Econ 303
Acme Steel Co. produces 1,000 tons of steel. Steel sells for $30 per ton. Acme pays wages of $10,000. Acme buys $15,000 worth of coal, which is needed to produce the steel. Acme pays $2,000 in taxes. Acme's contribution to GDP is
$15,000.
You are a baker. You paid $150K in wages, $50K for dough, $20K for power, $5K in interest for a business loan, and made a profit of $35K before tax. How much did you contribution to GDP using the income approach?
$190K
We have the following information about a shoe manufacturer: wages $100,000, sales $500,000, taxes $50,000, loan interest $10,000, leather purchases $170,000, and rubber purchases $130,000. What is the contribution of this manufacturer to GDP using the income approach?
$200,000.
John's $6,000 deposit in a CD account has an interest rate of 4.6%. John's marginal tax rate is 15% when filing for federal personal income tax. How much revenue does the government collect from John's interest income?
$41.4
To increase the growth rate of living standard, Chinese government plans to implement the following policies. (1) Encourage investment, both domestic and foreign. (2) Control population growth. (3) Invest in public education and basic research. Which of the above increases the living standard in the long run and which increases the growth of living standard in the long run.
(1) and (2) increase the level, (3) increases the growth.
Dan's income now is $83,000 and his income in the future will be $100,000. The real interest rate is 5%. Which of the following consumption bundle is feasible for Dan?
(90,000, 92,000)
Kim's income is $118,000 today and $73,000 next period. The real interest rate is 7%. Government levies a 10% capital income tax on Kim. Which of the following consumption bundles can Kim afford?
(92,000, 92,000)
Which of the following taxes are labor income taxes or have a component that is labor income tax? (I) payroll tax. (II) individual income tax. (III) corporate income tax. (IV) sales tax. (V) property tax. (VI) excise and customs.
(I) and (II).
Assume that capital share is 30%. GDP in country A grew at the rate of 3% per year. Capital grew at the rate of 5% and labor 1% per year. What is the growth rate of TFP?
0.8%
Suppose that the real interest rate is r. To get one unit of real income next period how much does a household has to save today?
1/(1+r)
The GDP per capita in country M grows at a constant rate of 7%. The living standard in country M will double in approximately how many years?
10 years.
In Dakistan 3M people work, 0.5M are unemployed and get UI benefits, 0.1M are unemployed without UI benefits, and 3M have no intention to work. The unemployment rate is (to the nearest %)
17%.
The questions below deal with the Gizmo Company, which has the following production function. If the real wage is equal to 8 widgets and only an integer number of workers can be hired the Gizmo company should hire
2 workers
The real GDP per capital in country X is 600 in 1990 and 900 in 2000. The average annual growth rate during those 10 years is approximately
4%
Which of the following is a correct statement about income effect?
A consumer who experiences an income effect moves to a different indifference curve.
Which of the following statements about investment rate is correct?
A country should never invest beyond the point where the marginal product of capital net of depreciation is negative.
An increase in lump-sum taxes has which of the following impacts on the budget constraint?
A parallel move down.
Dick became a partner of a consulting firm. He bought the lifetime membership of a country club. Dick's behavior can be explained by which of the following?
A permanent increase of income.
After the World War II, many western European countries grew faster than the US. We explain this phenomena by which of the following results from Solow growth model?
Absolute convergence as this group of countries are heading towards the same steady state.
Which of the following is a correct analysis on how international trade affect growth?
Access to the international market provides the opportunity for a country with lagging technology to catch up; hence the import that is accompanied by flow of knowledge (machineries and equipments) is positively correlated with growth.
Adam's marginal rate of substitution between c 2 and c 1 is 1.2. Which of the following statement is true?
Adam is willing to buy one unit of c 2 with 1.2 units of c 1.
Suppose that 2008 is the base year. CPI in 2018 was 120. Fred's pay had increased by a total of 10% between 2008 and 2018. Which of the following statement is correct?
After adjusting for inflation, Fred was paid less in 2018 than 2008.
Even though capital per worker in India was less than 1/20 of that in the US at the end of the World War II, India's growth rate stayed low. This could due to which of the following fact(s)?
All of the choices.
How can you earn extra credit for this class?
All of those mentioned.
Which of the following statement is correct about a competitive equilibrium in a one-period macro model of an economy?
All statements are correct.
Which of the following statements is correct regarding to capital income tax?
All statements are correct.
It is estimated that 11% of adult population (age 15-49) is infected by HIV in Sub-Saharan Africa. Based on the Solow growth model, which of the following argument explains the predicted low growth rate in that region by the UN?
All three statements are relevant.
Amy's life time utility is ln c 1 + 0.95 ln c 2. In a consumption bundle, the first number indicates the amount of consumption today and the second the amount of consumption tomorrow. Which of the following statements is true?
Amy prefers bundle (92, 92) over bundle (88, 95)
Which of the following policies can increase job opportunity and wage at the same time?
Attract foreign direct investment.
Which of the following is NOT a correct description of labor market in the US since the World War II?
Average hours per person increased.
Both UK and Venezuela invested about 18% of their GDP per year during the period of 1960-1990. The capital per worker in the UK more than doubled, while that in Venezuela increased less than 50%. The could due to the fact that (a) the population growth rate in Venezuela is much higher; (b) the total factor productivity in the UK is higher.
Both
USSR was investing larger percentage of their GDP than the US after the World War II. As a result (a) USSR could not keep its higher growth rate for ever; (b) people in the USSR don't necessarily enjoy higher consumption even in the long run. Which of the above two statement(s) is/are correct?
Both
To compute the Chain-weighted real GDP nominal GDP is adjusted for which type(s) of price changes?
Both changes of general price level and relative prices.
There are policy proposals to move the US tax system from income based to consumption based. What is the theoretical support to such reform initiatives?
Both consumption and income tax distort households' labor supply decision, but income tax also distorts households' saving decision while consumption tax does not.
All of the following arguments are in support of eliminating capital income tax, EXCEPT which one?
Capital income tax reduces households' disposable income.
A decrease in the real interest rate will lead to a substitution effect described by which of the following statements?
Consumption in the future is relatively more expensive; households consume more now and less in the future.
Which of the following statements is correct?
Consumption tax has substitution effect and income effect in consumption-leisure choice but only has income effect in intertemporal choice.
The Solow growth model tells us that the standard living in country A can be higher than in country B for all the following reasons, EXCEPT which one?
Country A has a higher depreciation rate than country B.
In Solow growth model without technology progress, country A grows faster than country B if the only difference between them is described by which of the following?
Country A is further from its steady state.
We assume that the representative consumer's preferences exhibits all of the following properties, EXCEPT which one?
Current and future consumption must be the same.
Darrel was laid off for a job recently, which paid him a very decent salary. He started to work part time in a local grocery store, which pays him slightly above the minimum wage. Based on Darrel's choice we can deduce which of the following?
Darrel works less because he experiences both an income effect and a substitution effect and the substitution effect is stronger.
Look at the production schedule below: Workers012345Output04580100130165 Which property of a standard production function does it violate
Diminishing marginal product of labor
Edward is 60 years old. He had accumulated a sizable retirement fund invested in the stock market. Michael is 25 year old. He just started to accumulate his retirement fund. When returns on the stock market increases which of the following is a correct statement?
Edward is affected mainly through income effect while Michael is affected mainly through substitution effect.
Suppose that an economy lasts for two periods. The government spending of the two periods are 0.5 and 0.11, respectively. Suppose that the real interest rate is 10% and the amount of tax collected in the first period is 0.3. Which of the following is correct?
Government borrowing in the first period is 0.2.
The tax bracket for married filed jointly in 2020 is given below: Tax bracketsmarginal tax raterate of capital gain0-19,75010%0%19,751-80,25012%0%80,251-171,05022%15%171,051-326,60024%15% Both Green and Brown family had a taxable income of $95,000. Mrs. Green received an additional $5,000 year end bonus while Mr. Brown made an additional $5,000 after selling their holding of Facebook stock. Which of the following statement is true?
Green family has to pay $1100 of additional tax while Brown family only needs to pay $750.
Mr. Bond's marginal tax rate for federal individual income tax is 25%. Which of the following statement is correct?
Had Mr. Bond earned additional $100 dollars, he would have to pay exactly $25 additional federal income tax.
Jake has a log utility and discounts future utility by a factor of 0.9. His consumption now is 95 units and consumption in the future is 88 units. Which of the following is correct?
He should save a bit more if the real interest rate is 4%.
Ken gambles on Bitcoin and loses a lot of money.
He works more due to an income effect and saves less due to an income effect.
If president Donald Trump is registered for this class, he must turn in which sets of homework?
Homework 3B, 5B, and 7B
Which of the assumptions we have on utility function makes households in our model smooth consumption?
Households have diminishing marginal utility.
Government collects flat rate labor income tax in two periods. The tax rate in period 1 is 5% and that in period 2 is 25%. Other than that, everything else are the same in two periods. Considering the substitution effect only, which of the following is correct?
Households work more and consume more in period 1 than period 2.
Joe has a bigger subjective discount factor than Arthur. For example, Joe's subjective discount factor is 0.95 while Arthur's is 0.9. Which of the following is NOT correct?
If Joe and Arthur have the same income and interest rate Joe will consume more now than Arthur.
Which of the following is NOT a correct statement about Laffer curve?
If there is a Laffer curve it is never possible to raise government revenue while cutting tax rate.
Which of the following is a correct way of calculating inflation rate?
Inflation rate of 2005 = (GDP deflator 2005/GDP deflator 2004 -1)*100%.
Which of the following is the tax base of a capital income tax?
Interest received by Mr. Sam on his saving account.
Jack just won a million dollar lottery
Jack will work less due to an income effect.
Which of the following is NOT a correct statement about marginal rate of substitution between leisure and consumption?
MRS between leisure and consumption increases as leisure increases and consumption falls.
Two factors, capital and labor, are use in production. Based on our assumptions on production functions which of the following statements is true?
Marginal product of labor decreases if more labor is used in production while keeping capital at the same level.
When is the due date and time for all online quizzes ?
Mondays at 11am.
Fiscal policy encompasses all of the following EXCEPT which one?
Monetary injection by the government
Which of the following is NOT used by this class?
Moodle
Which types of borrowing is subsidized in the US?
Mortgage loans
All of the following is considered as investment EXCEPT which one?
New Tesla car bought by Jorgensen family.
Jessie has a square root utility function with a subjective discount factor of 0.93. Her current consumption bundle is (c 1=108, c 2=94). Which of the following is NOT correct?
One more unit of consumption brings Jessie the same amount of additional happiness.
A developing country sends smart kids to the US to be educated and purchases blueprints to make micro chips. Which of the following statements is true?
Only the first one refers to the accumulation of human capital.
According to one-period model of macroeconomics which of the following statements is correct about an economy engaging in a war financed by debt?
Output is increased but consumption is cut back so that the spending multiplier is positive but less than one.
All of the following are consumption taxes EXCEPT which one?
Payroll tax
The rational for cutting payroll tax during economic downturn is stated correctly by which of the following?
Payroll tax is a flat rate labor income tax. Reduction of it raises the after tax wage rate and encourages workers to work more.
To reduce opportunistic behaviors during exams, which of the following policies are NOT implemented in this class?
Proctor service such as ProctorU or Proctorio.
Contrary to the prediction of Ricardian equivalence studies on Bush 2008 tax rebate showed that a tax cut without cutting spending led to some increase of private consumption. In this case
Ricardian equivalence fails because some households are credit constrained; they would like to borrow to consume today but were discouraged by high interest rate they have to pay.
A tax increase without a spending increase will cause households to do which of the following?
Save less and consume the same amount.
Mary won a $100,000 lottery. According to the Permanent Income Hypothesis (PIH), Mary will do which of the following?
Spend a small amount of the money right away and save the rest for future consumption.
Where and to whom do you turn in your pencil-and-paper homework?
Submit online through compass
Which of the following statements is NOT correct?
Tax free saving program is always better than tax deferred saving program.
The Clinton administration lowered the tax rate on income from capital gains and the later Bush administration lowered the tax rate on dividend. These tax reforms are justified by which of the following arguments?
Tax on dividend and capital gains is a capital income tax and a reduction of its tax rate encourages saving and accumulation of capital.
Two households, A and B, have the following income over two periods. HouseholdPeriod 1Period 2A50,00030,000B20,00060,000 When interest rate decreases, which of the following statements on present value (PV) of income is correct?
The PVs of income for both households are higher, but the increase of household B's PV is bigger.
Despite that the labor productivity is lower a firm decides to hire more worker. Which of the following statements is correct?
The demand of labor shifts to the left; the quantity of labor demanded increases due to a fall of the real wage.
Which of the following shifts the labor demand curve?
The firm increases the amount of capital in production.
Which of the following is a correct statement about the first welfare theorem?
The first welfare theorem holds when government collects a lump-sum tax.
As a poor economy inches towards the steady state in the Solow growth model what happens?
The growth rate of output decreases.
Which of the following best describes the logic of Ricardian equivalence?
The income effect of different tax plans is determined by the present value of government spending.
The presence of a distortionary labor income tax leads to which of the following?
The marginal product of labor is bigger than the marginal rate of substitution between leisure and consumption.
Suppose that country Sophisticated only produces coffee and computers. We have the following data for year 2014 and 2015. Use 2014 price to calculate real GDP. YearQuantity Price computers coffeecomputerscoffee20141004,5001,2008020151204,3001,00085 Which of the following statements on changes of GDP between 2014 and 2015 is correct?
The nominal GDP increased less than the real GDP.
Which of the following is NOT a property of a competitive equilibrium?
The total factor productivity is increasing.
Let r denote the real interest rate. The horizontal axis is consumption in the future and vertical axis is consumption now. Which of the following statements about intertemporal budget line is correct?
The vertical intercept is the present value of income and the slope (absolute value) is 1/(1+r).c
Suppose that country Simple only produces corn and cars. We have the following data for year 2004 and 2005. The relative price between car and corn is bushels of corn per car. Which of the following statements is correct? YearQuantity Price carscorn (bushels)carscorn (bushels)20041003,0001,2008020051053,2001,38092
There was an upward movement of general price level but no relative price change.
Suppose that a firm uses only labor in production. If this firm maximizes profits which of the following statements is true?
This firm will hire labor to the point where the marginal product of labor is equal to the real wage.
Both Tim and Rob work for the same insurance company for the same pay. This year Tim landed a big contract and got a hefty bonus. Rob took a two-month unpaid leave to take care of his sick mother. Which of the following is a correct description of their consumption and saving behavior?
Tim will increase his current consumption and saving.
Which of the following is correct?
Total tax over total income gives the average tax rate; additional tax over additional income gives the marginal tax rate.
What assumption do we impose on the aggregate production function?
When we increase one input while keeping all the other input fixed the marginal contribution of that input decreases.
Which of the following is correct with regard to missed exams?
You must inform the instructor within 24 hours.
A wealth tax, whether levied while the owner is alive (proposal by Warren) or dead (federal estate and gift tax) is
a capital income tax with a tax rate more than 100%.
When the wage decreases, the substitution effect in the household's choices leads to
a decrease in consumption and an increase in leisure.
On a competitive labor market,
a firm's labor demand curve is the same as the marginal product of labor curve.
A positive capital income tax is equivalent to
a lower interest rate and could have positive or negative income effect on households.
In theory a positive capital income tax leads to
a negative income effect for savers and a positive income effect on borrowers.
An increase in real dividend income represents
a pure income effect.
If the representative firm stays on the same labor demand then
all of the choices are correct.
The base year of real GDP calculation is 1996, which means that
all of the choices are correct.
When the real interest rate falls,
all of the statement is correct
Debt financing is better than budget balance period by period, because
all of the statements.
Some people, after receiving a significant amount of inheritance, dropped out of the labor force. This can be explained by
an income effect only.
The University of Illinois increased its tuition by 20%. John, currently a junior at the U of I, increased his hours of his part-time job at the library. This is due to
an income effect only.
When the real wage rate increases the substitution effect in the household's choices leads to
an increase in consumption and a decrease in leisure.
An increase in second-period income results in
an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving.
If government spending is held constant and Ricardian equivalence holds
an increase in government saving is always matched by an equal reduction in private saving.
Out of the following, which is the least likely example of an increase in total factor productivity?
an increase in immigration
We say a bundle is the optimal choice for a consumer if
any bundle that is better costs more than what he can afford.
A progressive income tax means that
average tax rate rises with income.
Everything else is the same, a country that is more efficient at producing goods and services is expected to
be richer in the long run and grow faster in the short run.
GDP and GNP may differ
because some income generated by domestic production may be received as income by foreign residents.
If the price of college education falls then
both CPI and GDP deflator are affected by this price change.
Most of women with post graduate degree stays in the labor force throughout their working age. We can explain this by
both an income effect and a substitution effect and substitution effect dominates.
The labor force participation rate is higher for workers with higher education. This can be explained by
both an income effect and a substitution effect and substitution effect dominates.
On a competitive labor market
both individual worker and individual firm have no influence on the real wage.
The property of diminishing marginal rate of substitution is the same property that indifference curves are
bowed toward the origin.
Capital income tax is considered as a bad tax because
capital income tax makes future consumption relatively more expensive hence reduces households' saving.
Corporate income tax is a
capital income tax.
The property that macroeconomic variables fluctuate together in business cycles is called
co-movement.
Double all input output is also doubled. This property of production function is referred as
constant returns to scale.
We assume that the representative consumer's preferences exhibit the properties that
consumption and leisure are both normal goods and that the consumer likes diversity in his or her consumption bundles.
The Golden Rule of capital accumulation maximizes the steady-state level of
consumption per capita.
Suppose that the BMW plant in Spartanburg, SC produces $10 million worth of vehicles in a given year. Of this total amount $1 million in profits is returned to the owners of the company in Germany. The $1 million in profits
contributes to U.S. GDP, but not U.S. GNP.
GDP per capita has been
converging among some countries, but no some others.
Additions to inventory are
counted as a component of investment.
GDP per capita in country A is 1/10 of that in country B. Country A grows at 5.8% per year, while country B 1% per year. In 50 years, roughly
country A will be as rich as country B
GDP per capita in country A is 1/10 of that in country B. Country A grows at 4.3% per year, while country B 1% per year. In 50 years roughly
country B will be only twice as rich as country A.
If current income increases as much as future income decreases and real interest rate is positive
current consumption increases.
The marginal propensity to consume measures how much does current consumption change when
current income changes.
At the steady state of the Solow model a fall of total factor productivity
decreases both capital and output per capita.
At the steady state of the Solow model an increase in population growth rate
decreases both capital and output per capita.
A decrease in the real wage rate
decreases consumption and has an ambiguous effect on quantity of labor supplied.
In the Solow growth model output per capita eventually stops growing because of
diminishing marginal product of capital.
A lump-sum tax is a tax that
does not depend on the actions of the economic agent being taxed.
An increase in wasteful government spending shifts the PPF
downward, but does not change its slope.
Long term capital gain and dividend are taxed at a lower marginal tax rate
due to a double taxation problem.
Joe, Patrick, and Adam are friends. They have the same preference over consumption and leisure. Joe has two jobs. He auditions for sitcoms during daytime and works at CVS at night time. Patrick works from 9 to 5 as a curator at a local museum. Adam is a partner of a law firm and works over time almost every week. Clearly both Joe and Adam work more than Patrick. This is because
for Joe income effect dominates while for Adam substitution effect dominates.
Ricardian equivalence may fail if
government debt incurred today may not be paid off until after some current households are deceased.
For a lender a decrease in the real interest rate
has an uncertain effect on current consumption and decreases future consumption.
In the household saving decision, a capital income tax
has both a substitution effect and an income effect.
In the Malthusian model of economic growth, an increase in the quantity of land
has no effect on steady state per capita consumption, and increases the steady state population.
Mr. Green uses tax free saving plan instead of deferred tax saving plan because
he predicts that his marginal income tax rate when he retires would be higher than his marginal income tax rate now.
If a firm is at a point where the marginal product of labor is less than real wage it can be better off to
hire less labor.
In response to an increase in government spending financed by a higher tax rate on labor income
households consume less and work less if substitution effect dominates.
In response to an increase in government spending financed by debt
households consume less and work more due to negative income effect.
With a permanent reduction of government spending,
households consume more and work more if substitution effect dominates.
The utility function captures
how an individual consumer ranks consumption bundles.
Which of the following is a correct expression for Fisher equation, where i is the nominal interest rate, r the real interest rate, and π the inflation rate?
i = r + π
In the Malthusian model an improvement in the technology of growing food is likely to
increase the size of the population and have no effect on the level of consumption per capita at the steady state.
When consumption and leisure are both normal goods after an increase of non-wage income a rational consumer
increases consumption and increases leisure.
An increase in total factor productivity
increases consumption, increases output, and increases the real wage.
The experience of the US economy during World Wars confirms the prediction that a dramatic increase of government spending
increases output but decreases consumption.
According to classical analysis, the increased government spending due to tsunami
is temporary spending that can be financed with government debt, hence creates jobs and stimulates production.
When a firm produces output
its output contributes to GDP only to the extent that there is value-added.
The sum of the employed and the unemployed divided by the adult population is the
labor force participation rate.
When capital income increases and everything else stays the same on the labor market
labor supply decreases and the real wage increases.
A permanent increase of one-unit of government expenditures financed by more tax should, according to our model, increase GDP by
less than zero unit.
Before the Industrial Revolution standards of living differed
little over time and across countries.
A constant consumption tax over time effectively
lowers the real wage but leaves the real interest rate unchanged.
According to the classical economic analysis, a decrease of wasteful government spending will
make households better off.
If the marginal rate of substitution between c 2 and c 1 is less than the inverse of (1+r),
marginal benefit of increasing c2 a bit is less than its marginal cost and a bit less saving improves happiness.
If an epidemic hits a Malthusian economy the long-term consequence is
no change in the standard of living.
Supply-side economists argue that
one can sometimes increase tax revenue by decreasing tax rate.
A consumer is a lender if
optimum current consumption is less than current disposable income.
With a Cobb-Douglas production function number of workers are fixed. When capital doubles
output is less than doubled.
When production function is linear in labor the demand for labor is
perfect elastic.
In the Malthusian model the population growth rate is
positively related to consumption per worker.
We say that an economy experiences inflation if
prices of all goods have increased.
Real consumption tends to be
procyclical and less variable than real GDP.
Real investment tends to be
procyclical and more volatile than real GDP.
If the correlation between GDP and y is 0.55, we say y is
procyclical.
We will get a downward sloping labor demand curve as long as
production function displays diminishing marginal product of labor.
If government runs fiscal deficit in a closed economy
public saving is negative and national saving is less than private saving.
A business cycle peak is a
relatively large positive deviation from trend in real GDP.
An increase in the real wage rate
represents a combination of income and substitution effects.
The value-added is
sales minus costs of intermediate goods.
An increase of fiscal deficit will
shift the supply of funds to the private sector to the left. If nothing else happens, real interest rate goes up and private investment is reduced.
In the Malthusian model, due to deteriation of environment, the yield of land is less. In the long run,
size of the population decreases and living standard stays put.
A competitive equilibrium is Pareto optimal if there is no way to rearrange or to reallocate goods so that
someone can be made better off without making someone else worse off.
When the real wage increases and everything else stays the same a firm
stays on the same labor demand curve and wants to hire less labor.
The Laffer curve is a curve showing
tax revenue as a function of tax rate.
A decrease in the price of domestically produced nuclear reactors will be reflected in
the GDP deflator but not in the consumer price index.
If a household borrows at an interest rate greater than the interest rate at which he or she can lend
the budget constraint has a kink at the income point.
Proportional income taxation is distortionary because
the competitive equilibrium is not Pareto optimal.
A competitive equilibrium fails to be a Pareto Optimum with a distorting tax because
the consumer faces a different effective wage than the firm.
The production function is concave in labor because
the contribution to production of each additional unit of labor decreases.
Suppose that two countries share identical level of total factor productivity, identical population growth rate, and identical investment rate. According to the Solow growth model
the country with the smaller initial level of output per worker will grow more rapidly than the country with the larger initial level of output per worker.
The Solow residual attempts to measure the amount of output not explained by
the direct contribution of labor and capital.
When the nominal interest rate is positive but less than the inflation rate
the dollar amount of saving increases next period, but the purchase power of saving decreases.
Real GDP values current production for very year at
the fixed base year prices.
The fixed price real GDP values current production for every year at
the fixed base year prices.
If two countries only differ in their ability to learn or adopt better technology, then we should observe that
the income difference between them widens in the long run.
In response to an increase in total factor productivity
the labor demand shifts to the right but the labor supply shifts to the left.
Economist A tries to estimate multiplier on government spending. According to the classical analysis, we should expect that
the multiplier of public roads built during recessions is less than one but positive.
During a period of year the consumer price index increased from 150 to 159 and the purchasing power of a person's bank account increased by 3.5%. For that year,
the nominal interest rate was 9.5%.
The tax base is
the object being taxed.
We can use a per-worker production function in the Malthusian model because
the production function is constant returns to scale.
The marginal rate of substitution measures
the rate at which a consumer is willing to exchange one good for another.
Data show that political instability is negatively correlated with economic growth. This is because
the risk of investing in physical capital, human capital and better technology are all increased.
The PPF determines
the set of feasible outcomes.
An epidemic hits a Malthusian economy. Right after the end of epidemic
the standard of living increases.
If the quantity of labor supplied increases when the real wage increases then
the substitution effect is larger than the income effect.
In a crude oil producing country a recent surge of international oil price increases the income of average households. On the loanable funds market
the supply curve shifts to the right and the real interest rate decreases.
The real wage denotes
the units of consumption goods that can be exchanged for one unit of labor.
Experts recommend most of the middle aged households to use tax deferred saving program instead of tax free saving program because
their marginal tax rate is in general higher now.
According to the endogenous growth model with human capital what can we say that is definitely true about countries with more efficient schools?
they grow faster
Increase the number people in the following group will reduce the labor force participation rate, EXCEPT which one?
unemployed workers
An increase in total factor productivity shifts the PPF
upward and also changes its slope.
The expenditure components of GDP include all of the following EXCEPT
wage
GDP measured using income approach are the sum of the following components:
wage and salary, rents, interest, and profits without adjusting for depreciation and taxes.
Which of the following does not shift the labor demand curve?
wage decreases
War spending differs from education spending in that
war spending is temporary and can be financed by debt.
Earned income tax credit (EITC) is better than means-tested welfare program as a way to help poor families because
welfare reduces hours worked due to a positive income effect while EITC increases hours worked due to a substitution effect.
A consumer is said to be indifferent between two consumption bundles
when the two bundles provide the equal amount of utility.
A decrease of total factor productivity
will decrease both marginal product of capital and labor.
When the real wage decreases and everything else stays the same a firm
will hire more labor and ends up with higher profits.
When production function is constant returns to scale, a proportional increase of capital and labor
will leave both marginal product of capital and marginal product of labor at the same level as before.
