ec 309 practice
if an increase of an equal percentage in all factors of production results in an increase in output of the same percentage, then a production function has the property called
constant returns to scale
an example of increasing returns to scale is when capital and labor inputs
both increase 5 percent and output increases 10 percent.
in a neoclassical economy, if consumption increases as the interest rate decreases, then a $10 billion rise in government spending would
crowd out between 0 and $10 billion of investment
in a neoclassical economy, if consumption increases as the interest rates decreases, then a $10 billion rise in government spending would
crowd out between zero and $10 billion of investment
when taxes are increased but government spending is unchanged, interest rates
decrease
people are considered to be unemployed if they
do not have a job, but have looked for work in the past 4 weeks
variables that a model takes as given are called
exogenous
macroeconomic models are used to explain how _________ variables influence _________ variables
exogenous; endogenous
all of the following are measures of GDP except the total
expenditures of all business in the economy
exogenous variables are
fixed at the moment they enter the model
which of the following is a flow of variable
income
in the classical model with fixed income a decrease in the real interest rate could be the result of
increase in taxes
crowding out occurs when an increase in government spending ____________ the interest rate and investment
increase; decrease
in a simple model of the supply and demand for pizza, when aggregate income increases, the price of pizza _____________ and the quantity purchased
increases; increases
when there is a technological advance that leads to an increase in investment demand
investment is unchanged and the interest rate rises
the supply and demand for loanable funds determines the
real interest rate
in a classical model with fixed output, the supply and demand for goods and services are balanced by
the interest rate
the CPI is determined by computing
the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.
all of the following statements about sticky prices are true except
the sticky price model describes the equilibrium toward which the economy slowly gravitates