quiz questions to study
Reducing the maximum LTV is likely to ________ demand and thus ________ the housing price increase. decrease; slow down increase; slow down decrease; speed up increase; speed up
decrease; slow down
The existence of inflation does which of the following? facilitates the downward adjustment of real wages reduces shoe-leather costs reduces tax distortions reduces the costs associated with money illusion
facilitates the downward adjustment of real wages
Assume individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose current government spending increases and that individuals expect future government spending to increase. Given this information, we know with certainty that current output and the current interest rate will both increase. current output will not change. future expected output will decrease. future expected output will not change.
future expected output will decrease.
LTV ratio appears to be positively related to bond price. stock price. housing price. none of the above all of the above
housing price.
For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π = π?* and u < un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.
implement a monetary contraction.
For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π > π?* and u < un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.
implement a monetary contraction.
For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π > π?* and u = un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.
implement a monetary contraction.
For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π < π?* and u > un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.
implement a monetary expansion.
For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: π = π?* and u > un. Given this information, we would expect that the Fed will implement a monetary contraction. implement a monetary expansion. maintain its current stance of monetary policy. more information is need to answer this question.
implement a monetary expansion.
Since the early 1980s, debt ratios for the OECD countries have increased. remained constant. decreased slightly. decreased dramatically, and are now close to zero.
increased
Suppose there is an increase in the expected future interest rate. This will cause which of the following to occur? the IS curve to shift left in the current period the IS curve to shift right in the current period the LM curve to shift up in the current period the LM curve to shift down in the current period
the IS curve to shift left in the current period
With the real wage on the vertical axis and the unemployment rate on the horizontal axis, we know that the WS curve is upward sloping. the WS curve is downward sloping. the PS curve is upward sloping. the PS curve is downward sloping.
the WS curve is downward sloping.
Which of the following is an example of the "shoe-leather costs" of inflation? a rise in the cost of primary raw materials, like leather for shoes an artificial rise in the capital gains tax the need to take more trips to the bank miscalculations due to money illusion
the need to take more trips to the bank
Suppose workers and firms expect the overall price level to increase by 5%. Given this information, we would expect that the nominal wage will increase by less than 5%. the nominal wage will increase by exactly 5%. the nominal wage will increase by more than 5%. the real wage will increase by 5%. the real wage will increase by less than 5%.
the nominal wage will increase by exactly 5%
"Convergence" has been occurring among the OECD countries because the richer countries give away more of their output than the poorer ones. the poorer countries have had higher growth rates than the richer ones. the richer countries have had higher growth rates than the poorer ones. the poorer countries have had positive growth rates, while the richer ones have had negative growth rates. the procedures for measuring output per capita have been changing.
the poorer countries have had higher growth rates than the richer ones.
The government budget constraint tells us that the budget deficit is equal to interest on the debt. the primary deficit. the primary deficit plus interest on the debt. imports minus exports. the primary deficit plus the trade deficit plus interest on the debt.
the primary deficit plus interest on the debt.
The correct measure of the deficit is represented by which of the following expressions? iB - G + T. iB + T - G. rB - G + T. (i - π)B + G - T.
(i - π)B + G - T.
When the budget deficit is financed entirely through money creation, the real budget deficit is equal to which of the following? ΔH ΔH - ΔP (ΔH)/P (ΔH)/H
(ΔH)/P
In 2014, the average inflation rate in the OECD countries was 1.7%. 2.3%. 5.2%. 3.8%.
1.7%.
In 2010, the deficit-to-GDP ratio for the United States was approximately equal to 10%. 17%. 37%. 67%.
10%
If output per capita grows by a constant 5% per year, then the standard of living would grow by about ________ over 3 years. 12% 16% 17% 18%
16%
The non-institutional civilian population is 250 million, of which 100 million are employed and 10 million are unemployed. Based on the information above, the labor force participation rate is 36%. 40%. 44%. 90.1%. 66%.
44%
The participation rate in the United States in 2014 was approximately equal to 96%. 90%. 62%. 26%.
62%
In 2010, the debt-to-GDP ratio for the United States was approximately equal to 90%. 17%. 37%. 67%.
90%
Suppose the aggregate production function is given by the following: Y = AN. Given this information, we know that labor productivity is represented by which of the following? 1/A A 1/N N/Y
A
Which of the following is not correct about quantitative easing? It is one of the conventional monetary policy tools. It refers to the Fed's asset purchasing program. It helped reduce term premium on long-term government bonds. As a result, the balance sheet of the Fed is much larger than it was before the crisis.
It is one of the conventional monetary policy tools.
Over the last half-century, which of the following countries has had the highest growth rate of output per capita? Japan France United Kingdom United States
Japan
Decreasing returns to capital (K) implies that a 4% increase in K will cause a reduction in output per worker (Y/N). a reduction in K/N. Y to increase by exactly 4%. Y to increase by less than 4%. no change in Y/N.
Y to increase by less than 4%.
A reduction in unemployment benefits will tend to cause which of the following? an upward shift in the WS curve a downward shift in the WS curve an upward shift in the PS curve a downward shift in the PS curve
a downward shift in the WS curve
Suppose the actual unemployment rate increases. This will cause an upward shift in the WS curve. a downward shift in the WS curve. an upward shift in the PS curve. a movement along the WS and the PS curves.
a movement along the WS and the PS curves.
Which of the following will not cause aggregate private spending to decrease? a reduction in expected future real interest rates a reduction in government spending an increase in future taxes all of the above none of the above
a reduction in expected future real interest rates
For this question, assume that there are decreasing returns to capital, decreasing returns to labor, and constant returns to scale. A reduction in the capital stock will cause which of the following? a reduction in output no change in output an increase in output per capita increase the capital-labor ratio
a reduction in output
Hyperinflation typically leads to a reduction in barter. a reduction in real money balances. a preference for domestic over foreign currency. an increase in real tax revenues collected by the government.
a reduction in real money balances.
Based on our understanding of the labor market model presented in Chapter 7, we know that an increase in the markup will cause an increase in the equilibrium real wage. a reduction in the equilibrium real wage. a reduction in the natural rate of unemployment. none of the above
a reduction in the equilibrium real wage.
Assume individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose individuals expect future government spending to decrease. Given this information, individuals will expect a reduction in the expected future interest rate and no change in expected future output. a reduction in the expected future interest rate and an increase in expected future output. a reduction in the expected future interest rate and a reduction in expected future output. a reduction in the expected future interest rate and an ambiguous effect on expected future output.
a reduction in the expected future interest rate and an increase in expected future output.
Henry Ford's experiment with efficiency wages resulted in a dramatic drop in productivity. a dramatic increase in the turnover rate. a reduction in the layoff rate. new problems with the work force, like drunkenness and reckless driving. no noticeable effects.
a reduction in the layoff rate.
Based on wage setting behavior, we know that an increase in the unemployment rate will cause no change in the real wage. a reduction in the real wage. an increase in the real wage. an upward shift of the WS curve.
a reduction in the real wage.
Which of the following will not cause an increase in aggregate output (Y) in the long run? an increase in N an increase in K an increase in technology a reduction in the saving rate
a reduction in the saving rate
Bracket creep would less likely occur in which of the following? a progressive income tax system a regressive income tax system a flat income tax system none of the above
a regressive income tax system
Given the broadest interpretation of technology, technology will include which of the following? how well firms are run the organization and sophistication of markets the political environment the list of blueprints defining the types of products and the techniques available to produce them all of the above
all of the above
Suppose the central bank reduces the money supply. This monetary contraction will always cause a greater reduction in output when it is accompanied by an increase in expected future taxes. an increase in expected future interest rates. a reduction in expected future output. all of the above
all of the above
Based on wage setting behavior, we know that a reduction in the unemployment rate will cause no change in the real wage. a reduction in the real wage. an increase in the real wage. an upward shift of the WS curve.
an increase in the real wage.
The "official measure" of the deficit (the one reported by the government) tells us the change in government nominal debt. is equal to nominal interest payments on the debt plus the primary deficit. overestimates the real budget deficit whenever the inflation rate is positive. all of the above
all of the above
The deficit at natural level of output is called full-employment deficit. mid-cycle deficit. structural deficit. cyclically adjusted deficit. all of the above
all of the above
To deal with dangerous behavior in the financial system, macro prudential tools can be used to aim directly at borrowers. lenders. banks and other financial institutions. none of the above all of the above
all of the above
Which of the following is a main conclusion about growth for OECD countries and the four rich countries examined in the chapter? There has been a large increase in the standard of living since 1950. The growth rates have decreased since the mid-1970s. There has been a convergence of output per capita since 1950. all of the above none of the above
all of the above
Which of the following will cause a reduction in output per worker (Y/N)? a reduction in the capital stock (K) a reduction in the saving rate a reduction in K/N all of the above
all of the above
The existence of inflation does which of the following? reduces tax distortions reduces shoe-leather costs allows for the possibility of negative real interest rates reduces the costs associated with money illusion
allows for the possibility of negative real interest rates
The existence of inflation does which of the following? reduces tax distortions allows governments to benefit from seignorage reduces shoe-leather costs reduces the costs associated with money illusion
allows governments to benefit from seignorage
Which of the following will not cause aggregate private spending to increase? an increase in expected future real interest rates an increase in government spending a reduction in future taxes all of the above none of the above
an increase in expected future real interest rates
Which of the following will cause a reduction in output per worker in the long run run? capital accumulation or technological progress capital accumulation an increase in the number of workers expansionary monetary policy none of the above
an increase in the number of workers
Suppose that increased international trade makes product markets more competitive in the U.S. Given this information, we would expect to observe which of the following? an upward shift in the WS curve a downward shift in the WS curve an upward shift in the PS curve a downward shift in the PS curve
an upward shift in the PS curve
When a government partially defaults its debt, a "haircut" of 20% means that creditors receive 20% of what they owed. creditors receive 80% of what they owed. creditors receive 40% of what they owed. creditors receive 10% of what they owed.
creditors receive 80% of what they owed.
The United States financed the additional government spending during World War II through an increase in the deficit. an increase in taxes. an increase in imports. increases in both the deficit and taxes.
increases in both the deficit and taxes.
Which of the following would serve to reduce the costs caused by the variability of inflation? seignorage bracket creep a higher capital gains tax indexed wages
indexed wages
In virtually all hyperinflations, rapid money growth begins to occur because of a war. a change of government. union demands for higher wages. large and/or growing budget deficits.
large and/or growing budget deficits.
Based on price setting behavior, we know that a reduction in the unemployment rate will cause no change in the real wage. a reduction in the real wage. an increase in the real wage. an upward shift of the PS curve.
no change in the real wage
Suppose the Fed increases the money supply in the current period with no other policy change implemented or anticipated. This policy action will cause which of the following shifts in the IS and/or LM curves in the current period? IS left; LM up IS right; LM up no shift in IS; LM down IS left; LM down
no shift in IS; LM down
If the government runs a primary deficit in year zero of B0, and decides to repay it in year t (i.e., bring the debt back down to its pre-existing level), then in year t it must run a primary surplus equal to zero. one. B0. B0(1 + r). none of the above
none of the above
Suppose the stock of capital increases by 2% and employment increases by 2%. Given this information, we know that output per capita will increase by 6%. output will increase by 4%. output per capita will increase by less than 4% and more than 2%. none of the above
none of the above
The Taylor rule (where a and b are positive parameters) is represented by i = i* + a(π* - π) - b(un - u). i = i* + a(π - π *) + b(u - un). i = i* + a(π* - π) - b(u - un). none of the above
none of the above
The debt-to-GDP ratio is higher, the lower the real interest rate. the lower is the ratio of the primary deficit to GDP. the higher is the growth rate of output. none of the above
none of the above
The large increases in the deficit during the 1980s in the United States were associated with large increases in public saving. no change in public saving. large increases in private saving. all of the above none of the above
none of the above
The natural rate of unemployment is the rate of unemployment that occurs when the money market is in equilibrium. that occurs when the markup of prices over costs is zero. where the markup of prices over costs is equal to its historical value. that occurs when both the goods and financial markets are in equilibrium. none of the above
none of the above
The reservation wage is the wage that an employer must pay workers to reduce turnover to a reasonable level. the wage that ensures a laid-off individual will wait for re-hire, rather than find another job. the lowest wage firms are allowed by law to pay workers. the wage offer that will end a labor-strike. none of the above
none of the above
When answering this question, assume individuals consider only the short-run effects of changes in future variables when forming expectations of future output and future interest rates. Suppose policy makers announce a reduction in future government spending. Which of the following will occur as a result of this expected reduction in government spending? a reduction in the expected future interest rate and no change in expected future output a reduction in the expected future interest rate and an increase in expected future output a reduction in the expected future interest rate and an ambiguous effect on expected future output none of the above
none of the above
Which of the following will cause the LM curve to shift up? an increase in the expected future interest rate an increase in current income an increase in expected future taxes all of the above none of the above
none of the above
Constant returns to scale implies that if N and K both increase by 3% that output (Y) will increase by 3%. Y/N will increase by 3%. Y/N will increase by less than 3%. the capital-labor ratio will increase by 3%.
output (Y) will increase by 3%.
When using a logarithmic scale to plot output per capita over time, an upward-sloping curve that becomes increasingly steep indicates output per capita is not changing. output per capita is growing by a constant amount each year. output per capita is growing by a constant percentage each year. output per capita is growing by an increasing percentage each year.
output per capita is growing by an increasing percentage each year.
Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run output per capita will be greater in B than in A. output per capita will be greater in A than in B. economic growth will be higher in A than in B. more information is needed to answer this question.
output per capita will be greater in A than in B.
Assume that employment decreases by 3%. Holding all other factors constant, we know with certainty that which of the following will occur? output will decrease by 3% output per capita will decrease by 3% output will decrease by less than 3% the capital labor ratio will decrease
output will decrease by less than 3%
Suppose individuals wish to obtain the most accurate comparison of living standards between the Canada and Saudi Arabia. To do so, one would convert Saudi Arabian output into dollars using the current nominal exchange rate. the current real exchange rate. the prior year's real exchange rate. an average of the last five years' exchange rates. purchasing power parity methods.
purchasing power parity methods.
Given nominal money growth, the amount of seignorage will be greater when tax revenues are higher. real money balances are larger. the inflation rate is higher. foreign lending is higher.
real money balances are larger.
Suppose individuals expect that interest rates will increase in the future. Also assume that the Fed wants to prevent any change in current output. Given this goal of the Fed, the Fed should implement a policy in the current period that shifts the IS curve rightward. shifts the IS curve leftward. shifts the IS curve leftward and the LM curve upward. shifts the LM curve upward. shifts the LM curve downward.
shifts the LM curve downward.
With the real wage on the vertical axis and employment (N) on the horizontal axis, we know that the WS curve is upward sloping. the WS curve is downward sloping. the PS curve is upward sloping. the PS curve is downward sloping.
the WS curve is upward sloping.
A change in which of the following will have a direct effect on the amount of money individuals wish to hold in the current period? the current nominal interest rate the current real interest rate the expected future nominal interest rate the expected future real interest rate
the current nominal interest rate
An increase in which of the following variables will cause a reduction in the amount of money individuals wish to hold in the current period? current income the current nominal interest rate the current real interest rate expected future income
the current nominal interest rate
In the wage setting relation W = PeF(u,z), the variable z does not include which of the following variables? the minimum wage unemployment benefits the extent to which firms mark up prices over their marginal cost all of the above
the extent to which firms mark up prices over their marginal cost
Of the following, the most often used measure of changing living standards is the growth rate of nominal GDP. the growth rate of real GDP. the growth rate of nominal GDP per capita. the growth rate of real GDP per capita. unemployment per capita.
the growth rate of real GDP per capita.
The official measure of the deficit becomes more inaccurate as the inflation rate rises. the total debt falls. taxes rise. all of the above none of the above
the inflation rate rises.
Which of the following represents the participation rate? the ratio of the number employed to the size of the labor force the ratio of the number employed to the civilian noninstitutional population the ratio of the labor force to the civilian noninstitutional population the ratio of the labor force to the total number of employed and unemployed workers
the ratio of the labor force to the civilian noninstitutional population
An upward-sloping straight line on a linear scale will become a (an) ________ on a logarithmic scale. upward sloping straight line upward sloping curve that gets continually steeper upward sloping curve that gets continually flatter horizontal line
upward sloping curve that gets continually flatter
Between 1950 and 2004, standards of living in the OECD countries did not change at all. were converging. all increased at the same rate. decreased at the same rate. decreased, but at different rates.
were converging.
The nominal interest will never be negative. can be negative if inflation is unexpected. can be negative if the inflation rate is greater than the nominal interest rate. can be negative if deflation occurs.
will never be negative.
If efficiency wage theory is valid, we would expect a relatively low premium over the reservation wage when the unemployment rate is low. the job requires very little training. workers can be easily monitored. workers have few other options for employment in the area.
workers can be easily monitored.
