ECON 320 Chapter 3

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

increase.

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

investment decreases.

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

lower investment and raise the interest rate.

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

national saving.

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

output of goods and services.

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

the interest rate will fall.

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

the interest rate.

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

the quantity of capital increases.

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. no change in the quantity of investment goods demanded. a decrease 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.

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

income minus consumption minus government spending.

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

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

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

According to the neoclassical theory of distribution, in an economy described by a Cobb-Douglas production function, when average labor productivity is growing rapidly: 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. economic profits will be positive.

workers will experience high rates of real wage growth.

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

disposable income; the real interest rate

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

0.85 units.

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

marginal productivities.