Question 1

An externality is any activity for which an individual firm or consumer does not take into account all

Accepted Answer

A)  of the ramifications of its actions on others. 
B)  associated costs. 
C)  associated benefits. 
D)  associated costs and benefits. 
E)  negative impacts on the economy. 
A)  of the ramifications of its actions on others. 
B)  associated costs. 
C)  associated benefits. 
D)  associated costs and benefits. 
E)  negative impacts on the economy.

Question 2

An increase in total factor productivity involves

Accepted Answer

A)  a more educated workforce. 
B)  a reduced real wage. 
C)  a better technology for converting factor inputs into aggregate output. 
D)  an increase in the capital stock. 
E)  more government spending. 
A)  a more educated workforce. 
B)  a reduced real wage. 
C)  a better technology for converting factor inputs into aggregate output. 
D)  an increase in the capital stock. 
E)  more government spending.

Question 3

An example of a negative externality is

Accepted Answer

A)  a chemical factory dumping waste in a river upstream from a popular fishing spot. 
B)  a chemical factory that enters a town and bids up wages, and, therefore, increases the cost of other firms. 
C)  a chemical factory producing fertilizers that kills plants, rather than help them as advertised. 
D)  a chemical factory producing fertilizers that do not, in fact, help plants grow. 
E)  a chemical factory that conducts research into the safe disposal if chemicals. 
A)  a chemical factory dumping waste in a river upstream from a popular fishing spot. 
B)  a chemical factory that enters a town and bids up wages, and, therefore, increases the cost of other firms. 
C)  a chemical factory producing fertilizers that kills plants, rather than help them as advertised. 
D)  a chemical factory producing fertilizers that do not, in fact, help plants grow. 
E)  a chemical factory that conducts research into the safe disposal if chemicals.

Question 4

The real wage is determined by

Accepted Answer

A)  the competitive equilibrium. 
B)  -(slope of PPF). 
C)  +(slope of indifference curve) 
D)  the marginal product of capital. 
E)  the marginal rate of transformation. 
A)  the competitive equilibrium. 
B)  -(slope of PPF). 
C)  +(slope of indifference curve) 
D)  the marginal product of capital. 
E)  the marginal rate of transformation.

Question 5

Fiscal policy refers to a government's choices over its

Accepted Answer

A)  expenditures, taxes, transfers, and borrowing. 
B)  expenditures, taxes, issuance of money, and borrowing. 
C)  expenditures, foreign affairs, issuance of money, and borrowing. 
D)  issuance of money, taxes, environmental regulations, and foreign affairs. 
E)  changing the money supply, defense, and borrowing. 
A)  expenditures, taxes, transfers, and borrowing. 
B)  expenditures, taxes, issuance of money, and borrowing. 
C)  expenditures, foreign affairs, issuance of money, and borrowing. 
D)  issuance of money, taxes, environmental regulations, and foreign affairs. 
E)  changing the money supply, defense, and borrowing.

Question 6

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

Accepted Answer

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

Question 7

Points on the production possibilities frontier have the property that they

Accepted Answer

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

Question 8

The marginal rate of transformation is equal to

Accepted Answer

A)  marginal product of capital. 
B)  marginal product of labour. 
C)  marginal rate of substitution of leisure. 
D)  marginal rate of substitution for capital. 
E)  the real wage rate divided by total factor productivity. 
A)  marginal product of capital. 
B)  marginal product of labour. 
C)  marginal rate of substitution of leisure. 
D)  marginal rate of substitution for capital. 
E)  the real wage rate divided by total factor productivity.

Question 9

According to the Laffer Curve

Accepted Answer

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

Question 10

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 11

To choose the optimal level of government expenditures,G*,the government

Accepted Answer

A)  must know the preferences of all consumers over private and public goods 
B)  needs only to balance the budget as any level of G is Pareto optimal 
C)  minimize the tax burden 
D)  must know the preferenes of all consumers and mimimize the tax burden. 
E)  obtain the correct balance between military spending and social programs. 
A)  must know the preferences of all consumers over private and public goods 
B)  needs only to balance the budget as any level of G is Pareto optimal 
C)  minimize the tax burden 
D)  must know the preferenes of all consumers and mimimize the tax burden. 
E)  obtain the correct balance between military spending and social programs.

Question 12

In the production function,output is given by

Accepted Answer

A)  consumption and taxes. 
B)  consumption and government spending. 
C)  capital stock and employment. 
D)  capital stock and leisure. 
E)  production technology and the capital stock. 
A)  consumption and taxes. 
B)  consumption and government spending. 
C)  capital stock and employment. 
D)  capital stock and leisure. 
E)  production technology and the capital stock.

Question 13

Goods and services provided by the government are called

Accepted Answer

A)  government goods. 
B)  public goods. 
C)  free goods. 
D)  social goods. 
E)  national goods. 
A)  government goods. 
B)  public goods. 
C)  free goods. 
D)  social goods. 
E)  national goods.

Question 14

An increase in total factor productivity shifts the production function

Accepted Answer

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

Question 15

Changes in total factor productivity are plausible causes of business cycles because productivity-induced business cycles correctly predict

Accepted Answer

A)  real wages and total hours must be procyclical. 
B)  real wages and consumption must be procyclical. 
C)  total hours worked and consumption must be procyclical. 
D)  consumption and government spending must be procyclical. 
E)  consumption and total factor productivity must be procyclical. 
A)  real wages and total hours must be procyclical. 
B)  real wages and consumption must be procyclical. 
C)  total hours worked and consumption must be procyclical. 
D)  consumption and government spending must be procyclical. 
E)  consumption and total factor productivity must be procyclical.

Question 16

The concept of Pareto optimality is a

Accepted Answer

A)  utopian concept. 
B)  useful concept because it guarantees economic equality. 
C)  useful concept because it guarantees economic efficiency. 
D)  useful concept that carefully balances a society's desires for equality and efficiency. 
E)  useful concept because it guarantees economic equity. 
A)  utopian concept. 
B)  useful concept because it guarantees economic equality. 
C)  useful concept because it guarantees economic efficiency. 
D)  useful concept that carefully balances a society's desires for equality and efficiency. 
E)  useful concept because it guarantees economic equity.

Question 17

Relative to the social optimum,monopoly power directly leads to

Accepted Answer

A)  underproduction. 
B)  overproduction. 
C)  too much leisure. 
D)  too little leisure. 
E)  social efficiency. 
A)  underproduction. 
B)  overproduction. 
C)  too much leisure. 
D)  too little leisure. 
E)  social efficiency.

Question 18

When we adjust the model to include consumer preferences over both C and G,the government can optimally choose government spending.Explain some of the difficulties the government may encounter in trying to determine G*.Specifically,compare this problem with the one the market solves in competitive equilibrium in the original model where G is fixed exogenously.

Accepted Answer

In principal,the problem the government

Question 19

A competitive equilibrium has the following property:

Accepted Answer

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

Question 20

Making use of an economic model is a process of

Accepted Answer

A)  solving hundreds of simultaneous equations. 
B)  running experiments to determine how changes in the endogenous variables will change the exogenous variables. 
C)  running experiments to determine how changes in the exogenous variables will change the endogenous variables. 
D)  resolving inconsistencies in the actions of economic agents. 
E)  determining how a closed economy is linked to an open economy. 
A)  solving hundreds of simultaneous equations. 
B)  running experiments to determine how changes in the endogenous variables will change the exogenous variables. 
C)  running experiments to determine how changes in the exogenous variables will change the endogenous variables. 
D)  resolving inconsistencies in the actions of economic agents. 
E)  determining how a closed economy is linked to an open economy.

An externality is any activity for which an individual firm or consumer does not take into account all

An increase in total factor productivity involves

An example of a negative externality is

The real wage is determined by

Fiscal policy refers to a government's choices over its

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

Points on the production possibilities frontier have the property that they

The marginal rate of transformation is equal to

According to the Laffer Curve

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

To choose the optimal level of government expenditures,G*,the government

In the production function,output is given by

Goods and services provided by the government are called

An increase in total factor productivity shifts the production function

Changes in total factor productivity are plausible causes of business cycles because productivity-induced business cycles correctly predict

The concept of Pareto optimality is a

Relative to the social optimum,monopoly power directly leads to

A competitive equilibrium has the following property:

Making use of an economic model is a process of

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings 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

An externality is any activity for which an individual firm or consumer does not take into account all

An increase in total factor productivity involves

An example of a negative externality is

The real wage is determined by

Fiscal policy refers to a government's choices over its

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

Points on the production possibilities frontier have the property that they

The marginal rate of transformation is equal to

According to the Laffer Curve

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

To choose the optimal level of government expenditures,G*,the government

In the production function,output is given by

Goods and services provided by the government are called

An increase in total factor productivity shifts the production function

Changes in total factor productivity are plausible causes of business cycles because productivity-induced business cycles correctly predict

The concept of Pareto optimality is a

Relative to the social optimum,monopoly power directly leads to

A competitive equilibrium has the following property:

Making use of an economic model is a process of

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings 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