Question 1

If consumption spending changes by $5 trillion when disposable income changes by $8 trillion, the marginal propensity to save is equal to

Accepted Answer

A)  $3 trillion. 
B)  .625. 
C)  $13 trillion. 
D)  .375 
A)  $3 trillion. 
B)  .625. 
C)  $13 trillion. 
D)  .375 D

Question 2

The typical firm's demand for labor for the Cobb-Douglas production function with K=1 is

Accepted Answer

A)     
B)     
C)      
D)      
A)     
B)     
C)      
D)      A

Question 3

Investment spending tends to vary _______ with real interest rates and _______ with business managers' confidence.

Accepted Answer

A)  directly; inversely 
B)  directly; directly 
C)  inversely; inversely 
D)  inversely; directly 
A)  directly; inversely 
B)  directly; directly 
C)  inversely; inversely 
D)  inversely; directly D

Question 4

Consumption spending equals

Accepted Answer

A)  income minus investment spending minus net taxes. 
B)  income minus net taxes minus savings. 
C)  income minus government purchases minus net taxes. 
D)  income minus savings minus net exports. 
A)  income minus investment spending minus net taxes. 
B)  income minus net taxes minus savings. 
C)  income minus government purchases minus net taxes. 
D)  income minus savings minus net exports.

Question 5

The MPL for the Cobb-Douglas production function with K=1 is

Accepted Answer

A)      
B)      
C)      
D)      
A)      
B)      
C)      
D)

Question 6

In the Classical Model, if the real wage increases, the quantity of labor demanded will _______ until it is ________ the quantity of labor supplied

Accepted Answer

A)  increase; equal to 
B)  increase; less than 
C)  decrease; equal to. 
D)  decrease; more than. 
A)  increase; equal to 
B)  increase; less than 
C)  decrease; equal to. 
D)  decrease; more than.

Question 7

Other determinants of consumption spending include each of the following except

Accepted Answer

A)  real interest rate. 
B)  expectations of income growth. 
C)  tolerance for risk.. 
D)  permanent vs. transitory investment. 
A)  real interest rate. 
B)  expectations of income growth. 
C)  tolerance for risk.. 
D)  permanent vs. transitory investment.

Question 8

Gross exports depend on

Accepted Answer

A)  real income of our trading partners (Yf) and the real exchange rate. 
B)  domestic real income (Y) and the real exchange rate. 
C)  real income of our trading partners (Yf) and the nominal exchange rate. 
D)  real income of our trading partners (Yf) and the real interest rate. 
A)  real income of our trading partners (Yf) and the real exchange rate. 
B)  domestic real income (Y) and the real exchange rate. 
C)  real income of our trading partners (Yf) and the nominal exchange rate. 
D)  real income of our trading partners (Yf) and the real interest rate.

Question 9

Another view of investment spending is that it tends to be

Accepted Answer

A)  a function of consumption spending. 
B)  a function of stock market prices. 
C)  a function of government spending. 
D)  a function of the dividends paid to owners of stocks. 
A)  a function of consumption spending. 
B)  a function of stock market prices. 
C)  a function of government spending. 
D)  a function of the dividends paid to owners of stocks.

Question 10

In order for an investment project to be profitable

Accepted Answer

A)  the appropriately discounted return on the investment must be greater than the investment's cost. 
B)  the appropriately discounted return on the investment must be less than the investment's cost. 
C)  the appropriately discounted return on the investment must be greater than the appropriate interest rate. 
D)  the appropriately discounted return on the investment must be less than the appropriate interest rate. 
A)  the appropriately discounted return on the investment must be greater than the investment's cost. 
B)  the appropriately discounted return on the investment must be less than the investment's cost. 
C)  the appropriately discounted return on the investment must be greater than the appropriate interest rate. 
D)  the appropriately discounted return on the investment must be less than the appropriate interest rate.

Question 11

In a full employment economy, the real wage will ________ if     _________.

Accepted Answer

A)  increase; decreases 
B)  decrease; decreases 
C)  increase; increases 
D)  none of the above 
A)  increase; decreases 
B)  decrease; decreases 
C)  increase; increases 
D)  none of the above

Question 12

Government ________ tends to larger than ________.

Accepted Answer

A)  purchases; spending 
B)  transfer payments; spending 
C)  spending; purchases 
D)  employment; spending 
A)  purchases; spending 
B)  transfer payments; spending 
C)  spending; purchases 
D)  employment; spending

Question 13

The marginal propensity to consume for ___________ is larger than the marginal propensity to consume For ___________.

Accepted Answer

A)  transitory income; permanent income 
B)  interest income; wage income 
C)  permanent income; transitory income 
D)  permanent income; wage income 
A)  transitory income; permanent income 
B)  interest income; wage income 
C)  permanent income; transitory income 
D)  permanent income; wage income

Question 14

The higher the value of the ______________________, the ___________ U.S.-made goods are to foreigners.

Accepted Answer

A)  real interest rate; cheaper 
B)  real exchange rate; cheaper 
C)  real exchange rate; more expensive 
D)  real interest rate; more expensive. 
A)  real interest rate; cheaper 
B)  real exchange rate; cheaper 
C)  real exchange rate; more expensive 
D)  real interest rate; more expensive.

Question 15

If markets work well

Accepted Answer

A)  the actual output level in the economy will be less than the economy's potential output level. 
B)  the actual output level in the economy will be equal to the economy's potential output level. 
C)  the actual output level in the economy will be greater than the economy's potential output level. 
D)  the actual employment level in the economy will equal the population of the economy. 
A)  the actual output level in the economy will be less than the economy's potential output level. 
B)  the actual output level in the economy will be equal to the economy's potential output level. 
C)  the actual output level in the economy will be greater than the economy's potential output level. 
D)  the actual employment level in the economy will equal the population of the economy.

Question 16

When markets work well, the main factor keeping the economy at full employment and actual production equal to potential output is

Accepted Answer

A)  the adjustment of interest rates in the money market. 
B)  the adjustment of the demand for products to the supply of products. 
C)  the adjustment of prices and supply and demand in the labor market. 
D)  the adjustment of government spending to tax revenue. 
A)  the adjustment of interest rates in the money market. 
B)  the adjustment of the demand for products to the supply of products. 
C)  the adjustment of prices and supply and demand in the labor market. 
D)  the adjustment of government spending to tax revenue.

Question 17

Economists categorize investment spending in each of following uses except

Accepted Answer

A)  residential construction. 
B)  purchase of a bond. 
C)  non-residential construction. 
D)  equipment investment. 
A)  residential construction. 
B)  purchase of a bond. 
C)  non-residential construction. 
D)  equipment investment.

Question 18

National income can also be found by

Accepted Answer

A)  summing the wages of workers plus the profits of property owners. 
B)  summing the wages of workers and the savings of households. 
C)  summing the profits of property owners and the taxes paid to governments. 
D)  summing the wages of workers and the taxes paid to governments. 
A)  summing the wages of workers plus the profits of property owners. 
B)  summing the wages of workers and the savings of households. 
C)  summing the profits of property owners and the taxes paid to governments. 
D)  summing the wages of workers and the taxes paid to governments.

Question 19

In the Classical Model, if the quantity of labor demanded at current wages and prices is greater than the quantity of labor supplied

Accepted Answer

A)  unemployment will result. 
B)  the real wage will increase. 
C)  the real wage will not change. 
D)  the real wage will decrease. 
A)  unemployment will result. 
B)  the real wage will increase. 
C)  the real wage will not change. 
D)  the real wage will decrease.

Question 20

In order to achieve highest possible level of profit, the typical firm in the economy should

Accepted Answer

A)  stop hiring labor when the extra profit from selling the output produced by the last worker hired just equals the value of the last worker's wage. 
B)  stop hiring labor when the extra revenue from selling the output produced by the last worker hired just equals the value of the last worker's wage. 
C)  stop hiring labor when the extra price from selling the output produced by the last worker hired just equals the value of the last worker's wage. 
D)  stop hiring labor when the extra revenue from selling the output produced by the last worker hired becomes less than the value of the last worker's wage. 
A)  stop hiring labor when the extra profit from selling the output produced by the last worker hired just equals the value of the last worker's wage. 
B)  stop hiring labor when the extra revenue from selling the output produced by the last worker hired just equals the value of the last worker's wage. 
C)  stop hiring labor when the extra price from selling the output produced by the last worker hired just equals the value of the last worker's wage. 
D)  stop hiring labor when the extra revenue from selling the output produced by the last worker hired becomes less than the value of the last worker's wage.

If consumption spending changes by $5 trillion when disposable income changes by $8 trillion, the marginal propensity to save is equal to

The typical firm's demand for labor for the Cobb-Douglas production function with K=1 is

Investment spending tends to vary _ with real interest rates and _ with business managers' confidence.

Consumption spending equals

The MPL for the Cobb-Douglas production function with K=1 is

In the Classical Model, if the real wage increases, the quantity of labor demanded will _ until it is __ the quantity of labor supplied

Other determinants of consumption spending include each of the following except

Gross exports depend on

Another view of investment spending is that it tends to be

In order for an investment project to be profitable

In a full employment economy, the real wage will if _.

Government tends to larger than .

The marginal propensity to consume for _ is larger than the marginal propensity to consume For _.

The higher the value of the ____________, the _ U.S.-made goods are to foreigners.

If markets work well

When markets work well, the main factor keeping the economy at full employment and actual production equal to potential output is

Economists categorize investment spending in each of following uses except

National income can also be found by

In the Classical Model, if the quantity of labor demanded at current wages and prices is greater than the quantity of labor supplied

In order to achieve highest possible level of profit, the typical firm in the economy should

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 6: Building Blocks of the Flexible-Price Model

If consumption spending changes by $5 trillion when disposable income changes by $8 trillion, the marginal propensity to save is equal to

The typical firm's demand for labor for the Cobb-Douglas production function with K=1 is

Investment spending tends to vary _______ with real interest rates and _______ with business managers' confidence.

Consumption spending equals

The MPL for the Cobb-Douglas production function with K=1 is

In the Classical Model, if the real wage increases, the quantity of labor demanded will _______ until it is ________ the quantity of labor supplied

Other determinants of consumption spending include each of the following except

Gross exports depend on

Another view of investment spending is that it tends to be

In order for an investment project to be profitable

In a full employment economy, the real wage will ________ if _________.

Government ________ tends to larger than ________.

The marginal propensity to consume for ___________ is larger than the marginal propensity to consume For ___________.

The higher the value of the ______________________, the ___________ U.S.-made goods are to foreigners.

If markets work well

When markets work well, the main factor keeping the economy at full employment and actual production equal to potential output is

Economists categorize investment spending in each of following uses except

National income can also be found by

In the Classical Model, if the quantity of labor demanded at current wages and prices is greater than the quantity of labor supplied

In order to achieve highest possible level of profit, the typical firm in the economy should

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Investment spending tends to vary _ with real interest rates and _ with business managers' confidence.

In the Classical Model, if the real wage increases, the quantity of labor demanded will _ until it is __ the quantity of labor supplied

In a full employment economy, the real wage will if _.

Government tends to larger than .

The marginal propensity to consume for _ is larger than the marginal propensity to consume For _.

The higher the value of the ____________, the _ U.S.-made goods are to foreigners.