Question 1

For a competitive equilibrium to occur,all of the following has to happen except

Accepted Answer

A)  agents are price takers. 
B)  the government sets taxes at zero. 
C)  markets clear. 
D)  the actions of all agents are consistent. 
A)  agents are price takers. 
B)  the government sets taxes at zero. 
C)  markets clear. 
D)  the actions of all agents are consistent.

Question 2

An economy that has no interaction with the rest of the world is called

Accepted Answer

A)  an isolated economy. 
B)  a closed economy. 
C)  a parochial economy. 
D)  a rogue nation. 
A)  an isolated economy. 
B)  a closed economy. 
C)  a parochial economy. 
D)  a rogue nation.

Question 3

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

Question 4

Which of the following is not equal to the others in equilibrium?

Accepted Answer

A)  the real wage 
B)  the marginal rate of substitution between leisure and consumption 
C)  the marginal product of labor 
D)  the price of consumption 
A)  the real wage 
B)  the marginal rate of substitution between leisure and consumption 
C)  the marginal product of labor 
D)  the price of consumption

Question 5

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. 
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.

Question 6

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

Question 7

Which of the following is not a property of a competitive equilibrium?

Accepted Answer

A)  markets clear. 
B)  consumers and firms optimize given market prices. 
C)  the government budget constraint is satisfied. 
D)  increasing total factor productivity. 
A)  markets clear. 
B)  consumers and firms optimize given market prices. 
C)  the government budget constraint is satisfied. 
D)  increasing total factor productivity.

Question 8

Changes in government spending are not likely causes of business cycles because changes in government spending predict

Accepted Answer

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

Question 9

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

Question 10

The production possibilities frontier in the one-period model is a

Accepted Answer

A)  behavioral relationship between consumption and leisure. 
B)  behavioral relationship between consumption and government spending. 
C)  technological relationship between consumption and leisure. 
D)  technological relationship between consumption and government spending. 
A)  behavioral relationship between consumption and leisure. 
B)  behavioral relationship between consumption and government spending. 
C)  technological relationship between consumption and leisure. 
D)  technological relationship between consumption and government spending.

Question 11

A closed economy is characterized by

Accepted Answer

A)  the absence of trade with other economies. 
B)  the absence of use of money for transactions. 
C)  no growth in population. 
D)  a Cobb-Douglas production function. 
A)  the absence of trade with other economies. 
B)  the absence of use of money for transactions. 
C)  no growth in population. 
D)  a Cobb-Douglas production function.

Question 12

Proportional income taxation is distorting because

Accepted Answer

A)  people do all they can to avoid paying taxes. 
B)  the competitive equilibrium is not Pareto optimal. 
C)  firms do all they can to avoid paying taxes. 
D)  the government budget constraint does not hold. 
A)  people do all they can to avoid paying taxes. 
B)  the competitive equilibrium is not Pareto optimal. 
C)  firms do all they can to avoid paying taxes. 
D)  the government budget constraint does not hold.

Question 13

The presence of a distorting tax on wage income can result in

Accepted Answer

A)  MPN < MRT?,C. 
B)  MRT?,C < MRS?,C. 
C)  MPN < w. 
D)  MRS?,C < MPN 
A)  MPN < MRT?,C. 
B)  MRT?,C < MRS?,C. 
C)  MPN < w. 
D)  MRS?,C < MPN

Question 14

A competitive equilibrium may fail to be Pareto optimal due to all of the following except

Accepted Answer

A)  inequality. 
B)  externalities. 
C)  distorting taxes. 
D)  non-price-taking firms. 
A)  inequality. 
B)  externalities. 
C)  distorting taxes. 
D)  non-price-taking firms.

Question 15

In the one-period competitive model we have been studying

Accepted Answer

A)  both consumption and total factor productivity are exogenous. 
B)  consumption is exogenous and total factor productivity is endogenous. 
C)  consumption is endogenous and total factor productivity is exogenous. 
D)  both consumption and total factor productivity are endogenous. 
A)  both consumption and total factor productivity are exogenous. 
B)  consumption is exogenous and total factor productivity is endogenous. 
C)  consumption is endogenous and total factor productivity is exogenous. 
D)  both consumption and total factor productivity are endogenous.

Question 16

If the government replaces a lump sum tax with a proportional labor income tax,then

Accepted Answer

A)  employment and output increase. 
B)  employment increases and output decreases. 
C)  employment decreases and output increases. 
D)  employment and output decrease. 
A)  employment and output increase. 
B)  employment increases and output decreases. 
C)  employment decreases and output increases. 
D)  employment and output decrease.

Question 17

An increase in government spending

Accepted Answer

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

Question 18

Changes in total factor productivity are plausible causes of business cycles because

Accepted Answer

A)  of the welfare theorems. 
B)  the U.S. government is following supply-side economic policy. 
C)  the model matches many stylized facts. 
D)  prices are countercyclical. 
A)  of the welfare theorems. 
B)  the U.S. government is following supply-side economic policy. 
C)  the model matches many stylized facts. 
D)  prices are countercyclical.

Question 19

An increase in government spending shifts the PPF

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. 
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.

Question 20

The first fundamental theorem of welfare economics states that

Accepted Answer

A)  under certain conditions, a competitive equilibrium is Pareto optimal. 
B)  a competitive equilibrium is always Pareto optimal. 
C)  under certain conditions, a Pareto optimum is a competitive equilibrium. 
D)  a Pareto optimum is always a competitive equilibrium. 
A)  under certain conditions, a competitive equilibrium is Pareto optimal. 
B)  a competitive equilibrium is always Pareto optimal. 
C)  under certain conditions, a Pareto optimum is a competitive equilibrium. 
D)  a Pareto optimum is always a competitive equilibrium.

For a competitive equilibrium to occur,all of the following has to happen except

An economy that has no interaction with the rest of the world is called

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

Which of the following is not equal to the others in equilibrium?

Making use of an economic model is a process of

The concept of Pareto optimality is a

Which of the following is not a property of a competitive equilibrium?

Changes in government spending are not likely causes of business cycles because changes in government spending predict

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

The production possibilities frontier in the one-period model is a

A closed economy is characterized by

Proportional income taxation is distorting because

The presence of a distorting tax on wage income can result in

A competitive equilibrium may fail to be Pareto optimal due to all of the following except

In the one-period competitive model we have been studying

If the government replaces a lump sum tax with a proportional labor income tax,then

An increase in government spending

Changes in total factor productivity are plausible causes of business cycles because

An increase in government spending shifts the PPF

The first fundamental theorem of welfare economics states that

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

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking

Inflation, the Phillips Curve, and Central Bank Commitment

Filters

Exam 5: A Closed-Economy One-Period Macroeconomic Model

For a competitive equilibrium to occur,all of the following has to happen except

An economy that has no interaction with the rest of the world is called

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

Which of the following is not equal to the others in equilibrium?

Making use of an economic model is a process of

The concept of Pareto optimality is a

Which of the following is not a property of a competitive equilibrium?

Changes in government spending are not likely causes of business cycles because changes in government spending predict

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

The production possibilities frontier in the one-period model is a

A closed economy is characterized by

Proportional income taxation is distorting because

The presence of a distorting tax on wage income can result in

A competitive equilibrium may fail to be Pareto optimal due to all of the following except

In the one-period competitive model we have been studying

If the government replaces a lump sum tax with a proportional labor income tax,then

An increase in government spending

Changes in total factor productivity are plausible causes of business cycles because

An increase in government spending shifts the PPF

The first fundamental theorem of welfare economics states that

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

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking

Inflation, the Phillips Curve, and Central Bank Commitment

Filters