Question 1

Suppose the index of leading economic indicators begins to decline for several months. Which of the following economic events will likely follow?

Accepted Answer

A)  A recession. 
B)  Severe inflation. 
C)  Greater employment. 
D)  Higher investment. 
A)  A recession. 
B)  Severe inflation. 
C)  Greater employment. 
D)  Higher investment.

Question 2

For a given state of unchanging production technologies without the technological change:

Accepted Answer

A)  no further growth in living standards can be achieved at some point in time. 
B)  further growth in living standards can be achieved if investment is higher than
Consumption. 
C)  further growth in living standards can be achieved at some point in time. 
D)  further growth in living standards can be achieved if saving is higher than investment. 
A)  no further growth in living standards can be achieved at some point in time. 
B)  further growth in living standards can be achieved if investment is higher than
Consumption. 
C)  further growth in living standards can be achieved at some point in time. 
D)  further growth in living standards can be achieved if saving is higher than investment.

Question 3

One of the problems in a country achieving its steady-state level in the Solow model is that:

Accepted Answer

A)  short-term saving must be sacrificed in order to increase living standards in the long term. 
B)  short-term consumption must be sacrificed in order to increase living standards in the long term. 
C)  short-term investment must be sacrificed in order to increase living standards in the long term. 
D)  future generations will need to cut back on consumption in the long term. 
A)  short-term saving must be sacrificed in order to increase living standards in the long term. 
B)  short-term consumption must be sacrificed in order to increase living standards in the long term. 
C)  short-term investment must be sacrificed in order to increase living standards in the long term. 
D)  future generations will need to cut back on consumption in the long term.

Question 4

The trough is the point:

Accepted Answer

A)  at which the economy reaches its maximum. 
B)  at which unemployment is at the lowest level relative to recent years. 
C)  where the level of real GDP is at a maximum. 
D)  at which employment is at the lowest level relative to recent years. 
A)  at which the economy reaches its maximum. 
B)  at which unemployment is at the lowest level relative to recent years. 
C)  where the level of real GDP is at a maximum. 
D)  at which employment is at the lowest level relative to recent years.

Question 5

The GDP gap is the difference between:

Accepted Answer

A)  full-employment real GDP and nominal GDP. 
B)  the full employment rate and real GDP chain price index. 
C)  full-employment real GDP and actual real GDP. 
D)  seasonal unemployment and nominal GDP. 
A)  full-employment real GDP and nominal GDP. 
B)  the full employment rate and real GDP chain price index. 
C)  full-employment real GDP and actual real GDP. 
D)  seasonal unemployment and nominal GDP.

Question 6

The Solow growth model is based on holding labour and capital constant, but increasing technological progress.

Accepted Answer

A) True 
 B)False

Question 7

Economic indicators (e.g. unemployment claims and the average working week), which change before real GDP changes, are called:

Accepted Answer

A)  leading. 
B)  lagging. 
C)  coincident. 
D)  structural. 
A)  leading. 
B)  lagging. 
C)  coincident. 
D)  structural.

Question 8

Without technological progress a country can never enjoy sustained increases in living standards because:

Accepted Answer

A)  of diminishing marginal productivity. 
B)  of decreasing returns to scale. 
C)  an economy can never exceed its optimal rate of saving in the long run. 
D)  of increasing marginal productivity. 
A)  of diminishing marginal productivity. 
B)  of decreasing returns to scale. 
C)  an economy can never exceed its optimal rate of saving in the long run. 
D)  of increasing marginal productivity.

Question 9

According to the endogenous growth model, public sector spending on basic research may:

Accepted Answer

A)  be better spent on the private sector. 
B)  have long-term benefits to society. 
C)  have short-term benefits to society, but will be money wasted in the long term. 
D)  have a higher return than private sector research and development. 
A)  be better spent on the private sector. 
B)  have long-term benefits to society. 
C)  have short-term benefits to society, but will be money wasted in the long term. 
D)  have a higher return than private sector research and development.

Question 10

The GDP gap measures:

Accepted Answer

A)  the value of non-market goods. 
B)  the cost of additional labour. 
C)  total value of final goods and services. 
D)  the cost of cyclical unemployment. 
A)  the value of non-market goods. 
B)  the cost of additional labour. 
C)  total value of final goods and services. 
D)  the cost of cyclical unemployment.

Question 11

A business cycle is:

Accepted Answer

A)  the period of time in which the expansion and contraction of economic activity are equal. 
B)  the period of time in which there are three phases, which are: peak, depression
And recovery. 
C)  the recurring growth and decline in real GDP. 
D)  the period of time in which a business is established and ceases operations. 
A)  the period of time in which the expansion and contraction of economic activity are equal. 
B)  the period of time in which there are three phases, which are: peak, depression
And recovery. 
C)  the recurring growth and decline in real GDP. 
D)  the period of time in which a business is established and ceases operations.

Question 12

According to the Solow model, with a constant amount of labour and constant technology, increases in the quantity of capital will lead to output per worker:

Accepted Answer

A)  increasing at an increasing rate. 
B)  increasing at a decreasing rate. 
C)  remaining constant. 
D)  declining at an increasing rate. 
A)  increasing at an increasing rate. 
B)  increasing at a decreasing rate. 
C)  remaining constant. 
D)  declining at an increasing rate.

Question 13

Government intervention may be necessary for an economy to increase its living standards in the long run.

Accepted Answer

A) True 
 B)False

Question 14

Patents are an example of governments:

Accepted Answer

A)  stifling competition. 
B)  protecting lazy monopolies. 
C)  providing an incentive for firms to engage in research and development. 
D)  inducing negative externalities. 
A)  stifling competition. 
B)  protecting lazy monopolies. 
C)  providing an incentive for firms to engage in research and development. 
D)  inducing negative externalities.

Question 15

If an increase in labour and capital of 10 per cent leads to output increasing by 20 per cent then, ceteris paribus, the economy is operating with:

Accepted Answer

A)  diseconomies of scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale. 
A)  diseconomies of scale. 
B)  decreasing returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale.

Question 16

Narrbegin Exhibit 12.2
 \[\begin{array} { | c | c | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Capital stock } \
\text { per person }
\end{array} & \begin{array} { c } 
\text { Output per } \
\text { person }
\end{array} & \begin{array} { c } 
\text { Capital stock } \
\text { depreciation } \
\text { (at rate of 10 } \
\text { per cent) }
\end{array} & \begin{array} { c } 
\text { Gross in- } \
\text { vestment } \
\text { per person }
\end{array} & \begin{array} { c } 
\text { Required } \
\text { saving } \
\text { per per- } \
\text { son }
\end{array} & \begin{array} { c } 
\text { Required } \
\text { saving } \
\text { rate }
\end{array} & \begin{array} { c } 
\text { Consump- } \
\text { tion per } \
\text { person }
\end{array} \
\hline 100 \quad ( \langle 20 \% ) & 40 & 10 & 10 & 10 & 25 \% & 30 \
\hline 120 \quad ( \langle 20 \% ) & 46 ( < 15 \% ) & 12 & 12 & 12 & 26 \% &-?- \ 
\hline 144 \quad ( \langle 20 \% ) & \begin{array} { c } 
50.6 ( < \
10 \% )
\end{array} & 14 & 14 & 144 & 28.5 \% & 36.2 \
\hline 172.8 ( \langle 20 \% ) & 53.1 ( \langle 5 \% ) & 17.3 & 17.3 & 17.3 &  { } _ { - } { ?} _ { - } \% & 35.8 \
\hline
\end{array}\]
-According to Exhibit 12.2, output per worker is increasing at a decreasing rate. This is due to:

Accepted Answer

A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  diminishing marginal productivity. 
D)  increasing marginal productivity. 
A)  increasing returns to scale. 
B)  decreasing returns to scale. 
C)  diminishing marginal productivity. 
D)  increasing marginal productivity.

Question 17

The business cycle occurs from:

Accepted Answer

A)  changes in industry demand. 
B)  changes in local supply and taxes. 
C)  changes in weather. 
D)  changes in the costs of production and in total spending. 
A)  changes in industry demand. 
B)  changes in local supply and taxes. 
C)  changes in weather. 
D)  changes in the costs of production and in total spending.

Question 18

A temporary monopoly right through the patent:

Accepted Answer

A)  is a waste of resources. 
B)  should not be granted. 
C)  can be in society's longer term interest. 
D)  is a luxury that only advantageous people enjoy. 
A)  is a waste of resources. 
B)  should not be granted. 
C)  can be in society's longer term interest. 
D)  is a luxury that only advantageous people enjoy.

Question 19

Total spending influences the business cycle because:

Accepted Answer

A)  increases in spending flow through to higher output, employment and income. 
B)  it allows GDP to increase well beyond the full-employment level of output. 
C)  decreases in spending will increase inflation, which then reduces real GDP. 
D)  increases in spending will decrease inflation, which then increases real GDP. 
A)  increases in spending flow through to higher output, employment and income. 
B)  it allows GDP to increase well beyond the full-employment level of output. 
C)  decreases in spending will increase inflation, which then reduces real GDP. 
D)  increases in spending will decrease inflation, which then increases real GDP.

Question 20

A country can still enjoy sustained increases in living standards even if it does not enjoy technological progress.

Accepted Answer

A) True 
 B)False

Suppose the index of leading economic indicators begins to decline for several months. Which of the following economic events will likely follow?

For a given state of unchanging production technologies without the technological change:

One of the problems in a country achieving its steady-state level in the Solow model is that:

The trough is the point:

The GDP gap is the difference between:

The Solow growth model is based on holding labour and capital constant, but increasing technological progress.

Economic indicators (e.g. unemployment claims and the average working week), which change before real GDP changes, are called:

Without technological progress a country can never enjoy sustained increases in living standards because:

According to the endogenous growth model, public sector spending on basic research may:

The GDP gap measures:

A business cycle is:

According to the Solow model, with a constant amount of labour and constant technology, increases in the quantity of capital will lead to output per worker:

Government intervention may be necessary for an economy to increase its living standards in the long run.

Patents are an example of governments:

If an increase in labour and capital of 10 per cent leads to output increasing by 20 per cent then, ceteris paribus, the economy is operating with:

The business cycle occurs from:

A temporary monopoly right through the patent:

Total spending influences the business cycle because:

A country can still enjoy sustained increases in living standards even if it does not enjoy technological progress.

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 13: Business Cycles and Economic Growth

Suppose the index of leading economic indicators begins to decline for several months. Which of the following economic events will likely follow?

For a given state of unchanging production technologies without the technological change:

One of the problems in a country achieving its steady-state level in the Solow model is that:

The trough is the point:

The GDP gap is the difference between:

The Solow growth model is based on holding labour and capital constant, but increasing technological progress.

Economic indicators (e.g. unemployment claims and the average working week), which change before real GDP changes, are called:

Without technological progress a country can never enjoy sustained increases in living standards because:

According to the endogenous growth model, public sector spending on basic research may:

The GDP gap measures:

A business cycle is:

According to the Solow model, with a constant amount of labour and constant technology, increases in the quantity of capital will lead to output per worker:

Government intervention may be necessary for an economy to increase its living standards in the long run.

Patents are an example of governments:

If an increase in labour and capital of 10 per cent leads to output increasing by 20 per cent then, ceteris paribus, the economy is operating with:

The business cycle occurs from:

A temporary monopoly right through the patent:

Total spending influences the business cycle because:

A country can still enjoy sustained increases in living standards even if it does not enjoy technological progress.

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters