Econ

A measure of productivity is A) aggregate output divided by employment. B) the growth rate of aggregate output. C) the interest rate. D) the inflation rate.

A) aggregate output divided by employment.

The desire to smooth consumption is reflected in A) the production possibilities frontier. B) choice between present and future. C) the curvature in a consumer's indifference curves. D) the consumer's budget constraint.

C) the curvature in a consumer's indifference curves.

In an economic model, an endogenous variable is A) a variable that has no effect on the workings of the model. B) a stand-in for more complicated variables. C) determined outside the model. D) determined by the model itself.

D) determined by the model itself.

The idea that contact with others with high levels of human capital increases ones own human capital is called human capital A) contagion. B) convergence. C) transference. D) externality

D) externality

Suppose that the government collects $3 million in taxes, pays $2 million in social security benefits, 17) pays $0.5 million in interest on the national debt, and pays workers $1 million to sit at their desks and work as little as possible. The government's contribution to GDP is A) $1million B)0 C)$3million D)$3.5million

A) $1million

Suppose that GDP is equal to 1000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal A) 250. B) 150. C) 300. D) 200.

A) 250

Suppose that GDP is equal to 1000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Investment must equal A) 300. B) 150. C) 250. D) 200.

A) 300

According to Solow's exogenous growth theory, what happens to a country at steady state that suffered extensive capital destruction due to a war or climate event? A) It will get back to its original status. B) Anything can happen. C) It will stay poor forever. D) It will grow back to be richer than before.

A) It will get back to its original status.

The importance of barriers to the adoption of technologies is supported by research by A) S. Parente and E. Prescott. C) P. Romer. B) G. Glomm and B. Ravikumar. D) R. Lucas.

A) S. Parente and E. Prescott.

Which of the following is not a feature of the steady state in Solow's exogenous growth model? A) Total saving is steady. B) Consumption per worker is steady. C) The capital/output ratio is steady. D) Capital grows continuously.

A) Total saving is steady.

A temporary increase in income today leads to A) a small increase in current consumption. C) a small decrease in future consumption. B) a large increase in current consumption. D) a large decrease in future consumption.

A) a small increase in current consumption.

In the endogenous growth model, workers divide their time between market work and A) accumulating human capital. B) work at home. C) trying to invent new production processes. D) accumulating physical capital.

A) accumulating human capital.

The permanent income hypothesis and the Ricardian equivalence theorem A) are related, but the first relates to the behavior of a single consumer while the second relates to the behavior of the whole economy. B) are the same thing. C) are related, but the first relates to the behavior of the whole economy, while the second relates to the behavior of a single consumer. D) are completely unrelated.

A) are related, but the first relates to the behavior of a single consumer while the second relates to the behavior of the whole economy.

The Solow model emphasizes the role of which of the following factors of production? A) capital B) land C) labor D) natural resources

A) capital

An increase in lifetime wealth A) decrease current labor supply and increase current consumption demand. B) increase current labor supply and decrease current consumption demand. C) decrease current labor supply and decrease current consumption demand. D) increase current labor supply and increase current consumption demand.

A) decrease current labor supply and increase current consumption demand.

When consumption and leisure are both normal goods, after an increase in real dividend income minus taxation, the rational consumer A) increases consumption and increases leisure. B) increases consumption and reduces leisure. C) reduces consumption and reduces leisure. D) reduces consumption and increases leisure.

A) increases consumption and increases leisure.

When consumption and leisure are both normal goods, after an increase in real dividend income minus taxation, the rational consumer A) increases consumption and reduces labor supply. B) increases consumption and increases labor supply. C) reduces consumption and increases labor supply. D) reduces consumption and reduces labor supply.

A) increases consumption and reduces labor supply.

In the endogenous growth model with human capital, spending more time on education A) increases the growth rate and decreases output in the short term. B) decreases the growth rate and increases output in the short term. C) increases the growth rate and increases output in the short term. D) decreases the growth rate and decreases output in the short term.

A) increases the growth rate and decreases output in the short term.

As the quantity of labor increases, the marginal product of capital A) increases. C) is constant. B) may either increase or decrease. D) decreases.

A) increases.

In the endogenous growth model, human capital accumulation is best described as a form of A) investment. C) consumption. B) government spending. D) none of the above

A) investment.

A barter economy A) is an economy without monetary exchange. B) is not a competitive economy. C) cannot be a market economy. D) is an economy with no business firms.

A) is an economy without monetary exchange.

It is useful to study the Solow growth model because A) it is useful in understanding the sources of economic growth after 1800. B) it provides a useful account of the reasons for population growth. C) it has a steady state. D) it can help us understand the reasons for population control.

A) it is useful in understanding the sources of economic growth after 1800.

Which of the following is best characterized as being nonrivalrous? A) knowledge B) services C) physical capital D) consumption goods

A) knowledge

If a macroeconomic variable tends to aid in predicting the future path of real GDP, it is said to be a A) leading variable. B) lagging variable. C) coincident variable. D) convenient variable.

A) leading variable.

Which of the following policies would increase the growth rate of an economy in the endogenous growth model with human capital? A) mandatory schooling. B) lump-sum taxation. C) minimum wages. D) redistributive taxation.

A) mandatory schooling.

Leisure includes all of the following except A) market work. C) recreational activities. B) home yard work. D) sleep.

A) market work.

A consumer is a borrower if A) optimum current consumption is greater than current disposable income. B) future disposable income is greater than current disposable income. C) the consumer's indifference curves are relatively steep. D) optimum current consumption is less than current disposable income

A) optimum current consumption is greater than current disposable income.

The Malthusian model predicts that A) population control improves the standard of living. B) health improvements increase the standard of living. C) the standard of living will keep increasing. D) population will keep increasing.

A) population control improves the standard of living.

In the Golden Rule steady state, the marginal product of capital is equal to the A) population growth rate plus the depreciation rate. B) savings rate divided by the marginal product of labor. C) depreciation rate plus the savings rate. D) savings rate plus the population growth rate.

A) population growth rate plus the depreciation rate.

Recent evidence suggests that output per worker is A) positively related to the rate of investment and negatively related to the rate of population growth. B) negatively related to both the rate of investment and to the rate of population growth. C) positively related to both the rate of investment and to the rate of population growth. D) negatively related to the rate of investment and positively related to the rate of population growth.

A) positively related to the rate of investment and negatively related to the rate of population growth.

Real investment tends to be A) procyclical and more variable than real GDP. B) procyclical and less variable than real GDP. C) countercyclical and more variable than real GDP. D) countercyclical and less variable than real GDP.

A) procyclical and more variable than real GDP.

The three approaches to measuring GDP are called the A) product approach, the income approach, and the expenditure approach. B) accounting approach, the statistical approach, and the income approach. C) product approach, the cost approach, and the expenditure approach. D) accounting approach, the income approach, and the expenditure approach.

A) product approach, the income approach, and the expenditure approach.

The Solow residual attempts to measure the amount of output not explained by A) the direct contribution of labor and capital. B) technological progress. C) economic projections. D) the amount of a nation's human capital.

A) the direct contribution of labor and capital.

With an increase in total factor productivity in the Solow growth model, A) the economy reaches a steady state with higher output. B) output decreases temporarily and returns to the previous steady state. C) the economy reaches a steady state with lower output. D) output increases temporarily and returns to the previous steady state.

A) the economy reaches a steady state with higher output.

In the real intertemporal model with investment A) the firm maximizes the present value of profits. B) the firm maximizes the present value of revenues. C) the firm maximizes current profits plus future profits. D) the firm maximizes current profits.

A) the firm maximizes the present value of profits.

We can use a per-worker production function in the Malthusian model because A) the production function has constant returns to scale. B) firms are competitive. C) there is a steady state. D) there is a representative worker.

A) the production function has constant returns to scale.

There is evidence that income per worker is converging in A) the richest countries, but not the poorest countries. B) neither the richest nor the poorest countries. C) the poorest countries, but not the richest countries. D) the richest countries and the poorest countries.

A) the richest countries, but not the poorest countries.

In response to an increase in total factor productivity A) the substitution effect suggests that hours worked should increase, while the income effect suggests that hours worked should decrease. B) both the substitution effect and the income effect suggest that hours worked should increase. C) both the substitution effect and the income effect suggest that hours worked should decrease. D) the substitution effect suggests that hours worked should decrease, while the income effect suggests that hours worked should increase.

A) the substitution effect suggests that hours worked should increase, while the income effect suggests that hours worked should decrease.

In the Malthusian model, the population growth rate is A) positively related to consumption per worker. B) negatively related to consumption per worker. C) assumed to be constant. D) exogenous.

A)positively related to consumption per worker.

Suppose that the government collects $3 million in taxes, pays $2 million in social security benefits, pays $0.5 million in interest on the national debt, and pays workers $1 million to sit at their desks and work as little as possible. The government's contribution to GDP is A) $3.5 million. B) $1 million. C) $0. D) $3 million.

B) $1 million.

Here is what we know about a household: wages $25,000, unemployment insurance benefits 15) $3,000, dividend income $4,000, income tax $5,000. What is the contribution to GDP of this household following the expenditure approach? A) $29,000 B) $28,000 C) $24,000 D) $25,000

B) $28,000

Suppose that GDP is equal to 1000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal A) 200. B) 250. C) 300. D) 150.

B) 250.

What characteristic do human and physical capital share? A) Their growth depends crucially on the growth of total factor productivity. B) Current costs are incurred for future benefits. C) The use of both exhibits rivalry. D) Both are controlled by the government.

B) Current costs are incurred for future benefits.

What characterizes a competitive equilibrium? A) It is costly to experiment with policies. C) Markets are rationed. B) Economic agents are price-takers. D) Governments stay out of the market.

B) Economic agents are price-takers.

If the interest rate goes up, what happens to the investment demand curve? A) It shift to the left. C) We cannot tell.. B) It stays put. D) It shifts to the right.

B) It stays put.

Labor demand depends on the interest rate because A) household savings depend on the interest rate. B) Labor demand actually does not depend on the interest rate. C) of Ricardian equivalence. D) firms discount future profits.

B) Labor demand actually does not depend on the interest rate

In a Malthusian world, why is misery recurrent? A) The marginal returns of capital are decreasing. B) Mortality depends on the standard of living. C) Output is increasing in labor. D) Fertility is endogenous.

B) Mortality depends on the standard of living.

The equilibrium effects of a prospective future increase in total factor productivity include A) an increase in the real wage and a decrease in the real interest rate. B) a decrease in the real wage and an increase in the real interest rate. C) a decrease in the real wage and a decrease in the real interest rate. D) an increase in the real wage and an increase in the real interest rate.

B) a decrease in the real wage and an increase in the real interest rate.

A permanent decrease in taxes leads to A) a small increase in current consumption. C) a small decrease in future consumption. B) a large increase in current consumption. D) a large decrease in future consumption.

B) a large increase in current consumption.

The income-expenditure identity is best paraphrased as A) all profits are used for investment spending. B) all spending generates income. C) on average, consumers cannot save. D) on average, government can spend no more than what it collects in income taxes.

B) all spending generates income.

The response of output following a natural disaster includes A) an increase in output demand and an increase in output supply. B) an increase in output demand and a decrease in output supply. C) a decrease in output demand and a decrease in output supply. D) a decrease in output demand and an increase in output supply.

B) an increase in output demand and a decrease in output supply.

If an epidemic hits a Malthusian economy, the immediate consequence is A) dependent on the population growth rate. B) an increase in the standard of living. C) no change in the standard of living. D) a reduction in the standard of living.

B) an increase in the standard of living.

2) More government spending A) lowers the government deficit. B) can compete with private spending and cause crowding out. C) is always beneficial. D) increases the government surplus.

B) can compete with private spending and cause crowding out.

In the steady state of Solow's exogenous growth model, an increase in the growth rate of labor force A) decreases output per worker and increases capital per worker. B) decreases output per worker and decreases capital per worker. C) increases output per worker and decreases capital per worker. D) increases output per worker and increases capital per worker.

B) decreases output per worker and decreases capital per worker.

If there are human capital externalities, then A) human capital should be taxed. B) differences in human capital across countries can persist. C) convergence in per capita incomes occurs. D) pollution is a problem.

B) differences in human capital across countries can persist.

When drawn against the current real wage, the labor demand curve is A) downward sloping because the marginal product of labor rises with the quantity of labor employed. B) downward sloping because the marginal product of labor declines with the quantity of labor employed. C) upward sloping because the marginal product of labor declines with the quantity of labor employed. D) upward sloping because the marginal product of labor rises with the quantity of labor employed.

B) downward sloping because the marginal product of labor declines with the quantity of labor employed.

An increase in government spending shifts the PPF A) upward, and also changes its slope. C) downward, and also changes its slope. B) downward, but does not change its slope. D) upward, but does not change its slope.

B) downward, but does not change its slope.

If the government replaces a lump sum tax with a proportional labor income tax, then A) employment and output increase. B) employment and output decrease. C) employment increases and output decreases. D) employment decreases and output increases.

B) employment and output decrease.

An important reason why Ricardian equivalence may fail is if A) state and local governments also engage in debt finance. B) government debt incurred today may not be paid off until after some current consumers are deceased. C) some consumers are borrowers, while other consumers are lenders. D) borrowing and lending are done through intermediaries.

B) government debt incurred today may not be paid off until after some current consumers are deceased.

Theoretically, an increase in the real wage A) decreases leisure. B) has an ambiguous effect on leisure. C) has no effect on leisure. D) increases leisure.

B) has an ambiguous effect on leisure.

In Solow's exogenous growth model, the steady-state growth rate of capital can be increased by A) higher depreciation rate. B) higher population growth. C) higher saving rate. D) higher interest rate.

B) higher population growth.

Jim's Nursery produces and sells $1100 worth of flowers. Jim uses no intermediate inputs. He pays his workers $700 in wages, pays $100 in taxes and pays $200 in interest on a loan. Jim's contribution to GDP is A) $1000. B) $1800. C) $1100. D) $900.

C) $1100.

We know the following about a tie manufacturer: tie sales $1,300, cotton purchases $750, wages $400, interest on business loans $100, and profits $50. What is the contribution to GDP of this producer using the income approach? A) $450 B) $400 C) $550 D) $500

C) $550

In the endogenous growth model, an increase in a worker's level of human capital A) increases neither the amount of additional human capital she can produce nor the amount of output she can produce. B) increases both the amount of additional human capital she can produce and the amount of output she can produce. C) increases the amount of additional output she can produce, but does not increase the amount of human capital she can produce. D) increases the amount of additional human capital she can produce, but does not increase the amount of output she can produce.

B) increases both the amount of additional human capital she can produce and the amount of output she can produce.

In the steady state of Solow's exogenous growth model, an increase in total factor productivity A) decreases output per worker and decreases capital per worker. B) increases output per worker and increases capital per worker. C) increases output per worker and decreases capital per worker. D) decreases output per worker and increases capital per worker.

B) increases output per worker and increases capital per worker.

In the endogenous growth model, human capital accumulation is best described as a form of A) government spending. B) investment. C) consumption. D) none of the above

B) investment

The saving rate has the following characteristic in Solow's exogenous growth model A) it first decreases, then increases with output. B) it is constant. C) it increases with output. D) it first increases, then decreases with output.

B) it is constant.

Which of the following is best characterized as being nonrivalrous? A) physical capital C) consumption goods B) knowledge D) services

B) knowledge

The slope of the output per worker function is equal to the A) marginal product of labor. B) marginal product of capital. C) savings rate. D) growth rate of the population

B) marginal product of capital.

The quantity of labor supplied A) is similar to the supply for any other good or service, as quantity supplied increases with price. B) may increase with the real wage, if the substitution effect is larger than the income effect. C) may decrease with the real wage, if the income effect is smaller than the substitution effect. D) always decreases when the real wage increases.

B) may increase with the real wage, if the substitution effect is larger than the income effect.

An increase in the real wage A) causes a parallel shift in the consumer's budget line. B) represents a combination of income and substitution effects. C) represents a pure income effect. D) represents a pure substitution effect.

B) represents a combination of income and substitution effects.

In Solow's model of economic growth, suppose that s represents the savings rate, z represents total factor productivity, k represents the level of capital per worker, and f(k) represents the per-worker production function. Also suppose that n represents the population growth rate and d represents the depreciation rate of capital. The equilibrium level of capital per worker, k*, will satisfy the equation A) szk* = (n + d)f(k*). C) f(k*) = [s /(n + d)]k* B) szf(k*) = (n + d)k*. D) nf(k*) =sk*/(s + d)

B) szf(k*) = (n + d)k*

In a two-period model, government spending is financed through A) taxes only. C) taxes and redeeming debt. B) taxes and issuing debt. D) taxes and transfer payments.

B) taxes and issuing debt.

Which aspect of macroeconomics generates the most controversy? A) economic growth B) the causes of business cycles C) competitive equilibrium D) supply and demand

B) the causes of business cycles

The Solow residual attempts to measure the amount of output not explained by A) the amount of a nation's human capital. B) the direct contribution of labor and capital. C) economic projections. D) technological progress.

B) the direct contribution of labor and capital.

The Ricardian Equivalence says A) higher government expenses reduce consumption. B) whatever the timing of taxes, consumption is the same. C) an increase in current consumption has to lead to a decrease in future consumption. D) whatever the level of government expenses, consumption is the same.

B) whatever the timing of taxes, consumption is the same.

The principle that consumers and firms optimize A) is not helpful because some economic agents may behave irrationally. B)is helpful because it allows us to analyze how economic agents respond to changes in their environment. C)is helpful because it determines the available technology. D)only applies to perfectly competitive markets.

B)is helpful because it allows us to analyze how economic agents respond to changes in their environment.

Which of the following is not a reason for differences in total factor productivity across countries? A) learning by doing. B) barriers to the adoption of new technology. C) Differences in the size of population. D) inefficient allocation of factors of production across firms in some countries.

C) Differences in the size of population.

Which of the following assertions is false? A) Real GDP per capita dipped about 30% during the Great Depression. B) On average, the U.S. economy grows at a rate of 2.1%. C) The Great Depression was a typical business cycle. D) Very rapid growth occurred during World War II.

C) The Great Depression was a typical business cycle.

Private disposable income is equal to A) Y - TR - INT + T. C) Y + NFP + TR + INT - T. B) Y + CA - G. D) Y + TR + INT - T.

C) Y + NFP + TR + INT - T.

Any increase in the present value of taxes implies A) an increase in lifetime wealth and a decrease in the current labor supply. B) an increase in lifetime wealth and an increase in the current labor supply. C) a decrease in lifetime wealth and an increase in the current labor supply. D) a decrease in lifetime wealth and a decrease in the current labor supply.

C) a decrease in lifetime wealth and an increase in the current labor supply.

An increase in second-period income results in A) an increase in first-period consumption, a decrease in second-period consumption, and an increase in saving. B) a decrease in first-period consumption, an increase in second-period consumption, and an increase in saving. C) an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving. D) an increase in first-period consumption, an increase in second-period consumption, and an increase in saving.

C) an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving.

In the endogenous growth model presented in the text, suppose that u represents the fraction of time spent working (as opposed to accumulating human capital) and b represents the efficiency of human capital accumulation. The growth rate of human capital equals A) 1 + b(1 - u). B) (1 + b)(1 - u). C) b(1 - u) - 1. D) u(1 - b) - 1.

C) b(1 - u) - 1.

In a Malthusian world, what would improve the standard of living permanently? A) democracy C) birth control B) a new medical drug D) a war

C) birth control

In the Malthusian model, state-mandated population control policies are likely to 19) A) have no effect on the equilibrium size of the population and increase the equilibrium level of consumption per worker. B) have no effect on either the equilibrium size of the population or the equilibrium level of consumption per worker. C) decrease the equilibrium size of the population and increase the equilibrium level of consumption per worker. D) decrease the equilibrium size of the population and have no effect on the equilibriu level of consumption per worker.

C) decrease the equilibrium size of the population and increase the equilibrium level of consumption per worker.

A competitive equilibrium may fail to be Pareto optimal due to all of the following except A) externalities. C) inequality. B) distorting taxes. D) non-price-taking firms.

C) inequality.

A static decision is one that A) involves planning over exactly two time periods. B) is made very slowly. C) involves planning over one time period. D) involves planning over more than one time period.

C) involves planning over one time period.

The marginal product of a factor of production A) is equal to the amount of additional output that can be produced with one additional unit of each factor input. B) is equal to the ratio of the amount of that factor of production to the amount of output produced. C) is equal to the amount of additional output that can be produced with one additional unit of that factor input, holding constant the quantities of the other factor inputs. D) always exceeds the average product of that factor input, holding constant the quantities of the other factor inputs.

C) is equal to the amount of additional output that can be produced with one additional unit of that factor input, holding constant the quantities of the other factor inputs.

The Malthusian model emphasizes fixity in which of the following factors of production? A) labor B) energy C) land D) none of the above

C) land

The endowment point is the consumption bundle in which A) both consumptions are the same. B) the interest rate equals zero. C) no savings occur. D) current consumption equals current output less current government expenses.

C) no savings occur.

For the period 1947-2012, employment in the United States was A) procyclical and leading. B) countercyclical and lagging. C) procyclical and lagging. D) countercyclical and leading.

C) procyclical and lagging

If dividend income increases, the following does not happen: A) the consumer chooses to consume more leisure. B) the consumer chooses to consume more consumption goods. C) the substitution effect exceeds the income effect. D) the budget constraint shifts to the right.

C) the substitution effect exceeds the income effect.

A lagging variable can be recognized by the fact that A) its persistence is larger than that of GDP. B) its turning points happen before the turning points of GDP. C) the turning points of GDP happen before its turning points. D) its persistence is smaller than that of GDP.

C) the turning points of GDP happen before its turning points.

Predicting business cycles is difficult because A) they are very persistent. C) their frequency is irregular. B) statistics lie. D) the weather changes unpredictably.

C) their frequency is irregular.

For a borrower in a (c,c') graph, the optimal consumption bundle is A) to the left of the endowment point. B) on the endowment point. C) to the right of the endowment point. D) dependent on other factors.

C) to the right of the endowment point.

What is the key feature that differentiates business cycle theories? A) whether the theory also explains economic growth. B) whether the theory was developed before or after the Great Depression. C) wether it is Keynesian or non Keynesian D) whether the theory explains how monetary policy works.

C) wether it is Keynesian or non Keynesian

One plausible explanation of the U.S. productivity slowdown starting in 1973 is that it was the result of the time needed to adapt to new technology. This explanation would require that A) workers withdraw from the labor force to learn about the new technology. B) a large number of new entrants be attracted to the labor force. C) workers time at their jobs be diverted from production to learning the technology. D) managers be reluctant to adopt changes.

C) workers time at their jobs be diverted from production to learning the technology.

For a competitive equilibrium to occur, all of the following has to happen except A) markets clear. B) agents are price takers. C)the government sets taxes at zero. D) the actions of all agents are consistent.

C)the government sets taxes at zero.

Acme Steel Co. produces 1000 tons of steel. Steel sells for $30 per ton. Acme pays wages of $10,000. Acme buys $15,000 worth of coal, which is needed to produce the steel. Acme pays $2,000 in taxes. Acme's contribution to GDP is A) $30,000. B) $45,000. C) $20,000. D) $15,000.

D) $15,000.

Suppose we know the following about a lawn repair business: wages $15,000, profits $4,000, tax $3,000, parts $ 9,000. What is the contribution to GDP of this business using the product approach? A) $27,000. B) $31,000. C) $26,000. D) $22,000.

D) $22,000.

Suppose we have the following information about a car manufacturer: car sales $1000M, steal purchases $600M, wages $300M, interest on business loans $50M, and profits $50M. What is its contribution to GDP using the product approach? A) $600M B) $350M C) $1000M D) $400M

D) $400M

Assume that in an economy with 200M inhabitants, 90M work, 4M are looking for a job, 3M receive unemployment insurance compensation, and 6M receive unemployment insurance compensation and looking for a job. What is the unemployment rate? A) 6.5% B) 13% C) 5% D) 10%

D) 10%

For the consumer to be at an optimum, it must be the case that A) MRTc,c' = (1 + r) B) MRSc,c' = 1/(1 + r) C) MRTc,c' = 1 /(1+R D) MRSc,c' = (1 + r)

D) MRSc,c' = (1 + r)

The demand for current consumption, as plotted against the interest rate, shifts to the right due to all of the following except A) an increase in future income. C) an increase in current income. B) a decrease in current taxes. D) a increase in future taxes.

D) a increase in future taxes.

An externality is any activity for which an individual firm or consumer does not take into account all A) of the ramifications of its actions on others. B) associated benefits. C) associated costs. D) associated costs and benefits.

D) associated costs and benefits

GDP and GNP may differ A) because some intermediate good inputs are imported. B) because some workers are illegal aliens. C) whenever tariff rates become excessively high. D) because some income generated by domestic production may be received as income by foreign residents.

D) because some income generated by domestic production may be received as income by foreign residents.

At the endowment point, we have the property that A) y = y'. B) c = c'. C) y - t= y'- t' D) c = y - t

D) c = y - t

When drawn against the real interest rate, output supply increases if A) household savings depend on the interest rate. B) the interest rate decreases. C) the present value of taxes decreases. D) current capital increases.

D) current capital increases.

The fact that indifference curves are downward sloping A) follows from the property that the consumer likes diversity in his or her consumption bundle. B) follows from the property that consumption and leisure are normal goods. C) is not true. D) follows from the fact that more is preferred to less.

D) follows from the fact that more is preferred to less.

In the Solow growth model, countries with identical total factor productivities, identical labor force growth rates, and identical savings rates A) always have identical levels of capital per worker and output per worker. B) in equilibrium, have identical levels of capital per worker but not necessarily identical levels of output per worker. C) in equilibrium, have identical levels of output per worker but not necessarily identical levels of capital per worker. D) in equilibrium, have identical levels of capital per worker and output per worker.

D) in equilibrium, have identical levels of capital per worker and output per worker.

Primarily, macroeconomists use microeconomic principles to study A) long-run economic growth and antitrust policies. B) trends in the stock market and long-term economic growth. C) business cycles and trends in the stock market. D) long-run economic growth and business cycles.

D) long-run economic growth and business cycles.

Which of the following is not a reason for the Ricardian equivalence theorem to fail to hold? A) finite-lived people. B) tax distortions C) credit market imperfections. D) people can borrow from the government.

D) people can borrow from the government.

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the A) Friedman-Lucas theory. C) intertemporal substitution effect. B) Ricardian equivalence theorem. D) permanent income hypothesis.

D) permanent income hypothesis.

Employment tends to be A) countercyclical and more variable than real GDP. B) countercyclical and less variable than real GDP. C) procyclical and more variable than real GDP. D) procyclical and less variable than real GDP.

D) procyclical and less variable than real GDP.

Points on the production possibilities frontier have the property that they A) are inherently unattainable. B) show the maximum amount of leisure that can be consumed for given amounts of hours worked. C) show the maximum amount of goods that can be consumed for given amounts of government spending. D) show the maximum amount of leisure that can be consumed for given amounts of goods consumed.

D) show the maximum amount of leisure that can be consumed for given amounts of goods consumed

The period between the 1981-1982 recession and the 2008-2009 recession is 3) A) the Beveridge controversy. C) the Great Recession. B) the productivity slowdown. D) the Great Moderation.

D) the Great Moderation.

In the basic two-period model, A) credit markets have frictions B) some consumers will always default on their debts. C) consumers do not default on their debts. D) the government borrows at a lower interest rate than do consumers.

D) the government borrows at a lower interest rate than do consumers.

The Ricardian Equivalence holds only if A) the government runs surpluses. B) the government runs deficits. C) the government is altruistic. D) there are no binding credit constraints.

D) there are no binding credit constraints.

Difficulties in determining the cyclical pattern in real wage rates from aggregate data are primarily caused by biases due to A) substantial differences across different business cycles. B) changing policy responses to business cycles. C) substitution behavior. D) variations in the composition of the labor force over the business cycle.

D) variations in the composition of the labor force over the business cycle.

In a competitive equilibrium all these relationships hold but one. Which one? A) G=T B) Y=G+C C) Nd=Ns D) w=z

D) w=z

If we represents a two-period consumer's lifetime wealth and r denotes the real rate of interest, the horizontal (current consumption) intercept of the consumer's budget line is equal to A)(1+r)we B)(1+r)/we C) we/(1 + r) D)we

D)we