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