Chapter 3: National Income: Where It Comes From and Where It Goes'

Other things equal, an increase in the interest rate leads to: -sometimes an increase and sometimes a decrease in the quantity of investment goods demanded. -a decrease in the quantity of investment goods demanded. -no change in the quantity of investment goods demanded. -an increase in the quantity of investment goods demanded.

a decrease in the quantity of investment goods demanded.

Consumption depends positively on ______ and investment depends negatively on ______. -the real interest rate; disposable income -public saving; private saving -private saving; public saving -disposable income; the real interest rate

disposable income; the real interest rate

National saving refers to: -income minus consumption minus government spending. -taxes minus government spending. -disposable income minus consumption. -income minus investment.

income minus consumption minus government spending.

When government spending increases and taxes are increased by an equal amount, interest rates: -increase. -can vary wildly. -remain the same. -decrease.

increase

In the neoclassical model with fixed income, if there is a decrease in government spending with no change in taxes, then public saving ______ and private saving ______. -decreases; does not change -decreases; increases -increases; increases. -increases; does not change

increases; does not change

According to the model developed in Chapter 3, when government spending increases without a change in taxes: -investment increases. -investment decreases. -consumption increases. -consumption decreases.

investment decreases

An economy's factors of production and its production function determine the economy's: -labor force participation rate. -budget surplus or deficit. -population growth rate. -output of goods and services.

output of goods and services.

A competitive, profit-maximizing firm hires labor until the: -price of output multiplied by the marginal product of labor equals the wage. -real wage equals the real rental price of capital. -wage equals the rental price of capital. -marginal product of labor equals the wage.

price of output multiplied by the marginal product of labor equals the wage.

The equation F = C(Y-T)+I(r) + G may be solved for the equilibrium level of: -income. -the interest rate. -consumption. -government purchases.

the interest rate

If saving exceeds investment demand, and consumption is not a function of the interest rate: -the interest rate will rise. -the interest rate will fall. -saving will fall. -the demand for loans exceeds the supply of loans.

the interest rate will fall

In a Cobb-Douglas production function the marginal product of labor will increase if: -the quantity of labor increases. -capital's share of output increases. -the quantity of capital increases. -average labor productivity decreases.

the quantity of capital increases.

According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas production function, when average labor productivity is growing rapidly: -economic profits will be positive. -workers will experience high rates of real wage growth. -labor's share of total income will be increasing. -labor's share of income will be decreasing.

workers will experience high rates of real wage growth.

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by: -0.85 units. -0.5 units. -0.15 units. -1 unit.

0.85 units.

At any particular point in time, the output of the economy: -is fixed because the demand for goods and services is fixed. -varies because the technology for turning capital and labor into goods and services varies. -varies because the supplies of capital and labor vary. -is fixed because the supplies of capital and labor and the technology are fixed.

is fixed because the supplies of capital and labor and the technology are fixed.

Assume that an increase in consumer confidence raises consumers' expectations of future income and thus the amount they want to consume today for any given income. This shift, in a neoclassical economy, will: -lower investment and raise the interest rate. -raise both investment and the interest rate. -lower both investment and the interest rate. -raise investment and lower the interest rate.

lower investment and raise the interest rate.

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labor depending on their: -marginal productivities. -relative political power. -supply. -equilibrium growth rates.

marginal productivities

In equilibrium, total investment equals: -private saving. -national saving. -public saving. -household saving.

national saving