Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

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

Question 3

Consumption smoothing refers to

Accepted Answer

A)  the tendency of all consumers to choose the same amount of current consumption. 
B)  the tendency of consumers to seek a consumption path over time that is smoother than income. 
C)  the tendency of consumers to seek an income path over time that is smoother than consumption. 
D)  consumer's concerns about going heavily into debt. 
E)  balance savings with consumption over time. 
A)  the tendency of all consumers to choose the same amount of current consumption. 
B)  the tendency of consumers to seek a consumption path over time that is smoother than income. 
C)  the tendency of consumers to seek an income path over time that is smoother than consumption. 
D)  consumer's concerns about going heavily into debt. 
E)  balance savings with consumption over time.

Question 4

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

Accepted Answer

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

Question 5

A key channel for interest rate effects on real activity will be through

Accepted Answer

A)  temporary income. 
B)  permanent income. 
C)  aggregate consumption. 
D)  aggregate investment. 
E)  consumption and savings. 
A)  temporary income. 
B)  permanent income. 
C)  aggregate consumption. 
D)  aggregate investment. 
E)  consumption and savings.

Question 6

The simplest device to analyze dynamic decisions is a

Accepted Answer

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

Question 7

The government's current period budget constraint is:

Accepted Answer

A)  G + B = T 
B)  G' = T' + (1 + r)B 
C)  G = T + B 
D)  G + T = B 
E)  G + S = B 
A)  G + B = T 
B)  G' = T' + (1 + r)B 
C)  G = T + B 
D)  G + T = B 
E)  G + S = B

Question 8

In the case where current and future consumption are perfect complements,an increase in the real interest rate

Accepted Answer

A)  involves only income effects. 
B)  has ambiguous effects depending on whether the substitution or income effects dominate. 
C)  involves only subsitution effects. 
D)  involves a substitution effect only for lenders. 
E)  is relevant only for borrowers. 
A)  involves only income effects. 
B)  has ambiguous effects depending on whether the substitution or income effects dominate. 
C)  involves only subsitution effects. 
D)  involves a substitution effect only for lenders. 
E)  is relevant only for borrowers.

Question 9

An increase in second-period income results in

Accepted Answer

A)  an increase in first-period consumption, an increase in second-period consumption, and an increase in saving. 
B)  an increase in first-period consumption, a decrease in second-period consumption, and an increase in saving. 
C)  a decrease in first-period consumption, an increase in second-period consumption, and an increase in saving. 
D)  an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving. 
E)  a decrease in first-period consumption, a decrease in second-period consumption, and an increase in saving. 
A)  an increase in first-period consumption, an increase in second-period consumption, and an increase in saving. 
B)  an increase in first-period consumption, a decrease in second-period consumption, and an increase in saving. 
C)  a decrease in first-period consumption, an increase in second-period consumption, and an increase in saving. 
D)  an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving. 
E)  a decrease in first-period consumption, a decrease in second-period consumption, and an increase in saving.

Question 10

In Japan the ratio of government debt to real GDP is 220%,while in Greece it is 143%.Despite this,Greece is viewed as on an unsustainable course,while Japan is not.What could explain this?

Accepted Answer

A)  The political system is more corrupt in Japan. 
B)  Legislators are more efficient in Japan than in Greece at issuing new debt. 
C)  The prospects for economic growth in Japan are much better than in Greece. 
D)  The real interest rate is much higher in Japan than in Greece. 
E)  Japan's proximity to China. 
A)  The political system is more corrupt in Japan. 
B)  Legislators are more efficient in Japan than in Greece at issuing new debt. 
C)  The prospects for economic growth in Japan are much better than in Greece. 
D)  The real interest rate is much higher in Japan than in Greece. 
E)  Japan's proximity to China.

Question 11

A good proxy for the flow of consumption services would be

Accepted Answer

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

Question 12

A key variable in intertemporal choice is

Accepted Answer

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

Question 13

Distorting taxes can invalidate Ricardian equivalence because

Accepted Answer

A)  they confuse consumers about the need for government to repay its debt. 
B)  alternative ways of collecting the same tax revenue produce different amounts of lost welfare. 
C)  they are inferior to lump-sum taxes. 
D)  they are more popular, politically, than lump-sum taxes. 
E)  the distortions are only faced by the business sector. 
A)  they confuse consumers about the need for government to repay its debt. 
B)  alternative ways of collecting the same tax revenue produce different amounts of lost welfare. 
C)  they are inferior to lump-sum taxes. 
D)  they are more popular, politically, than lump-sum taxes. 
E)  the distortions are only faced by the business sector.

Question 14

The endowment point is the consumption bundle in which

Accepted Answer

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

Question 15

In the two-period model of the economy,

Accepted Answer

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

Question 16

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

Question 17

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

Accepted Answer

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

Question 18

Ricardian equivalence suggests that the government must pay off its debt by

Accepted Answer

A)  reducing government spending in the future. 
B)  increasing taxes in the future. 
C)  transferring surpluses to the debt. 
D)  reduces private savings in the future. 
E)  increases the real interest rate. 
A)  reducing government spending in the future. 
B)  increasing taxes in the future. 
C)  transferring surpluses to the debt. 
D)  reduces private savings in the future. 
E)  increases the real interest rate.

Question 19

For a lender,an increase in the real interest rate

Accepted Answer

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

Question 20

A consumer's budget constraint in the future period is

Accepted Answer

A)  c' = y'- t' + (1 + r)s. 
B)  c' + (1 + r)s = y'- t'. 
C)  c + s = y - t. 
D)  c' = y' - t' - (1 + r)s. 
E)  y' - t' = (1 + r)s. 
A)  c' = y'- t' + (1 + r)s. 
B)  c' + (1 + r)s = y'- t'. 
C)  c + s = y - t. 
D)  c' = y' - t' - (1 + r)s. 
E)  y' - t' = (1 + r)s.

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

Consumption smoothing refers to

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

A key channel for interest rate effects on real activity will be through

The simplest device to analyze dynamic decisions is a

The government's current period budget constraint is:

In the case where current and future consumption are perfect complements,an increase in the real interest rate

An increase in second-period income results in

In Japan the ratio of government debt to real GDP is 220%,while in Greece it is 143%.Despite this,Greece is viewed as on an unsustainable course,while Japan is not.What could explain this?

A good proxy for the flow of consumption services would be

A key variable in intertemporal choice is

Distorting taxes can invalidate Ricardian equivalence because

The endowment point is the consumption bundle in which

In the two-period model of the economy,

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

Ricardian equivalence suggests that the government must pay off its debt by

For a lender,an increase in the real interest rate

A consumer's budget constraint in the future period is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure 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 Consumption–Savings Decision and Credit Markets

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

Consumption smoothing refers to

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

A key channel for interest rate effects on real activity will be through

The simplest device to analyze dynamic decisions is a

The government's current period budget constraint is:

In the case where current and future consumption are perfect complements,an increase in the real interest rate

An increase in second-period income results in

In Japan the ratio of government debt to real GDP is 220%,while in Greece it is 143%.Despite this,Greece is viewed as on an unsustainable course,while Japan is not.What could explain this?

A good proxy for the flow of consumption services would be

A key variable in intertemporal choice is

Distorting taxes can invalidate Ricardian equivalence because

The endowment point is the consumption bundle in which

In the two-period model of the economy,

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

Ricardian equivalence suggests that the government must pay off its debt by

For a lender,an increase in the real interest rate

A consumer's budget constraint in the future period is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure 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