Macro Final

If​ Okun's law is U−Un ​=− 0.5​ (Y− Y^P​), and potential output grows at​ 2% per​ year, then a recession that causes output to decrease by one percentage point will cause unemployment to increase by​ ________. A. 3 percentage points B. 1 percentage point C. one−half percentage point D. 2 percentage points E. 1.5 percentage points

1.5 percentage points

Output per person is 170 in an economy in which 15 percent of the population are engaged in research and​ development, where their productivity is​ 0.002, and the total population size is 100 million. If this economy is on a balanced growth​ path, then output per person in the next period will be​ ________. A. 195.5 B. 176.2 C. 177.3 D. 175.1

177.3

Consider the five steps of developing an economic theory or​ model, listed below in random order. Use the​ pull-down numbers after each step to put them in​ order, where 1 is the first step and 5 is the last. Choose variables Create equations or graphs Identify a question of interest Make predictions with the model Compare the​ model's results with​ real-world data If a theory or model does not do a good job of explaining​ real-world data, then the next step is to A. revise the​ model, perhaps by changing the variables used. B. throw the model out entirely long dash— nothing in the model can be useful in this case. C. make economic predictions anyway long dash— ​don't second-guess yourself. D. rewrite equations so that they fit the​ data, plugging in numbers again and again until your model fits

2,3,1,5,4 revise the​ model, perhaps by changing the variables used

If the level of technology rises from 8 to 8.2 in one​ period, the growth rate of technology is​ ________. A. 0.2 percent B. 2.5 percent C. 20 percent D. two percent

2.5 percent

based on the data in this table U p π per 1 6 1 4 per 2 8 0 3.2 per 3 8 2 4.4 If the natural rate of unemployment is steady at 7​ percent, and, in period​ four, there is no price shock and unemployment is 8​ percent, then the inflation rate in period 4 will be​ ________ percent. A. 4.4 B. 1.6 C. 3.6 D. 3.4 E. none of the above

3.6

Suppose an item sells for​ $125 in the United States and for​ 62,500 pesos in Chile. According to the law of one​ price, the nominal exchange rate​ (pesos/dollar) should be​ ________. A. ​31,313 B. either​ $125, or​ 62,500 pesos, but not both C. 500 D. 0.002

500

Based on the data in this​ table, U ρ π per 1. 6 1 4 per 2. 7 0 4.5 per 3. 6 2 ?? If the natural rate of unemployment is steady at 8​ percent, what is the inflation rate in period​ 3? A. 8.5 percent B. 5.5 percent C. 7.5 percent D. 6.3 percent E. none of the above

7.5 percent

​________ may cause a shift of the long−run aggregate supply curve. A. A price shock B. A major earthquake C. A change in expected inflation D. all of the above E. none of the above

A major earthquake

Which of the following is a primary objective of monetary​ policy? A. Achieving price stability B. Achieving a zero natural rate of unemployment C. Targeting a zero rate of inflation D. all of the above E. none of the above

Achieving price stability

The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters​ worse, a financial crisis hit the U.S. economy starting in August of 2007. Which of the following is true of the United​ Kingdom's experience? A. ​Eventually, the Lehman Brothers bankruptcy caused a negative demand shock leading to a further fall in output and an increase in the unemployment rate B. The financial crisis did not take hold right away so the AD curve did not immediately shift C. The increase in the price of oil immediately shifted the AS curve to the left D. all of the above E. none of the above

All of the above

In the long run​ ________. A. aggregate supply is fixed at the potential level of output B. there is enough time for prices to fully adjust so the classical dichotomy holds C. the amount of output an economy can produce is determined by real variables like​ capital, labor and technological advances D. all of the above E. none of the above

All of the above OR the economy reaches the potential output level consistent with the natural rate of unemployment

​________ can counteract a currency depreciation. A. Autonomous monetary policy tightening B. Capital controls C. Purchase of international reserves D. Autonomous monetary policy easing

Autonomous monetary policy tightening

The legal system based on common law derives from the experience of which​ country? A. Rome. B. England. C. Germany. D. France.

England.

By the time Paul Volcker took office as the new Federal Reserve chairman in​ 1979, both the inflation and unemployment rates were higher than during most of the​ 1950s, 60s and early 70s. The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famous Volker Disinflation which was successful in bringing both problems under control. What would have been a likely long−run result had Mr. Volker conducted an expansionary monetary policy​ instead? A. ​Eventually, inflation would have been fixed and unemployment would have been made worse B. There would have been no effect on the unemployment and inflation rates C. Eventually, inflation would have been made worse and unemployment would not have been fixed D. ​Eventually, both the inflation and unemployment rates would have declined E. none of the above

Eventually, inflation would have been made worse and unemployment would not have been fixed

H I G F On the graph​ above, suppose the economy is at point F when there is a temporary positive supply shock. The new long−run equilibrium is at point​ ________. A. G B. H C. I D. F E. none of the above

F

On the​ graph, which pair of points best represents the impacts in the U. S. of the financial crisis and policy response from 2007 through​ 2008? A. K to G B. I to H C. G to J D. K to F E. H to I It would shift ________________

G to J

On the​ graph, which pair of points best represents a scenario in which the nominal interest rate and expected inflation decline​ equally? A. K to F B. I to H C. J to H D. G to K E. I to J

K to F

By the time Paul Volcker took office as the new Federal Reserve chairman in​ 1979, the inflation rate exceeded​ 10%. By 1982 the unemployment rate soared to​ 9.7% and inflation was cut to​ 6.2%. By the end of 1986 the unemployment rate was brought down to​ 7% and the inflation rate was brought further down to​ 1.9%. Which of the following is an appropriate description of the mechanism behind the Volcker Disinflation​? A. With the Federal Reserve raising interest​ rates, the AD curve shifted to the left lowering the equilibrium level of inflation but inducing a negative output​ gap, which explains the lower inflation rate between 1979 and 1982 at the cost of a higher unemployment rate over the same period B. The AD curve shifted right due to the autonomous tightening of monetary policy which explains the lowering of the unemployment rate between 1982 and 1986 C. The LRAS curve shifted left due to the tightening of monetary policy generating a positive output gap or a negative unemployment gap which explains the lowering of the unemployment rate between 1982 and 1986 D. all of the above .E. none of the above

With the Federal Reserve raising interest​ rates, the AD curve shifted to the left lowering the equilibrium level of inflation but inducing a negative output​ gap, which explains the lower inflation rate between 1979 and 1982 at the cost of a higher unemployment rate over the same period

Which is a plausible cause of the movement in Figure 13.1 from point 1 to point​ 2? (from the zero lower bound bend to where AD1 and As cross below the ZLB) A. the central bank achieves a negative value for the nominal interest rate B. a decrease in expected inflation C. a change in expectations that causes a decline in the real interest rate for investments D. the​ economy's self−correcting mechanism E. none of the above

a change in expectations that causes a decline in the real interest rate for investments

The legal system in which the law is continually reinterpreted by judges is​ labeled________. A. a common law system. B. a Napoleonic system of law. C. a constitutional system. D. a tropicalismo system.

a common law system

In the short−​run, an appreciation in the value of the U.S. dollar will tend to cause​ ________. A. a decrease in the level of income and higher inflation B. an increase in the level of income and higher inflation C. an increase in the level of income and lower inflation D. a decrease in the level of income and lower inflation

a decrease in the level of income and lower inflation

Which of the following will cause an increase in the marginal product of capital​ (MPK)? A. a decrease in the quantity of capital in use B. an increase in labor productivity C. a decrease in the quantity of labor in use D. all of the above E. none of the above

a decrease in the quantity of capital in use

A decrease in the value of a​ country's currency is known as​ ________. A. a depreciation of its value. B. a spot exchange rate. C. an appreciation of its value. D. a forward spotting.

a depreciation of its value.

If government cuts taxes​ ________. A. after tax income and the equilibrium level of output remain unchanged B. after tax income should increase shifting AD to the right to a higher equilibrium level of output C. after tax income should increase shifting AD to the left to a lower equilibrium level of output D. after tax income remains unchanged but the equilibrium level of output would increase E. none of the above

after tax income should increase shifting AD to the right to a higher equilibrium level of output

Activists believe that​ ________. A. Keynes was right with his statement​ "in the longminus−​run, we are all​ dead" B. frictions to the selfminus−correcting mechanism of markets prevent prices and wages from being very flexible C. it takes a very long time to reach the long run D. all of the above E. none of the above

all of the above

By the time Paul Volcker took office as the new Federal Reserve chairman in​ 1979, both the inflation and unemployment rates were higher than during most of the​ 1950s, 60s and early 70s. The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famous Volker Disinflation which was successful in bringing both problems under control. Which of the following is an appropriate description had Mr. Volker conducted an expansionary monetary policy​ instead? A. Due to the autonomous expansion of monetary​ policy, a temporary positive output gap might have ensued thereby decreasing the unemployment rate while exerting huge inflationary pressures in the economy B. Due to the autonomous expansion of monetary policy the unemployment rate might have artificially declined.​ However, the AS curve would then have shifted left to close the ensuing positive output gap thereby returning the unemployment rate to the levels prior to the​ Fed's action​ while, likely, making inflation even worse than before Mr. Volker took office C. The AD curve would have likely shifted right due to the Federal Reserve lowering of interest rates which might have resulted in a temporary decline in the unemployment rate but at the cost of skyrocketing inflation D. all of the above E. none of the above

all of the above

By the time Paul Volcker took office as the new Federal Reserve chairman in​ 1979, the inflation rate exceeded​ 10%. By 1982 the unemployment rate soared to​ 9.7% and inflation was cut to​ 6.2%. By the end of 1986 the unemployment rate was brought down to​ 7% and the inflation rate was brought further down to​ 1.9%. Which of the following is an appropriate description of the mechanism behind the Volcker Disinflation​? A. By​ 1982, it is likely that equilibrium output was lower than potential leading the AS curve to shift to the right to close the output gap toward a general equilibrium which explains the reduction in the unemployment rate and the further reduction in inflation between 1982 and 1986 B. The AD curve likely shifted left due to the autonomous tightening of monetary policy which explains the lowering of the inflation rate between 1979 and 1982 C. Due to the autonomous tightening of monetary​ policy, a negative output gap ensued which explains the increase in the unemployment rate between 1979 and 1982 D. all of the above E. none of the above

all of the above

Nonactivists believe that​ ________. A. policy interventions should take place less frequently than what Keynesians advocate B. there is a very rapid self−correcting mechanism since prices and wages are very flexible C. lags to policy implementation are so long that even the​ "correct" policies may lead to undesirable consequences D. all of the above E. none of the above

all of the above

The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters​ worse, a financial crisis hit the U.S. economy starting in August of 2007. Which of the following is true of the Chinese​ experience? A. The worldwide decline in demand led to a collapse of Chinese exports B. The Chinese economy was better able than the U.S. economy to weather the financial crisis with output growth starting to grow earlier and more quickly than that of the U.S. C. Instead of relying solely on the​ economy's self−correcting ​mechanism, much more aggressive fiscal expansions than those of the U.S.​ (in addition to a substantial monetary​ easing) served to shift the AD curve back to general equilibrium relatively quickly D. all of the above E. none of the above

all of the above

When a temporary negative supply shock hits the​ economy, then in the short−run ​________. A. the divine coincidence does not hold B. if the central bank focuses on stabilizing​ output, it cannot stabilize inflation C. if the central bank focuses on stabilizing​ inflation, it cannot stabilize output D. all of the above E. none of the above

all of the above

Which of the following constitutes an input to the Cobb−Douglas production​ function? A. capital B. total factor productivity C. labor D. all of the above E. none of the above

all of the above

Which of the following is true about the Taylor​ principle? A. it reflects the practice of monetary policy B. it explains the link between higher inflation and higher real interest rates C. it is the foundation for an upward sloping MP curve D. all of the above E. none of the above

all of the above

The MP curve may be used to represent (how)​ ________. A. how the real interest rate is related to the inflation rate B. movements of the real interest rate as a direct policy action of the Federal Reserve C. movements of the real interest rate that are independent of direct Federal Reserve action D. all of the above E. none of the above

all of the above if A. how the real interest rate is related to the inflation rate B. movements of the real interest rate as a direct policy action of the Federal Reserve C. movements of the real interest rate that are independent of direct Federal Reserve action OR movement of the real interest rate are determined but the inflation rate OR movements of the real interest rate is related to the inflation rate

The real business cycle model explains fluctuations in employment and unemployment​ with/by A. productivity shocks that alter real wages. B. voluntary choices workers make to maximize their​ well-being. C. the willingness of workers to shift work effort over time as real wages change. D. all of the above. E. A and C only.

all of the above.

According to the Romer​ model, an increase in population will​ cause________. A. an immediate increase in output per capita and a permanent decrease in output per capita. B. an immediate decrease in output per capita and a permanent increase in output per capita. C. an immediate increase in output per capita and a permanent increase in output per capita. D. an immediate and permanent decrease in output per capita.

an immediate decrease in output per capita and a permanent increase in output per capita.

An increase in the value of the U.S. dollar will tend to​ cause, other things the same​ ________. A. a decrease in the volume of U.S. exports and imports. B. an increase in the volume of U.S exports and imports. C. an increase in the volume of U.S. exports. D. an increase in the volume of U.S. imports.

an increase in the volume of U.S. imports.

Suppose than an economy has output Y​ = AK^0.3 x L^0.7, that Y equals​ $19 trillion, capital K is​ $27 trillion, and labor L is 125 million workers. Given this​ information, what is the closest approximation of total factor productivity​ A? A. close to 0.4 B. around 0.25 C. less than 0.01 D. roughly 0.33 E. exactly 144

around 0.25

The equilibrium real interest rate is the rate​ ________. A. controlled by the central bank B. at which the inflation rate is low C. at which the output gap is zero D. all of the above E. none of the above

at which the output gap is zero

Which of the following is a likely objective of monetary​ policy? A. Achieving a zero inflation gap B. Stabilizing economic activity C. avoiding large changes in unemployment D. all of the above E. none of the above

avoiding large changes in unemployment OR A. Achieving price stability B. Stabilizing economic activity C. Closing the output gap to zero OR Achieving a zero inflation gap

Capital and labor are distinct from technology​ since________. A. capital and labor are physical things. This is the correct answer.B. technology is exogenous C. technology is a physical thing. D. technology is rival in its use

capital and labor are physical things.

If depreciation is less than investment​ ________. A. capital per−worker is constant. B. capital per worker is greater than saving C. capital per−worker is rising. D. capital per−worker is falling.

capital per−worker is rising.

The aggregate demand curves in Figure 13.1 have a positively−sloped portion. The reason this can happen is​ ________. A. a sudden increase in potential output B. rising inflation causes financial frictions to increase C. sloppy editing D. the monetary policy response to declining inflation causes the real interest rate to​ fall, which causes output to rise E. changes in expected inflation cause the real interest rate to change in the opposite direction

changes in expected inflation cause the real interest rate to change in the opposite direction

Sciences other than economics also design models to explain the behavior of endogenous variables based on assumptions about the environment and changes in exogenous variables. Suppose you have to design a model that links child obesity and diabetes. In this​ study, __________________ would be the exogenous variable and ________________ would be the endogenous variable.

childhood obesity= exo, diabetes = endo

Suppose the nominal exchange rate −− Canadian dollar per Brazilian real −− is constant. If the price level in Brazil rises by four​ percent, while the price level in Canada rises by eight​ percent, then the real exchange rate −− Brazilian goods for Canadian goods minus−minus− has​ ________ by​ ________ percent. A. ​risen; two B. ​declined; one−half C. ​risen; one−half D. ​declined; four

declined; four

Population growth is similar to​ depreciation, in that​ ________. A. each helps to explain how economies can sustain a positive growth rate of output B. each lowers the capital−labor ratio C. each tends to encourage saving D. capital wears out faster when used by more workers

each lowers the capital−labor ratio

A central bank can control the real interest rate​ precisely, so long as​ ________ remains constant. A. monetary policy B. the nominal interest rate C. expected inflation D. all of the above E. none of the above

expected inflation

A depreciation of the exchange rate is most likely to be celebrated by​ ________. A. consumers B. central bankers C. importers D. exporters

exporters

Within rich​ economies, there is strong evidence of convergence​ ________. A. of capital​ stocks, rather than output B. with developing economies. C. leading to military conflict. D. for regions within a country.

for regions within a country.

A key difference between human capital and technology is that​ ________. A. technology is an input in the production of new technology B. human capital is excludable C. scarce resources are used in the production of human capital D. human capital is nonrival

human capital is excludable

If the rate of inflation in Country A is higher than in Country​ B, then​ ________. A. in nominal​ terms, country​ A's currency should depreciate B. in nominal​ terms, country​ B's currency should depreciate C. the law of one price will not hold D. purchasing power parity does not apply

in nominal​ terms, country​ A's currency should depreciate

In the long​ run, following a combination of a negative demand shock and a temporary negative supply​ shock, ________. A. inflation is permanently​ reduced, while output returns to potential output B. output returns to potential​ output, while inflation may be higher or lower than its initial value C. inflation is permanently​ increased, while output returns to potential output D. both inflation and output return to the original longminus−run equilibrium values E. none of the above

inflation is permanently​ reduced, while output returns to potential output

An increase in the overall price level is referred to as _______ ​, while a decrease in the overall price level is referred to as _______ . Which of the following is true about​ inflation? A. Inflation was quite low in the United States until World War I and then increased markedly until World War II. B. Hyperinflation refers to periods of especially high and destructive inflation. C. The inflation rate tends to be about the same in most countries at any given time. D. Inflation was very low from the 1960s to the early 1980s in the United States.

inflation, deflation, Hyperinflation refers to periods of especially high and destructive inflation.

The observation that countries with high rates of population growth​ don't have higher per capita income​ ________. A. is consistent with the Romer model as applied to individual countries B. suggests that the Solow model is unrealistic C. is not supported by most empirical studies D. implies that technology​ doesn't work as well in countries where the population is growing rapidly

is consistent with the Romer model as applied to individual countries

If expected inflation​ rises, monetary policy​ ________. A. will prevent any increase in the real interest rate B. must be​ tightened, to prevent further increases in inflation and expected inflation C. is rendered ineffective D. is designed to increase the nominal interest rate by more than the increase in expected inflation E. none of the above

is designed to increase the nominal interest rate by more than the increase in expected inflation

The New Keynesian​ model, is Keynesian in that​ ________. A. expectations are assumed to be rational. B. it assumes wages and prices are sticky. C. changes in the money supply are taken to be the single most important influence on business movements. D. the velocity of money is a constant.

it assumes wages and prices are sticky.

An increase in the saving rate results in a higher steady state​ ________. A. growth rate of output per worker B. level of consumption per worker C. growth rate of capital D. level of capital per worker

level of capital per worker

Throughout​ 2008, inflation and the real interest rate declined together. The cause is a combination of​ ________. A. monetary policy tightening and inversion of the MP curve B. increased government spending and movement along a fixed MP curve C. declining autonomous spending and movement along a fixed MP curve D. monetary policy easing and declining autonomous spending E. none of the above

monetary policy easing and declining autonomous spending

On the graph​ above, suppose the economy has moved from point H to point G. If the shock was temporary and inflation expectations are​ adaptive, the economy will next​ ________. A. remain at point G B. move to point F C. return to point H D. move to a point between points G and H E. none of the above It would shift ________________

move to a point between points G and H

The relative price of one currency in terms of another is known as the​ ________ A. real exchange rate. B. nominal exchange rate. C. domestic price level. D. real interest rate.

nominal exchange rate

Nonconventional monetary policy attempts to reduce financial frictions by​ ________. A. reversing the expansion of the central​ bank's balance sheet that has made it costly for businesses to invest B. increasing the expected future shortminus−term interest rate C. purchasing shortminus−term ​assets, which raises their price and reduces the credit spread D. all of the above E. none of the above

none of the above

Technological advances lead to​ ________. A. an upward movement along the long run AS curve B. a shift of the short run AS curve up C. a shift of the long run AS curve to the left D. all of the above E. none of the above

none of the above

The aggregate demand curve shifts to the right when there is​ ________. A. a decrease in inflation B. a negative price shock C. a decrease in the nominal interest rate D. all of the above E. none of the above

none of the above

In recent​ decades, the trend among central banks has been to adopt​ ________. A. price stability as a central goal B. high employment as a central goal C. a dual mandate that gives equal weight to both price stability and low unemployment. D. a target of zero inflation E. none of the above

price stability as a central goal

In the Solow​ model, which of the following is an exogenous​ variable? A. consumption per worker B. investment per worker C. productivity .D. the capitalminus−labor ratio

productivity

Autonomous tightening of monetary policy involves​ ________. A. raising interest rates and shifting the MP curve to the left B. lowering interest rates and shifting the MP curve to the right C. lowering interest rates and shifting the MP curve to the left D. raising interest rates and shifting the MP curve to the right E. none of the above

raising interest rates and shifting the MP curve to the left

An increase in inflation leads to higher​ ________. A. real interest rate B. output C. spending D. all of the above E. none of the above

real interest rate

The theory of purchasing power parity suggests​ that, in the long−​run, exchange rates are determined by​ ________. A. the most significant monetary​ authorities, including the Federal​ Reserve, European Central​ Bank, Bank of England and the Bank of Japan. B. relative interest rate levels. C. the GDP values for the two countries. D. relative price levels.

relative price levels.

The graph might represent the​ ________. A. response to an increase in the total population B. response to a rise in the productiveness of research and development C. response to a rise in the saving rate D. response to an increase in the fraction of the population engaged in research and development

response to an increase in the fraction of the population engaged in research and development

The Romer model is distinct from the Solow model in that the former assumes​ that________. A. an increase in price affects quantity​ demanded, rather than demand. B. technology is fixed. C. output per worker is fixed. D. some labor is devoted to producing new technology.

some labor is devoted to producing new technology.

A central bank with a hierarchical mandate will seek​ ________ as a condition of pursuing other goals. A. the approval of the legislature B. moderate interest rates C. high employment D. stable inflation E. none of the above

stable inflation

Because original ideas are likely to become known and used by​ others, without the​ inventor's knowledge or​ consent, ________. A. new ideas contribute little to economic growth B. technology is the key driver of economic growth C. we refer to ideas as rival D. technology is inherently exogenous

technology is the key driver of economic growth

Which of the following is nonrival in​ character? A. capital. B. a desk. C. labor. D. technology.

technology.

To analyze aggregate​ productivity, economists typically assume​ ________. A. that the hours each person works varies with the wage rate B. that output can increase only if inputs have become more productive C. that all of the capital and labor in the economy are fully utilized D. all of the above E. none of the above

that all of the capital and labor in the economy are fully utilized

The forward exchange rate is relevant to transactions​ ________. A. that involve a transfer of funds within a corporate entity. B. crossing state lines. C. that require a future transfer of funds. D. that require an immediate transfer of funds.

that require a future transfer of funds.

The spot exchange rate is relevant to transactions​ ________. A. that require an immediate transfer of funds. B. within a​ corporation, or between a corporate holding company and a subsidiary. C. that involve a movement across state lines. D. that require a future transfer of funds.

that require an immediate transfer of funds.

If the economy is at point 1 in Figure 13.1 and there is no policy​ intervention, what happens​ next? (zero lower bound graph) A. the economy moves to the left along the AS curve B. the AS curve shifts​ down, causing both output and inflation to decline C. the AS curve shifts​ up, causing both output and inflation to rise D. the economy moves to point 2 E. the economy remains at point 1

the AS curve shifts​ down, causing both output and inflation to decline

If the Federal Reserve raises interest rates in an autonomous tightening​ ________ . A. the MP curve shifts​ up, there is an upward movement along the IS​ curve, and the AD curve shifts to the left to a lower level of equilibrium output B. the MP curve shifts​ down, there is an upward movement along the IS curve and the AD curve shifts to the left to a higher level of equilibrium output C. the MP curve shifts​ up, there is a downward movement along the IS curve and the AD curve shifts to the right to a lower level of equilibrium output D. the MP curve shifts​ down, there is a downward movement along the IS curve and the AD curve shifts to the right to a higher level of equilibrium output E. none of the above

the MP curve shifts​ up, there is an upward movement along the IS​ curve, and the AD curve shifts to the left to a lower level of equilibrium output

graph shows slope= 1.43xga1 and slope=1.43xga2 On the​ graph, the constant value 1.43 is​ ________. A. the productivity of labor devoted to research and development B. the logarithmic scale C. the amplification effect of improving technology D. the initial level of technology

the amplification effect of improving technology

When a temporary negative supply shock hits the economy​ ________. A. the divine coincidence holds in the short−run B. the divine coincidence does not hold in the long−run C. the divine coincidence does not always hold D. all of the above E. none of the above

the divine coincidence does not always hold

If an economy initially starts away from the steady state​ ________. A. consumption spending must rise. B. the economy will converge to the steady state in the long−run. C. output will gradually fall over time. D. consumption spending must be greater than investment spending.

the economy will converge to the steady state in the long−run.

According to Nobel Prize winner Douglass​ North, the most important factor in limiting economic growth in developing countries today​ is________. A. the inability to develop effective low−cost contract enforcement. B. the inadequate state of the health care system C. the relatively high rate of inflation. D. the relatively low level of saving.

the inability to develop effective low−cost contract enforcement.

For a U.S. economic agent​, the expected return on U.S. dollars includes​ ________. A. the expected return on some other currency B. the expected value of the dollar relative to some other currency. C. the rate of exchange between the dollar and some other currency. D. the interest rate on dollar−denominated bank deposits.

the interest rate on dollar−denominated bank deposits.

The key endogenous variable in endogenous growth theory is​ ________. A. the level of per capita income B. the growth rate of output C. the level of technology D. the productivity of research and development

the level of technology

According to the Law of One​ Price, if two countries produce an identical​ good, assuming transportation costs and trade barriers are not an issue​ ________. A. the value of the currency in both countries should rise B. the value of the currency in both countries should fall C. the value of the currency in one country will rise by the same amount that the value of the currency in the other country falls .D. the price of the good should be the same in the two countries

the price of the good should be the same in the two countries

If the central bank did not follow the Taylor​ principle, an increase in inflation would lead to a decrease in​ ________. A. aggregate output B. the nominal interest C. the real interest rate D. all of the above E. none of the above

the real interest rate

In the very short run​ ________. A. the real interest rate will be affected by changes in the nominal rate B. the inflation rate is determined by the federal funds rate C. monetary policy has an immediate effect on inflation D. all of the above E. none of the above

the real interest rate will be affected by changes in the nominal rate

The MP curve indicates the relationship between​ ________ and the​ ________. A. the real interest​ rate; inflation rate .B. ​taxes; price level C. monetary​ policy; IS curve .D. all of the above E. none of the above

the real interest​ rate; inflation rate

What do we learn from the shape of the Cobbminus−Douglas production​ function? A. the marginal product of labor declines as the labor input falls B. its slope remains constant as labor input increases C. there are diminishing returns to labor D. all of the above E. none of the above

there are diminishing returns to labor

If consumers suddenly became more optimistic​ ________. A. they would spend more at any given inflation rate B. planned expenditures would decline C. the aggregate demand curve would shift to the left D. all of the above E. none of the above

they would spend more at any given inflation rate

What do you think would be the Cob−Douglas single best prescription for poor countries to catch up with the​ rich? A. to increase their stock of capital B. to increase their labor force C. to find more efficient ways to allocate and use capital and labor D. to ask help of the rich countries E. none of the above

to find more efficient ways to allocate and use capital and labor

Strong evidence of convergence exists for​ ________. A. both rich and poor nations. B. wealthy nations that belong to the Organization for Economic Cooperation and Development. C. European and Caribbean economies. D. subminus−Saharan African economies and the economies of North America.

wealthy nations that belong to the Organization for Economic Cooperation and Development.

Diminishing marginal product means that​ ________. A. the amount of output increases when we add more inputs B. when adding extra units of a single​ input, output increases become larger C. when adding extra units of a single​ input, output declines D. when adding extra units of a single​ input, output increases become smaller E. none of the above

when adding extra units of a single​ input, output increases become smaller

The idea behind the Phillips curve is that​ ________. A. when firms raise wages to attract new​ workers, prices decrease B. tightness in the labor market puts downward pressures on wages and prices C. when the unemployment rate is low wages will increase D. all of the above E. none of the above

when the unemployment rate is low wages will increase OR when firms raise wages to attract new​ workers, prices will also increase OR tight labor markets lead to inflationary pressures (possibly all the above if have both of these options)

Based on the data in this​ table, U p π per 1 6 1 4 per 2 8 0 2.2 per 3 8 2 2.4 if the inflation rate in period zero had been 3​ percent, then the accelerationist Phillips curve is​ ________. A. Δπ ​= − 0.9​ (U− ​6) + ρ B. Δπ ​= − 1.1​ (U− ​6) + ρ C. Δπ ​= − 0.4​ (U − ​9) + ρ D. Δπ ​=− 1.8​ (U− ​7) + ρ E. none of the above

Δπ ​= − 0.9​ (U− ​6) + ρ

Based on the graph​ above, the short−run aggregate supply curve is​ ________. A. Y​ = 8two thirds​+ two thirds(π​) ​+ρ B. π ​= 2​ + 1.5​ (Y− ​10) + ρ C. π ​= 2​ + (Y− ​11) + ρ D. π ​= 3.5​ + 2​ (Y− ​10) + ρ E. none of the above

π ​= 2​ + 1.5​ (Y− ​10) + ρ

Given the production function Y​ = AK^0.3 L^0.7​, if an​ economy's capital per worker k is​ $27 thousand, and its total factor productivity A is​ 0.5, then output per worker is​ (approximately) ________. ​ (When computing your​ answer, assume k is in thousands of​ dollars.) A. ​$5,000 B. ​$40,500 C. ​$1,343 D. ​$13,343 E. ​$3,000

​$1,343

If output per worker in a steady state is​ $30,000, depreciation is​ 13%, the population growth rate is two​ percent, and the saving rate is​ 20%, what is the steady state capitalminus−labor ​ratio? A. ​$40,000 B. ​$10,500 C. ​$85,714 D. ​$22,500

​$40,000

Suppose that a haircut in your hometown costs​ $20, while the price for the same haircut in Mumbai is 600 Indian rupees. At which nominal exchange rate is the dollar price lower for the Mumbai​ haircut? A. ​0.029$/Rs. B. ​0.04$/Rs. C. ​25Rs./$ D. ​20Rs./$

​0.029$/Rs.

On the graph​ above, a movement from point​ ________ to point​ ________ might represent a positive supply shock. A. ​H: F B. ​F; G C. ​H: G D. ​F; I E. none of the above

​H: G

Frictional unemployment is to​ ________ as structural unemployment is to​ ________. A. ​search; mismatch B. job​ training; output gap C. ​temperature; rigidity D. all of the above E. none of the above

​search; mismatch