Question 1

During an economic boom,the employment-to-population ratio rises because:

Accepted Answer

A)  inflation tends to rise at that time. 
B)  the opportunity cost of leisure increases. 
C)  fewer people are available to work. 
D)  real wages tend to fall at that time. 
A)  inflation tends to rise at that time. 
B)  the opportunity cost of leisure increases. 
C)  fewer people are available to work. 
D)  real wages tend to fall at that time.

Question 2

When a shock is amplified,a mild _____ shock is transformed into _____.

Accepted Answer

A)  negative;a mild positive shock 
B)  negative;an economic boom 
C)  negative;a more serious reduction in output 
D)  positive;a mild negative shock 
A)  negative;a mild positive shock 
B)  negative;an economic boom 
C)  negative;a more serious reduction in output 
D)  positive;a mild negative shock

Question 3

Adam is unemployed and can try to find another job as a bank teller,or he can go back to school for 2 years and become a nurse.Nursing jobs are easy to find and nurses are better paid than bank tellers.Why must he think carefully before making this career change?

Accepted Answer

A)  Bank tellers are a dying profession. 
B)  He doesn't like his current career. 
C)  Student loans are easy to secure. 
D)  Nursing school is an irreversible investment. 
A)  Bank tellers are a dying profession. 
B)  He doesn't like his current career. 
C)  Student loans are easy to secure. 
D)  Nursing school is an irreversible investment.

Question 4

Which of the following is NOT a transmission mechanism?

Accepted Answer

A)  reductions in the money supply 
B)  intertemporal substitution 
C)  uncertainty 
D)  sticky wages and prices 
A)  reductions in the money supply 
B)  intertemporal substitution 
C)  uncertainty 
D)  sticky wages and prices

Question 5

Which of the following individuals is practicing intertemporal substitution?

Accepted Answer

A)  Sharona decides to stop being a stay-at-home mother and enters the workforce to get extra money for future college expenses. 
B)  Malika decides to stop being a stay-at-home mother and enters the workforce because the economy is booming. 
C)  Anneliese studies continuously throughout the semester for her final exams. 
D)  The United States enters a recession,and Tashika loses her job. 
A)  Sharona decides to stop being a stay-at-home mother and enters the workforce to get extra money for future college expenses. 
B)  Malika decides to stop being a stay-at-home mother and enters the workforce because the economy is booming. 
C)  Anneliese studies continuously throughout the semester for her final exams. 
D)  The United States enters a recession,and Tashika loses her job.

Question 6

If you work an extra hour when your boss offers to pay you double,you are time bunching.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is NOT true?

Accepted Answer

A)  There is a tendency for fewer people to enter college when wages are increasing. 
B)  People are more likely to retire or take early retirement during a boom. 
C)  Homemakers will likely choose to enter the workforce during boom periods. 
D)  There will be more people investing in their education when jobs are scarce. 
A)  There is a tendency for fewer people to enter college when wages are increasing. 
B)  People are more likely to retire or take early retirement during a boom. 
C)  Homemakers will likely choose to enter the workforce during boom periods. 
D)  There will be more people investing in their education when jobs are scarce.

Question 8

The clustering of economic activity in time does NOT:

Accepted Answer

A)  make buying and selling more efficient. 
B)  induce intertemporal substitution. 
C)  eliminate long periods of unemployment. 
D)  cause shocks to spread through the economy and through time. 
A)  make buying and selling more efficient. 
B)  induce intertemporal substitution. 
C)  eliminate long periods of unemployment. 
D)  cause shocks to spread through the economy and through time.

Question 9

Transmission mechanisms:

Accepted Answer

A)  can amplify positive shocks. 
B)  can amplify negative shocks. 
C)  can amplify both positive and negative shocks. 
D)  amplify neither positive nor negative shocks. 
A)  can amplify positive shocks. 
B)  can amplify negative shocks. 
C)  can amplify both positive and negative shocks. 
D)  amplify neither positive nor negative shocks.

Question 10

During a recession,lending typically declines because:

Accepted Answer

A)  banks need to hold less as a cushion for themselves. 
B)  asset prices fall and therefore the net worth of firms declines as well,making them look riskier to banks. 
C)  there are fewer collateral shocks. 
D)  there is more demand for investment funding. 
A)  banks need to hold less as a cushion for themselves. 
B)  asset prices fall and therefore the net worth of firms declines as well,making them look riskier to banks. 
C)  there are fewer collateral shocks. 
D)  there is more demand for investment funding.

Question 11

As a result of time bunching,the effect of an economic shock on the economy:

Accepted Answer

A)  is smaller. 
B)  is larger. 
C)  becomes less certain. 
D)  becomes more certain. 
A)  is smaller. 
B)  is larger. 
C)  becomes less certain. 
D)  becomes more certain.

Question 12

When car dealers offer to do tax returns for customers in February and March,what are they practicing?

Accepted Answer

A)  positive shock inertia 
B)  sticky price clustering 
C)  irreversible investing 
D)  time bunching 
A)  positive shock inertia 
B)  sticky price clustering 
C)  irreversible investing 
D)  time bunching

Question 13

The economic forces that amplify shocks by spreading them across time and sectors of the economy are called:

Accepted Answer

A)  irreversible investments. 
B)  intertemporal substitutions. 
C)  transmission mechanisms. 
D)  aggregate demand conveyances. 
A)  irreversible investments. 
B)  intertemporal substitutions. 
C)  transmission mechanisms. 
D)  aggregate demand conveyances.

Question 14

A capital investment is more irreversible if it involves a high:

Accepted Answer

A)  sunk cost. 
B)  labor cost. 
C)  maintenance cost. 
D)  depreciation rate. 
A)  sunk cost. 
B)  labor cost. 
C)  maintenance cost. 
D)  depreciation rate.

Question 15

An asset used by a borrower to secure a loan is called:

Accepted Answer

A)  an opportunity cost. 
B)  interest. 
C)  bunching. 
D)  collateral. 
A)  an opportunity cost. 
B)  interest. 
C)  bunching. 
D)  collateral.

Question 16

A positive real shock will increase real GDP growth more if there are more irreversible investments.

Accepted Answer

A) True 
 B)False

Question 17

If investors are less certain about the economic outlook,they will:

Accepted Answer

A)  reduce capital investments that are less irreversible. 
B)  reduce capital investments that are more irreversible. 
C)  raise capital investments that are less irreversible. 
D)  raise capital investments that are more irreversible. 
A)  reduce capital investments that are less irreversible. 
B)  reduce capital investments that are more irreversible. 
C)  raise capital investments that are less irreversible. 
D)  raise capital investments that are more irreversible.

Question 18

Individuals and/or firms have more of an incentive to take care of their assets if:

Accepted Answer

A)  they do not own the assets. 
B)  they have a lot of equity in the assets. 
C)  the economy is in a recession. 
D)  others value their assets. 
A)  they do not own the assets. 
B)  they have a lot of equity in the assets. 
C)  the economy is in a recession. 
D)  others value their assets.

Question 19

While people are making necessary but costly labor adjustments,output and employment will be higher than normal.

Accepted Answer

A) True 
 B)False

Question 20

Negative shocks also increase certainty,which is bad for business investment.

Accepted Answer

A) True 
 B)False

Exam 14: Transmission and Amplification Mechanisms

During an economic boom,the employment-to-population ratio rises because:

When a shock is amplified,a mild _____ shock is transformed into _____.

Adam is unemployed and can try to find another job as a bank teller,or he can go back to school for 2 years and become a nurse.Nursing jobs are easy to find and nurses are better paid than bank tellers.Why must he think carefully before making this career change?

Which of the following is NOT a transmission mechanism?

Which of the following individuals is practicing intertemporal substitution?

If you work an extra hour when your boss offers to pay you double,you are time bunching.

Which of the following statements is NOT true?

The clustering of economic activity in time does NOT:

Transmission mechanisms:

During a recession,lending typically declines because:

As a result of time bunching,the effect of an economic shock on the economy:

When car dealers offer to do tax returns for customers in February and March,what are they practicing?

The economic forces that amplify shocks by spreading them across time and sectors of the economy are called:

A capital investment is more irreversible if it involves a high:

An asset used by a borrower to secure a loan is called:

A positive real shock will increase real GDP growth more if there are more irreversible investments.

If investors are less certain about the economic outlook,they will:

Individuals and/or firms have more of an incentive to take care of their assets if:

While people are making necessary but costly labor adjustments,output and employment will be higher than normal.

Negative shocks also increase certainty,which is bad for business investment.

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

Filters

When a shock is amplified,a mild _ shock is transformed into _.