer Curve

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

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

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