QUIZ #2
If the consumption function is given by C=150+0.85Y and Y increase by 1 unit, then C increases by ______
0.85 units
If income is 4,800, consumption is 3,500, government spending is 1,000, and taxes-transfers are 800, private saving equals
500
A production function is a technological relationship between
Factors of production and the quantity of output produced
Consumption depends ________ on disposable income, and investment depends __________ on the real interest rate
Positively; negatively
In a closed economy, private saving equals
Y-T-C
The marginal product of labor is
additional output produced when one additional unit of labor is added
According to the model developed in Chapter 3, when government spending increases but taxes are not raised, interest rates
increase
The production function feature called "constant returns to scale" means that if we
increase capital and labor by 10 percent each, we increase output by 10 percent
If the production function describing an economy is Y=100 K^.25 L^.75, then the share of output is going to labor
is 75 percent
The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, public saving
rises by $100 billion
If an earthquake destroys some of the capital stock, the neoclassical theory of distribution predicts
the real wage will fall and the real rental price of capital will rise
If increased immigration raises the labor force, the neoclassical theory of distribution predicts
the real wage will fall and the real rental price of capital will rise