ECN 101

according to the Solow model, persistently rising living standards can only be explained by:

technological progress.

When prices of different goods are increasing by different amounts, the price index that will rise the fastest is:

the CPI

An increase in the price of goods bought by firms and the government will show up in:

the GDP deflator but not in the CPI

The theoretical separation of real and monetary variables is called:

the classical dichotomy.

According to the classical dichotomy, when the money supply decreases, _____ will decrease.

the price level

In a Cobb-Douglas production function the marginal product of labor will increase if:

the quantity of capital increases.

In the long run, what determines the level of total production of goods and services in an economy?

the quantity of capital, quantity of labor, and production technology

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.

According to Euler's theorem, if competitive firms pay each factor its marginal product and the production function has constant returns to scale, the sum of all factor payments will equal:

total output

All of the following are causes of structural unemployment except:

unemployment insurance.

The money supply will decrease if the:

currency-deposit ratio increases.

Nominal GDP means the value of goods and services is measured in ______ prices.

current

A decrease in the supply of labor will:

decrease the real rental rate of capital.

The investment function slopes ______ because there are ______ investment projects that are profitable as the interest rate decreases.

downward; more

In the Solow Model, if the national saving rate increases, the:

economy will grow at a faster rate until a new, higher, steady-state capital-labor ratio is reached.

Most hyperinflations end with _____ reforms that eliminate the need for _____.

fiscal; seigniorage

According to the Solow growth model, high population growth rates:

force the capital stock to be spread thinly, thereby reducing living standards.

In the Solow model with technological progress at rate g and population growth at rate n, the steady-state growth rate of output per worker (K/L) is:

g

If the real interest rate declines by 1 percent and the inflation rate increases by 2 percent, the nominal interest rate must:

increase by 1 percent.

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.

In a 100-percent-reserve banking system, if a customer deposits $100 of currency into a bank, then the money supply:

remains the same.

The unemployment resulting when real wages are held above equilibrium is called ______ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called ______ unemployment.

structural; frictional

The investment component of GDP includes all of the following except:

purchases of corporate stock

f the nominal interest rate is 1 percent and the inflation rate is 5 percent, the real interest rate is:

-4 percent

in the Solow model with technological progress, g, and population growth rate, n, the steady-state growth rate of capital per effective worker is:

0

If nominal GDP grew by 3 percent and real GDP grew by 1 percent, then the GDP deflator grew by approximately ______ percent.

2

According to the quantity theory of money, if the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be ______ percent.

3

In a Solow model with technological change, if population grows at a 2 percent rate and the efficiency of labor grows at a 3 percent rate, then in the steady state, output per actual worker grows at a ______ percent rate.

3

Banks create money in:

a fractional-reserve banking system but not in a 100-percent-reserve banking system.

Which of the following is an example of frictional unemployment?

Dave searches for a new job after voluntarily moving to San Diego.

If bread is produced by using a constant returns to scale production function, then if the:

amounts of equipment and workers are both doubled, twice as much bread will be produced.

In the Neoclassical model, if consumption is a negative function of the real interest rate, this will make investment fall _____ when government purchases rises, compared to a case where consumption does not depend on the real interest rate.

less

In the Solow growth model, with a given production function, depreciation rate, saving rate, and no technological change, lower rates of population growth produce:

lower steady-state growth rates of total output.

The money supply will increase if the:

monetary base increases.

In equilibrium, total investment equals:

national saving.

The marginal propensity to consume is:

normally expected to be between zero and one.