Econ 303 Quiz 1-4

Assume a Cobb-Douglas production function where the share of labor is 0.7 and the share of capital is 0.3. If there is no technological progress, capital grows at 1.5%, and labor doesn't grow at all, what is the growth rate of output?

A) 0.45%

Okun's law states that one extra percentage point in unemployment causes

A) a 2 percent fall in GDP

The reason that an increase in autonomous spending leads to an even greater increase in equilibrium level of output is that

A) as firms increase output to meet demand, income increases, and this induces more consumption spending

The spell of unemployment is

A) defined as the period during which a person remains continuously unemployed

Between 1966 and 1990, all four "Asian Tigers" achieved economic growth mostly through

A) hard work and sacrifice

Given the Keynesian AS-curve, expansionary monetary policy will

A) increase the level of output but leave the price level unchanged

The level of GDP that corresponds to full employment in the labor market is called

A) potential GDP

In the neoclassical growth model, an increase in the savings rate

A) raises the steady-state level of output

The neoclassical growth model predicts absolute convergence for countries with the

A) same technology, savings rate, and population growth

Assume a model with no government or foreign sector. If actual output is $13.1 trillion while aggregate demand is $13.2 trillion, we know that

A) the magnitude of unintended inventory adjustments is - $100 billion

If private domestic saving is 960, private domestic investment is 780, and the government spends 300 more than it receives in tax revenues, then it follows that

A) the trade deficit is 120

Frictional unemployment is

A) the unemployment that exists even at the full-employment level of output

The Bureau of Labor Statistics defines a person as employed if, during a reference week, that person

A) worked 15 or more hours as an unpaid worker in a business operated by a family member

Assume you deplete your savings to buy a new sofa and some government bonds and then take a vacation in a foreign country. Which of the following is true?

A. consumption will increase

If the nominal interest rate on a government bond is 6% and the rate of inflation is 4%, what is your real rate of return on this government bond?

B) +2%

Which of the following countries is NOT one of the "Asian Tigers"?

B) Japan

Which of the following is the most likely medium-run outcome of an adverse supply shock?

B) a decrease in real GDP

In the AD-AS model with an upward-sloping AS-curve, a decrease in oil prices will

B) decrease prices and increase output

The natural rate of unemployment is

B) determined in part by labor market frictions as people changes careers, etc.

Which of the following statements is FALSE?

B) endogenous growth theory predicts that an increase in population growth will always lead to an increase in the overall growth rate

Between 1966 and 1990 Hong Kong experienced a much higher growth rate of output than Singapore. This was at least partially due to the fact that Singapore had a government that

B) maintained much tighter control over market activities

Assume that the prices of cars manufactured in the U.S. increases due to an increase in quality. Which of the following should happen if the same number of cars is produced?

B) nominal GDP should increase

Assume a Cobb-Douglas production function where the share of capital and labor is each 1/2. If the growth in total factor productivity is zero and labor and capital each grow by 2%, then

B) output growth is 2% and the marginal product of capital is Y/(2K)

Assume a model with no government or foreign sector. If national income is Y = 800, autonomous consumption is C ̅ = 100, and the marginal propensity to consume is c = 0.7, then total consumption is

C) 660

If the marginal propensity to consume is equal to 0.8 then

C) The marginal propensity to save is 0.2

For a simple economy with no depreciation, no government, and no foreign sector, which of the following identities would be correct?

C) Y - C ≡ S

Which of these people is officially counted as unemployed?

C) a maid who got fired from her old job three months ago and is looking for a new job

The newer view of the Phillips curve implies that

C) an increase in monetary growth affects unemployment and inflation in the short run, but only affects inflation in the long run

If the government stimulates aggregate demand in response to an adverse supply shock,

C) an increase in unemployment can be avoided but only at the cost of increased inflation

Assume a production function with only two inputs, capital and labor. In this case, the concept of a diminishing marginal product of capital implies that

C) as the amount of capital is increased and the amount of labor remains fixed, output increases but at a decreasing rate

A production function that assumes a diminishing marginal product of capital

C) ensures that the savings line and the investment requirement line cross

The Beveridge curve shows a relationship between

C) job vacancies and the unemployment rate

The inverse relationship between inflation and unemployment is called

C) the Phillips curve

In the neoclassical growth model, if a nation's savings rate decreases, we should expect that

C) the growth rate of output will temporarily decrease but eventually return to its long-run trend

Increases in unwanted business inventories are counted as

C. an increase in investment

If we counted the value of autoworkers' salaries, wheels, tires, steel, body parts, and final car sales in calculating GDP, then we would be

C. overstating GDP through double counting

Assume a U.S. dealer bought 100 TVs from South Korea for $250 each in 2012. He subsequently sold 80 of them in 2012 for $450 each, and the rest in 2013 for $400 each. By how much was the U.S. GDP affected in 2012?

D) $16,000

If nominal GDP is $8,820 billion and the GDP-deflator is 105, then real GDP is

D) $8,400 billion

Which of the following constitutes moving out of the unemployment pool

D) All of the above

Which of the following identities is FALSE?

D) I - S ≡ (G - TA + TR) + NX

If we assume a Cobb-Douglas production function where the share of capital is equal to 0.2 and the share of labor is equal to 0.8, then the marginal product of capital is equal to

D) Y/5K

A shift of the AD-curve to the left can be caused by

D) a decrease in government spending

An employed person is defined as a person who during a reference week

D) all of the above

Assume that GDP = 4,800, consumption = 3,400, private domestic savings = 400, government purchases = 1,200, and net exports = -120. Which of the following is true?

D) all of the above

Which of the following people is in the unemployment pool?

D) all of the above

Total autonomous spending

D) is independent of the level of income

Which of the following is FALSE?

D) the AS-curve has a smaller slope in the long run than in the short run

Which of the following is FALSE?

D) the AS-curve is upward sloping since firms are willing to supply less output at higher prices

Which of the following is NOT used in deriving the AS-curve in Chapter 6?

D) the quantity theory of money

The original Phillips curve shows an inverse relationship between

D) the rate of change in money wages and the rate of unemployment

Which of the following statements is true?

D. NDP cannot be greater than GDP

As defined in our text, private domestic investment (I) does NOT include

D. investment in labor productivity through education and training

The difference between gross domestic investment and net domestic investment is equal to

D. the difference between GDP and NDP

Which of the following economists contributed greatly to neoclassical growth theory in the 1950s and 1960s?

E) Robert Solow

An increase in aggregate demand can be caused by

E) all of the above

Concerns about high unemployment

E) both C) and D)

Which of the following people has moved out of the pool of unemployment?

E) both Peter and Mary

The theory of aggregate supply is one of the most controversial in macroeconomics because

E) economists do not completely agree on the reasons for the slow adjustment of wages and prices after demand-side disturbances

The unemployment gap

E) none of the above

Changes in total factor productivity are also called

E) the Solow residual

Assume the economy is at full employment. If the Fed accommodates an increase in oil prices by expansionary monetary policy, the most likely long-run effect will be that

E) unemployment will remain about the same but prices will increase

Depreciation is

E. all of the above

Assume nominal GDP increased by 4.2% in the U.S. but by only 3.4% in Germany. We can definitely conclude that

E. none of the above