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