Econ 351 Exam 1

3.5 in a cobb-douglas production function, the marginal product of labor will increase if: a. the quantity of labor increases b. the quantity of capital increases c. capital's share of output decreases d. average labor productivity decreases

b. the quantity of capital increases

2.8. if an increasing proportion of the adult population is retired, the labor-force participation rate: a. will increase b. will decrease c. will remain constant d. may increase, decrease, or remain constant

b. will decrease

2.4. real GDP means the value of goods and services is measured in _______ prices a. current b. actual c. constant d. average

c. constant

3.1 according to the model developed in CH3, when taxes are increased, but government spending is unchanged, interest rates a. increase b. are unchanged c. decrease d. can vary wildly

c. decrease

2.3. when a firm sells a product out of inventory, GDP: a. increases b. decreases c. is not changed d. increases or decreases, depending on the year the product was being produced

c. is not changed

3.3 when the demand for loanable funds exceeds the supply of loanable funds, households want to save _______ than firms want to invest, and the interest rate ________. a. more; rises b. more; falls c. less; rises d. less; falls

c. less; rises

4.3 Assets of banks include a. money market mutual funds b. currency in the hands of the public c. loans to customers d. demand deposits

c. loans to customers

2.6. In the CFM, the flow of dollars from firms to households is paid _____, and the flow of dollars from households to firms is _____. a. as wages, capital income, and profits; for goods and services b. for value added; as imputed values c. in current dollars; in constant dollars d. as interest and dividends; for depreciation and taxes

a. as wages, capital income, and profits; for good and services

4.2 to increase the money supply, the federal reserve: a. buys government bonds b. sells government bonds c. buys corporate stocks d. sells corporate stocks

a. buys government bonds

4.8 if the federal reserve wishes to increase the money supply, it should: a. decrease the discount rate b. increase interest paid on reserves c. sell government bonds d. decrease the monetary base

a. decrease the discount rate

2.2. If nominal GDP increased by 5% and the GDP deflator increased by 3%, then real GDP _______ by _______%. a. increased; 2 b. decreased; 2 c. increased; 8 d. decreased; 8

a. increased; 2

4.5 the most frequently used tool of monetary policy is: a. open-market operations b. changes in the discount rate c. changes in reserve requirements d. changes in interest rate paid on reserves

a. open-market operations

2.5. an increase in the price of imported goods will show up in: a. the CPI but not in the GDP deflator b. the GDP deflator but not in the CPI c. both the CPI and GDP deflator d. neither the CPI nor the GDP deflator

a. the CPI but not in the GDP deflator

4.7 two ways for banks to borrow reserves from the federal reserve are through: a. the discount window and the term auction facility b. open-market operations and excess reserve swaps c. fraction-reserve banking and financial intermediation

a. the discount window and the term auction facility

3.8 In a cobb-douglas production function, the marginal product of capital will increase if: a. the quantity of labor increases b. the quantity of capital increases c. labor's share of output increases d. average capital productivity decreases

a. the quantity of labor increases

2.9. Assume that a firm buys all the parts that it puts into an automobile for $10,000, pays its workers $10,000 to fabricate the automobile, and sells the automobile for $22,000. In this case, the value added by the automobile company is; a . 10k b. 12k c. 20k d. 2k

b. 12k

4.4 based, on the table, owners' equity will fall to zero if loan defaults reduce the value of assets by _____ percent. Banks Balance Sheet Assets Reserves $10,000 loans 100,000 securities 40,000 Liabilities & net worth deposits $100,000 debt 20,000 equity 30,000 a. 10 b. 20 c. 30 d. 40

b. 20

3.2 if the production function describing an economy is Y = 100K^0.25L^0.75 then the share of output going to labor: a. 25% b. 75% c. depends on quantity of labor and capital d. depends on state of technology

b. 75%

3.6 government transfer payments: a. are included as part of government purchases, G b. can be viewed as negative tax payments, T c. are received as payments for inputs in the factor market d. do not affect the level of public or private saving

b. can be viewed as negative tax payments, T

3.7 an increase in the supply of capital will: a. increase the real rental price of capital b. decrease the real rental price of capital c. increase the productivity of capital d. increase the marginal product of capital

b. decrease the real rental price of capital

4.1 when the fed decreases the interest rate paid on reserves, it: a. increases the reserve-deposit ratio (rr) b. decreases the reserve-deposit ratio (rr) c. increase the monetary base (B) d. decreases the monetary base (B)

b. decreases the reserve-deposit ratio (rr)

2.7. measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some because a. provides a real, rather than a nominal, rate of inflation b. gives a better measure of ongoing, sustained price changes c. is more consistent with measures of inflation used in other countries d. fluctuates more than measures of inflation that include food and E prices

b. gives a better measure of ongoing, sustained price changes

2.10 Prices of items included in the CPI are: a. average, with the price of every item weighted equally b. weighted according to the amount of the item produced in GDP c. weight according to the quantity of the item purchased by the typical household d. chained to the base year by the year-to-year growth rate of the item

c. weight according to the quantity of the item purchased by the typical household

4.6 credit card balances are included in: a. M1 only b. M2 only c. both M1 and M2 d. neither M1 nor M2

d. neither M1 nor M2

2.1 If Nominal GDP and real GDP both rise by 10%, then the GDP deflator a. also rises by 10% b. rises by about 20% c. falls by 10% d. remains unchanged

d. remains unchanged

3.4 if an earthquake destroys some of the capital stock, the neoclassical theory of distribution predicts that: a. the real wage will rise, and the real rental price of capital will fall b. both the real wage and real rental price of capital will fall c. both the real wage and real rental price of capital will rise d. the real wage will fall, and the real rental price of capital will rise

d. the real wage will fall, and the real rental price of capital will rise