Question 1

When GDP is growing faster than trend,the employment-to-population ratio tends to grow:

Accepted Answer

A)  faster than trend. 
B)  more slowly than trend. 
C)  at its trend level. 
D)  unpredictably. 
A)  faster than trend. 
B)  more slowly than trend. 
C)  at its trend level. 
D)  unpredictably.

Question 2

Many economic activities tend to cluster together in time because:

Accepted Answer

A)  of cultural norms that tell us we are supposed to work during the day. 
B)  the returns to working are lower in the evening hours. 
C)  the returns to coordinating with others are high. 
D)  the opportunity cost is higher than when these activities are not clustered. 
A)  of cultural norms that tell us we are supposed to work during the day. 
B)  the returns to working are lower in the evening hours. 
C)  the returns to coordinating with others are high. 
D)  the opportunity cost is higher than when these activities are not clustered.

Question 3

Collateral shocks make borrowing and lending more difficult and help to exacerbate economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 4

Time bunching tends to amplify business cycles because:

Accepted Answer

A)  assets are typically worth more in booms than in recessions. 
B)  the returns to work are higher in booms than in recessions,so people work more during booms and less during recessions. 
C)  the returns to investment are higher when others are investing as well,thus we see more investment during booms and less during recessions. 
D)  the uncertainty of recessions tend to increase people's job search time,while greater certainty decreases search time during booms. 
A)  assets are typically worth more in booms than in recessions. 
B)  the returns to work are higher in booms than in recessions,so people work more during booms and less during recessions. 
C)  the returns to investment are higher when others are investing as well,thus we see more investment during booms and less during recessions. 
D)  the uncertainty of recessions tend to increase people's job search time,while greater certainty decreases search time during booms.

Question 5

After the 9/11 attacks:

Accepted Answer

A)  people rushed to invest in New York City. 
B)  the economy's long-run potential growth rate increased. 
C)  people held off on business investment until it became clear that the attacks would not become regular occurrences. 
D)  the need for information about the future went out the window. 
A)  people rushed to invest in New York City. 
B)  the economy's long-run potential growth rate increased. 
C)  people held off on business investment until it became clear that the attacks would not become regular occurrences. 
D)  the need for information about the future went out the window.

Question 6

A negative shock reduces capital investments because:

Accepted Answer

A)  capital investments involve sunk costs. 
B)  investments are always very speculative. 
C)  capital investments are easily reversible. 
D)  investors react only to capital investments that bring high returns. 
A)  capital investments involve sunk costs. 
B)  investments are always very speculative. 
C)  capital investments are easily reversible. 
D)  investors react only to capital investments that bring high returns.

Question 7

The term "intertemporal substitution" refers to the allocation of time between:

Accepted Answer

A)  making capital goods and making consumption goods. 
B)  consumption and saving. 
C)  friends and family. 
D)  leisure and work. 
A)  making capital goods and making consumption goods. 
B)  consumption and saving. 
C)  friends and family. 
D)  leisure and work.

Question 8

Uncertainty usually slows investment and keeps resources in less productive uses.

Accepted Answer

A) True 
 B)False

Question 9

Time bunching prevents shocks from spreading through time and through the economy.

Accepted Answer

A) True 
 B)False

Question 10

A laid-off autoworker does not immediately seek employment in a rapidly growing computer industry because:

Accepted Answer

A)  he is irrational,not considering the benefits of searching for a new job. 
B)  changing a career is a costly decision. 
C)  being unemployed is always the best decision for a person after a layoff. 
D)  there are benefits to being rationally ignorant. 
A)  he is irrational,not considering the benefits of searching for a new job. 
B)  changing a career is a costly decision. 
C)  being unemployed is always the best decision for a person after a layoff. 
D)  there are benefits to being rationally ignorant.

Question 11

After 9/11,why were many investors unwilling to engage in new construction in New York City?

Accepted Answer

A)  Construction companies were unwilling to work in New York City. 
B)  Uncertainty regarding future terrorist attacks left investors unsure about the demand for new offices. 
C)  The cost of steel had skyrocketed and building new construction became very expensive. 
D)  The Mayor of New York abolished new construction for a period of 6 months. 
A)  Construction companies were unwilling to work in New York City. 
B)  Uncertainty regarding future terrorist attacks left investors unsure about the demand for new offices. 
C)  The cost of steel had skyrocketed and building new construction became very expensive. 
D)  The Mayor of New York abolished new construction for a period of 6 months.

Question 12

Rapid changes in economic conditions that have large effects on the productivity of capital and labor are called:

Accepted Answer

A)  business cycles. 
B)  recessions. 
C)  shocks. 
D)  transmission mechanisms. 
A)  business cycles. 
B)  recessions. 
C)  shocks. 
D)  transmission mechanisms.

Question 13

Economists disagree on the importance of intertemporal substitution in generating real effects from fiscal policy.

Accepted Answer

A) True 
 B)False

Question 14

During a recession,higher labor adjustment costs lead to higher search unemployment.

Accepted Answer

A) True 
 B)False

Question 15

When the economy is in recession,we tend to see more people entering college.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is the reason banks are usually more concerned about downside risk than upside gain?

Accepted Answer

A)  Banks generally are very risk averse and try to minimize any possible level of risk. 
B)  Banks are highly regulated,and therefore they have to manage their risk very efficiently. 
C)  If the firm does poorly,the bank could lose the entire value of its loan,but if the firm does incredibly well,the bank simply gets its loan back plus interest. 
D)  If the firm does poorly,the bank could lose the entire value of its loan,but if the firm does incredibly well,the bank would also receive higher return. 
A)  Banks generally are very risk averse and try to minimize any possible level of risk. 
B)  Banks are highly regulated,and therefore they have to manage their risk very efficiently. 
C)  If the firm does poorly,the bank could lose the entire value of its loan,but if the firm does incredibly well,the bank simply gets its loan back plus interest. 
D)  If the firm does poorly,the bank could lose the entire value of its loan,but if the firm does incredibly well,the bank would also receive higher return.

Question 17

Time bunching results in:

Accepted Answer

A)  seasonal cycles of business activity. 
B)  a smooth trend in real GDP over time. 
C)  shocks having a smaller effect on the economy. 
D)  people working more during recessions. 
A)  seasonal cycles of business activity. 
B)  a smooth trend in real GDP over time. 
C)  shocks having a smaller effect on the economy. 
D)  people working more during recessions.

Question 18

Which quarter of the year produces the most economic output?

Accepted Answer

A)  first 
B)  second 
C)  third 
D)  fourth 
A)  first 
B)  second 
C)  third 
D)  fourth

Question 19

Intertemporal substitution tends to amplify business cycles because:

Accepted Answer

A)  assets are typically worth more in booms than in recessions. 
B)  the returns to work are higher in booms than in recessions,so people work more during booms and less during recessions. 
C)  the returns to investment are higher when others are investing as well,thus we see more investment during booms and less during recessions. 
D)  many people are hesitant to change jobs during recessions and thus resources are stuck in less productive uses. 
A)  assets are typically worth more in booms than in recessions. 
B)  the returns to work are higher in booms than in recessions,so people work more during booms and less during recessions. 
C)  the returns to investment are higher when others are investing as well,thus we see more investment during booms and less during recessions. 
D)  many people are hesitant to change jobs during recessions and thus resources are stuck in less productive uses.

Question 20

Uncertainty tends to keep resources:

Accepted Answer

A)  in more productive uses. 
B)  in less productive uses. 
C)  fully employed. 
D)  moving from country to country. 
A)  in more productive uses. 
B)  in less productive uses. 
C)  fully employed. 
D)  moving from country to country.

Exam 14: Transmission and Amplification Mechanisms

When GDP is growing faster than trend,the employment-to-population ratio tends to grow:

Many economic activities tend to cluster together in time because:

Collateral shocks make borrowing and lending more difficult and help to exacerbate economic fluctuations.

Time bunching tends to amplify business cycles because:

After the 9/11 attacks:

A negative shock reduces capital investments because:

The term "intertemporal substitution" refers to the allocation of time between:

Uncertainty usually slows investment and keeps resources in less productive uses.

Time bunching prevents shocks from spreading through time and through the economy.

A laid-off autoworker does not immediately seek employment in a rapidly growing computer industry because:

After 9/11,why were many investors unwilling to engage in new construction in New York City?

Rapid changes in economic conditions that have large effects on the productivity of capital and labor are called:

Economists disagree on the importance of intertemporal substitution in generating real effects from fiscal policy.

During a recession,higher labor adjustment costs lead to higher search unemployment.

When the economy is in recession,we tend to see more people entering college.

Which of the following is the reason banks are usually more concerned about downside risk than upside gain?

Time bunching results in:

Which quarter of the year produces the most economic output?

Intertemporal substitution tends to amplify business cycles because:

Uncertainty tends to keep resources:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

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