Question 1

An increase in second-period income results in

Accepted Answer

A)  an increase in first-period consumption, an increase in second-period consumption, and an increase in saving. 
B)  an increase in first-period consumption, a decrease in second-period consumption, and an increase in saving. 
C)  a decrease in first-period consumption, an increase in second-period consumption, and an increase in saving. 
D)  an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving. 
E)  a decrease in first-period consumption, a decrease in second-period consumption, and an increase in saving. 
A)  an increase in first-period consumption, an increase in second-period consumption, and an increase in saving. 
B)  an increase in first-period consumption, a decrease in second-period consumption, and an increase in saving. 
C)  a decrease in first-period consumption, an increase in second-period consumption, and an increase in saving. 
D)  an increase in first-period consumption, an increase in second-period consumption, and a decrease in saving. 
E)  a decrease in first-period consumption, a decrease in second-period consumption, and an increase in saving.

Question 2

The two primary explanations for the excess volatility of consumption are

Accepted Answer

A)  consumers' limited life spans and credit market imperfections. 
B)  credit market imperfections and changes in market prices. 
C)  changes in market prices and distorting taxes. 
D)  distorting taxes and consumers' limited life spans. 
E)  changes in market prices and consumer's limited life spans. 
A)  consumers' limited life spans and credit market imperfections. 
B)  credit market imperfections and changes in market prices. 
C)  changes in market prices and distorting taxes. 
D)  distorting taxes and consumers' limited life spans. 
E)  changes in market prices and consumer's limited life spans.

Question 3

The government's current period budget constraint is

Accepted Answer

A)  G + B = T. 
B)  G' = T' + (1 + r)B. 
C)  G = T + B. 
D)  G + T = B. 
E)  G + S = B. 
A)  G + B = T. 
B)  G' = T' + (1 + r)B. 
C)  G = T + B. 
D)  G + T = B. 
E)  G + S = B.

Question 4

The phenomenon that some consumers pay a higher interest rate when they borrow than the interest rate they receive when they lend is best described as an example of

Accepted Answer

A)  irrational behaviour. 
B)  a credit market imperfection. 
C)  a vast banking conspiracy. 
D)  the burden of public debt. 
E)  competitive disequilibrium. 
A)  irrational behaviour. 
B)  a credit market imperfection. 
C)  a vast banking conspiracy. 
D)  the burden of public debt. 
E)  competitive disequilibrium.

Question 5

The government's present value budget constraint states that

Accepted Answer

A)  taxes must equal government spending in each period. 
B)  the present value of government spending must be equal to the present value of consumers' disposable incomes. 
C)  the present value of government spending must be equal to the present value of taxes. 
D)  the government may run deficits each and every year, as long as the deficits are sufficiently small. 
E)  governments can increase spending as long as deficits are financed by issuing debt. 
A)  taxes must equal government spending in each period. 
B)  the present value of government spending must be equal to the present value of consumers' disposable incomes. 
C)  the present value of government spending must be equal to the present value of taxes. 
D)  the government may run deficits each and every year, as long as the deficits are sufficiently small. 
E)  governments can increase spending as long as deficits are financed by issuing debt.

Question 6

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

Accepted Answer

A)  Friedman-Lucas theory. 
B)  permanent income hypothesis. 
C)  Ricardian equivalence theorem. 
D)  intertemporal substitution effect. 
E)  steady state theorem. 
A)  Friedman-Lucas theory. 
B)  permanent income hypothesis. 
C)  Ricardian equivalence theorem. 
D)  intertemporal substitution effect. 
E)  steady state theorem.

Question 7

A permanent increase in income leads to

Accepted Answer

A)  a large increase in current consumption. 
B)  a small increase in current consumption. 
C)  a small decrease in future consumption. 
D)  a small increase in future consumption. 
E)  a large decrease in future consumption. 
A)  a large increase in current consumption. 
B)  a small increase in current consumption. 
C)  a small decrease in future consumption. 
D)  a small increase in future consumption. 
E)  a large decrease in future consumption.

Question 8

In a two-period model, government spending is financed through

Accepted Answer

A)  taxes and transfer payments. 
B)  taxes and issuing debt. 
C)  taxes and redeeming debt. 
D)  taxes only. 
E)  issuing bonds. 
A)  taxes and transfer payments. 
B)  taxes and issuing debt. 
C)  taxes and redeeming debt. 
D)  taxes only. 
E)  issuing bonds.

Question 9

A consumer's budget constraint in the future period is

Accepted Answer

A)  c' = y'- t' + (1 + r)s. 
B)  c' + (1 + r)s = y'- t'. 
C)  c + s = y - t. 
D)  c' = y' - t' - (1 + r)s. 
E)  y' - t' = (1 + r)s. 
A)  c' = y'- t' + (1 + r)s. 
B)  c' + (1 + r)s = y'- t'. 
C)  c + s = y - t. 
D)  c' = y' - t' - (1 + r)s. 
E)  y' - t' = (1 + r)s.

An increase in second-period income results in

The two primary explanations for the excess volatility of consumption are

The government's current period budget constraint is

The phenomenon that some consumers pay a higher interest rate when they borrow than the interest rate they receive when they lend is best described as an example of

The government's present value budget constraint states that

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

A permanent increase in income leads to

In a two-period model, government spending is financed through

A consumer's budget constraint in the future period is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 9: A Two-Period Model: The Consumption–Savings Decision and Credit Markets

An increase in second-period income results in

The two primary explanations for the excess volatility of consumption are

The government's current period budget constraint is

The phenomenon that some consumers pay a higher interest rate when they borrow than the interest rate they receive when they lend is best described as an example of

The government's present value budget constraint states that

The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the

A permanent increase in income leads to

In a two-period model, government spending is financed through

A consumer's budget constraint in the future period is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters