FINAL MC

The labor demand curve slopes downward because: A. wages are inflexible B. wages are higher when demand falls C. of the diminishing marginal product of labor D. of the income effect E. None of these answers are correct.

C. of the diminishing marginal product of labor

Nonrivalry in the knowledge sector means that: A. per capita income depends on the total population B. per capita income depends on some of the stock of ideas C. per capita income depends on the total stock of ideas D. labor in the ideas sector also can be used in the output sector E. all labor is used in the ideas sector

C. per capita income depends on the total stock of ideas

The velocity of money is: A. how quickly money can be printed B. how quickly individuals spend their income C. the average number of times a dollar is used in a transaction per year D. how many times individuals are paid per year E. None of these answers are correct.

C. the average number of times a dollar is used in a transaction per year

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________ variables are parameters to the model and generally are fixed over time, while ________ variables are the outcome of the model. A. Shocks; parameters B. Endogenous; exogenous C. Endogenous; shocks D. Exogenous; endogenous E. Parameters; system

A. Shocks; parameter

If there are large fixed costs due to research and development, perfect competition does not generate new ideas because: A. firms need to recoup these costs through higher profits B. with monopolistic competition, prices are equal to the marginal cost C. with monopolistic competition, prices are equal to the marginal cost minus a markup D. perfectly competitive firms always set prices lower than the marginal cost E. the government does not adequately fund innovation

A. firms need to recoup these costs through higher profits

The percent change in the nominal GDP is, approximately, given as: A. percent change in the price level + percent change in real GDP B. percent change in the price level - percent change in real GDP C. percent change in the price level × percent change in real GDP D. percent change in the price level ÷ percent change in real GDP E. price level × percent change in real GDP

A. percent change in the price level + percent change in real GDP

According to the government's budget constraint, if the government spends more than it generates in taxes, it can raise revenues by: A. printing money B. decreasing its debt C. lowering interest rates D. privatizing E. increasing interest rates

A. printing money

The monetary base consists of: A. reserves and currency B. M1 plus M2 C. only M1 D. gold reserves plus currency E. a country's holdings of foreign and domestic currencies

A. reserves and currency

The principle of transition dynamics can be summarized as: A. the further below its steady state an economy is, the faster the economy will grow B. the closer to its steady state an economy is, the faster the economy will grow C. the further below its steady state an economy is, the slower the economy will grow D. regardless of how close to its steady state an economy is, the economy grows at the same rate E. if the economy is very close to the steady state, it stops growing

A. the further below its steady state an economy is, the faster the economy will grow

According to the combined Solow-Romer model, all countries grow at: A. the same rate in the long run, but actual growth rates can differ across countries for long periods of time B. the same rate in the medium and long runs C. different rates forever D. the same rate as the United States in each period E. different rates in the long run, but actual growth rates are the same across countries for long periods of time

A. the same rate in the long run, but actual growth rates can differ across countries for long periods of time

If the population of Romania was about 20.3 million in 1970 and the average population growth rate is 0.2 percent, then Romania's population would have been about ________ in 2010. A. 20.3 million B. 22.0 million C. 40.6 million D. 17.4 million E. 23.6 million

B. 22.0 million

You are the head of the central bank and you want to maintain 2 percent long-run inflation, using the quantity theory of money. If the real GDP growth is 4 percent and velocity is constant, you suggest a: A. 6 percent interest rate B. 6 percent money supply growth C. 2 percent money supply growth D. 0 percent money supply growth E. 2 percent interest rate

B. 6 percent money supply growth

Which of the following is an example of an intermediate good? A. A new car sold to a family B. A new sound system sold to an automaker for installation in a car C. A metal-stamping machine used to produce cars sold to an automaker D. A new iPad sold to a teenager

B. A new sound system sold to an automaker for installation in a car

Assume two economies are identical in every way except that one has a higher saving rate. According to the Solow growth model, in the steady state, the country with the higher saving rate will have ________ level of total output and ________ rate of growth of output than/as the country with the lower saving rate. A. a higher; a higher B. a higher; the same C. a lower; a higher D. a higher; a lower E. the same; the same

B. a higher; the same

The explanation for the upward sloping supply of labor curve is that: A. the marginal product of capital is positive B. as the wage rises, the opportunity cost of leisure rises, so people work more C. as the wage rises, people want to work less D. the marginal product of labor is diminishing E. None of these answers are correct.

B. as the wage rises, the opportunity cost of leisure rises, so people work more

The "natural rate of unemployment" is the unemployment rate that would prevail: A. during changes in the business cycle B. if the economy were in neither a boom nor a recession C. if people voluntarily leave work D. during seasonal changes in the economy E. if the unemployment rate were zero

B. if the economy were in neither a boom nor a recession

In the "bathtub model" of unemployment, in the steady state: A. employment is constant B. the change in unemployment is zero C. the natural rate of unemployment rate is zero D. cyclical unemployment equals frictional unemployment E. the job separation rate is zero

B. the change in unemployment is zero

To get a more accurate view of the size of countries' economies, we first need to convert each country's GDP to the dollar using ________ and then adjust for ________. A. the interest rate; the exchange rate B. the exchange rate; price level differences C. price level differences; the interest rate D. the exchange rate; fiscal policy E. fiscal policy; the exchange rate

B. the exchange rate; price level differences

Suppose the total factor productivity in Switzerland, Italy, South Africa, and India are 0.89, 0.70, 0.33, and 0.21, respectively. If the U.S. total factor productivity is 1.00, then the United States is ________ these four countries. A. equally as productive, respectively, as B. 89 percentage points, 70 percentage points, 33 percentage points, and 21 percentage points less productive, respectively, than C. 11 percentage points, 30 percentage points, 67 percentage points, and 79 percentage points more productive, respectively, than D. 89 percentage points, 70 percentage points, 33 percentage points, and 21 percentage points more productive, respectively, than E. 11 percentage points, 30 percentage points, 67 percentage points, and 79 percentage points less productive, respectively, than

C. 11 percentage points, 30 percentage points, 67 percentage points, and 79 percentage points more productive, respectively, than

By how much does GDP change between 2010 and 2011 in the following scenario? In 2010, a rich woman has a chef and pays him $50,000 to cook for her. In 2010, she marries the chef and he continues to cook. A. GDP rises by $50,000. B. GDP is unchanged. C. GDP falls by $50,000. D. GDP rises by $25,000. E. Not enough information is given.

C. GDP falls by $50,000.

According to the classical dichotomy, in the long run there is: A. accelerating economic growth B. perfect connectivity between the nominal and real sides of the economy C. complete separation of the nominal and real sides of the economy D. no growth after the economy reaches the steady state E. zero inflation

C. complete separation of the nominal and real sides of the economy

One of the key characteristics of the Cobb-Douglas production function is: A. increasing returns to scale B. decreasing returns to scale C. constant returns to scale D. that it compacts all inputs into a single equation E. that it is an exact replication of a firm's production function

C. constant returns to scale

If France's per capita GDP is $5,000 in 1950 and Portugal's is $2,500, but Portugal is growing faster, the expectation that sometime in the future Portugal's per capita GDP will equal that of France is called economic: A. growth B. divergence C. convergence D. dynamics E. justice

C. convergence

In the Solow model, if we assume that capital depreciation rates are the same across all countries, differences in per capita output can be explained by: A. the steady-state capital stock B. the initial capital stock and saving rates C. differences in productivity and saving rates D. the labor stock and saving rates E. None of these answers are correct.

C. differences in productivity and saving rates

Money that has no intrinsic value except as money is called ________ money. A. bonded B. commodity C. fiat D. intrinsic E. None of these answers are correct.

C. fiat

The essence of the quantity theory of money is that: A. the price level is indeterminate B. in the long run, the only determinant of the price level is the money supply C. in the long run, a key determinant of the price level is the money supply D. only the central bank knows what the price level is E. money cannot pin down the price level

C. in the long run, a key determinant of the price level is the money supply

In the Solow model, in every period, a fraction of total output ________, which ________ next period's capital stock. A. is saved; reduces B. depreciates; adds to C. is saved; adds to D. is consumed; adds to E. is invested; reduces

C. is saved; adds to

If the inflation rate is larger than the nominal interest rate: A. unemployment rises B. the real interest rate is zero C. the real interest rate is negative D. the real interest rate is larger than the nominal interest rate E. Not enough information is given.

C. the real interest rate is negative

Frictional unemployment is the unemployment that results from: A. workers losing jobs during recession B. workers losing jobs during seasonal changes C. workers changing jobs in a dynamic economy D. prevailing labor market institutions E. workers leaving the labor force

C. workers changing jobs in a dynamic economy

The president of the World Bank is on his way to a meeting with the president of Uruguay. He bumps into you in the hallway and wants to know how long it will take for Uruguayan per capita GDP to double. All he knows is that the average growth rate has been about 1 percent. You quickly tell him it will take about ________ years because you know ________. A. 60; the rule of 60 B. 7; the rule of 70 C. 700; percent change D. 70; the rule of 70 E. 1; exponential growth

D. 70; the rule of 70

If the depreciation and saving rates are constant, the economy eventually will settle in the steady state in the Solow model because of: A. the lack of productivity B. increasing returns to capital in production C. constant returns to capital in production D. diminishing returns to capital in production E. increasing returns to labor in production

D. diminishing returns to capital in production

Empirically, a large amount of evidence suggests that money neutrality ________, but changes in money supply ________. A. holds in the short run; do not affect nominal variables B. does not hold in the long run; can have real effects in the short run C. holds in the short run; can have real effects in the long run D. holds in the long run; can have real effects in the short run E. does not hold in the long run; have an effect on unemployment in the long run

D. holds in the long run; can have real effects in the short run

"Growth accounting" endeavors to: A. measure GDP B. measure economic growth rates C. determine how capital accumulates D. measure what factors, and in what proportions, affect overall economic growth E. measure global output and the proportion of global output attributed to each country

D. measure what factors, and in what proportions, affect overall economic growth

Suppose nominal GDP in 2009 does not change (compared its previous level in 2008). Given this information, we know with certainty that A. real GDP increased during 2009. B. the GDP deflator increased during 2009. C. both the GDP deflator and real GDP fell during 2009. D. more information is needed to answer this question.

D. more information is needed to answer this question.

Despite the costs associated with economic growth, most believe: A. they will get only higher B. there are not too many benefits C. they are higher than the benefits D. the benefits far outweigh the costs E. the benefits are negative

D. the benefits far outweigh the costs

The study of economic growth concentrates on understanding the determinants of: A. the rate of price changes B. the short-term change in per capita GDP C. the rate of population growth D. the change in per capita GDP over time E. None of these answers are correct.

D. the change in per capita GDP over time

Over the past 50 years or so: A. the male employment-population ratio always has been rising B. the female employment-population ratio generally has been falling C. the male employment-population ratio generally has been rising D. the female employment-population ratio generally has been rising E. None of these answers are correct.

D. the female employment-population ratio generally has been rising

A balanced growth path is defined as a situation in which: A. the output growth rate is zero B. the growth rates of all endogenous variables are variable C. the growth rates of some of the endogenous variables are constant D. the growth rates of all endogenous variables are constant E. All of these answers are correct.

D. the growth rates of all endogenous variables are constant

A decrease in the income tax will result in: A. the labor demand curve shifting right B. the labor demand curve shifting left C. the labor supply curve shifting left and the labor demand curve shifting right D. the labor supply curve shifting right E. neither the labor supply nor demand curves shifting

D. the labor supply curve shifting right

For the years 1948-1973, output per person in the private sector grew 3.3 percent, labor composition grew 0.2 percent, and total factor productivity grew 2.2 percent. What was the growth rate of capital intensity? A. −1.5 percent B. 1.3 percent C. 3.2 percent D. 5.3 percent E. 2.9 percent

E. 2.9 percent

Which of the following is NOT included in the expenditure approach to national accounting? A. defense expenditures by government B. firm expenditures on equipment C. expenditures in new residential structures D. household service expenditures E. All of the above are included in the expenditure approach to national accounting.

E. All of the above are included in the expenditure approach to national accounting.

For which of the following does the Solow model NOT provide adequate explanations? A. why saving rates differ across countries B. the cause of productivity differences across countries C. why population growth rates differ across countries D. what causes long-term economic growth E. All of these answers are correct

E. All of these answers are correct

Europe's relatively high unemployment rates can be attributed to: A. adverse shocks B. inefficient labor market institutions C. strong labor unions D. generous unemployment insurance E. All of these answers are correct.

E. All of these answers are correct.

Which of the following is an exogenous variable in the Solow model? A. productivity B. depreciation rate C. saving rate D. the initial capital stock E. All of these answers are correct.

E. All of these answers are correct.

The National Income and Product Accounts identity states: A. Expenditure = Production + Income B. Production = Expenditure - Income C. Production = Expenditure + Income D. Expenditure = Production - Income E. Expenditure = Production = Income

E. Expenditure = Production = Income

Which of the following would NOT be considered part of investment spending? A. Ford buys a new robot for its automobile assembly line. B. Apple computer builds a new factory. C. Exxon increases its inventories of unsold gasoline. D. An accountant buys a newly built home for herself and her family. E. all of the above are part of investment spending

E. all of the above are part of investment spending

Which of the following is a nonrival good? A. a TV signal B. a blueprint C. national defense D. a lighthouse E. all of these answers are correct.

E. all of these answers are correct.

The law of diminishing marginal product to capital means that as we add additional units of capital A. and labor, output will increase but at a constant rate B. and labor, output will increase but at a decreasing rate C. but hold labor constant, output will increase but at an increasing rate D. but hold labor constant, output will increase but at a constant rate E. but hold labor constant, output will increase but at a decreasing rate

E. but hold labor constant, output will increase but at a decreasing rate

If there are large fixed or research and development costs, such as in the pharmaceutical industry, production can be characterized by: A. negative costs B. constant returns to scale C. decreasing returns to scale D. large variable costs E. increasing returns to scale

E. increasing returns to scale

A drawback of unemployment benefits is that: A. they increase job destruction B. they cost taxpayers over 50 percent of their incomes C. the payments are too large D. they always shorten the time spent unemployed E. they give workers a disincentive to find work

E. they give workers a disincentive to find work