Intermediate Macroeconomics - Test 1

If is an economy's production function, what is labor's share of output? A) α B) 1 − α C) α/(1 − α) D) (1 − α)/α

B) 1 − α

Which is a possible negative result of increased government spending? A)Hyperinflation B)Tax increases C)Lower GDP D)Crowding out of investment

D)Crowding out of investment

For economists, models are useful because they... A)explain the behavior of exogenous variables. B)enable economists to transform endogenous variables into exogenous variables & exogenous variables into endogenous variables. C)are used to keep economic theories inaccessible to non-economists. D)help us dispense with irrelevant details and focus on underlying connections.

D)help us dispense with irrelevant details and focus on underlying connections.

Which best describes real GDP in the U.S.? A)It rises over time, but its growth is not steady B)Its constant; only nominal GDP changes C)It grows at a consistent rate over time D) It falls in about as many years as it rises

A) it rises over time, but its growth is not steady

How do competitive, profit-maximizing firms determine the optimal level of a factor? Answer: The firm demands each factor of production until that factor's marginal product equals... A)its real factor price. B)zero. C)all other factors' marginal products. D)its nominal factor price.

A)its real factor price.

The neoclassical theory of distribution combined with the Cobb-Douglas production function suggest a linkage between: A)productivity growth and real wages. B)productivity growth and nominal output growth. C)capital and labor productivity. D)population growth and real output growth.

A)productivity growth and real wages.

Of the following statements, which best describes inflation in the U.S.? A)It has been steadily growing in recent decades. B)In recent decades, it has been less volatile. C)In recent decades, deflation has occurred about as often as inflation. D)The Fed has been able to eliminate inflation.

B)In recent decades, it has been less volatile.

Which statement is TRUE? The system of fractional-reserve banking creates money but not wealth. The system of fractional-reserve banking creates both money and wealth. The Fed determines commercial banks' excess reserves. With fractional-reserve banking, each round of loan and deposit creates a growing addition to the money supply.

The system of fractional-reserve banking creates money but not wealth.

A bank's total assets relative to the bank owners' equity is the: required reserve ratio. monetary base. leverage ratio. capital requirement.

leverage ratio.

The use of borrowed funds to make investments is called: hedging. the balance sheet. fractional-reserve banking. leveraging.

leveraging.

Real GDP measures the

total income of everyone in the economy in a given period, adjusted for price changes.

Of the following variables, which one is usually implicit in macroeconomic models? A)The interest rate B)The unemployment rate C)The optimizing behavior of households and firms D)The economy's growth rate

C)The optimizing behavior of households and firms

Of the following statements, which best describes unemployment in the U.S.? A)It rose in the Great Recession & has remained persistent since. B)It never falls below 4-5%. C)There is no discernible long-term trend in unemployment. D)Unemployment only occurs during recessions.

C)There is no discernible long-term trend in unemployment.

What enables money creation in addition to that directly created by the central bank? The Federal Reserve Open-market operations Off-shore banking Fractional-reserve banking

Fractional-reserve banking

Which is NOT a variable determining the supply of money? The monetary base The marginal propensity to save The reserve-deposit ratio The currency-deposit ratio

The marginal propensity to save