Question 1

The total government expenditure multiplier

Accepted Answer

A)  is the ratio of total increase in real output to the increase in government spending. 
B)  is the total increase in the demand for goods. 
C)  equals   
D)  is the ratio of total increase in demand for goods to the increase in government spending. 
E)  equals the MPC. 
A)  is the ratio of total increase in real output to the increase in government spending. 
B)  is the total increase in the demand for goods. 
C)  equals   
D)  is the ratio of total increase in demand for goods to the increase in government spending. 
E)  equals the MPC.

Question 2

The marginal benefit from investment comes from

Accepted Answer

A)  increased production and more undepreciated capital in the future period. 
B)  only increased production in the future period. 
C)  only increased undepreciated capital in the future period. 
D)  having more capital in the current period. 
E)  increases in the prices of stocks. 
A)  increased production and more undepreciated capital in the future period. 
B)  only increased production in the future period. 
C)  only increased undepreciated capital in the future period. 
D)  having more capital in the current period. 
E)  increases in the prices of stocks.

Question 3

The representative consumer's current labour supply curve slopes upward under the assumption that

Accepted Answer

A)  there is an indirect relationship between the current real wage and current labour supply. 
B)  the substitution effect of an increase in the real wage outweighs the income effect. 
C)  the substitution effect of an increase in the real wage is less than the income effect. 
D)  the substitution effect of an increase in the current labour supply outweighs the income effect. 
E)  the substitution effect of an increase in the current labour supply is less than the income effect. 
A)  there is an indirect relationship between the current real wage and current labour supply. 
B)  the substitution effect of an increase in the real wage outweighs the income effect. 
C)  the substitution effect of an increase in the real wage is less than the income effect. 
D)  the substitution effect of an increase in the current labour supply outweighs the income effect. 
E)  the substitution effect of an increase in the current labour supply is less than the income effect.

Question 4

When drawn against the real interest rate, the optimal investment schedule shifts to the right if the

Accepted Answer

A)  current capital stock K increases. 
B)  current capital stock K decreases. 
C)  future capital stock K' increases. 
D)  future capital stock K' decreases. 
E)  future total factor productivity increases. 
A)  current capital stock K increases. 
B)  current capital stock K decreases. 
C)  future capital stock K' increases. 
D)  future capital stock K' decreases. 
E)  future total factor productivity increases.

Question 5

If firm-level asymmetric information becomes more severe, then

Accepted Answer

A)  investment demand decreases. 
B)  investment demand does not change. 
C)  investment demand increases. 
D)  there is an unambiguous effect on investment demand. 
E)  investment demand decreases if the substitution effect dominates, increases if the income effect dominates. 
A)  investment demand decreases. 
B)  investment demand does not change. 
C)  investment demand increases. 
D)  there is an unambiguous effect on investment demand. 
E)  investment demand decreases if the substitution effect dominates, increases if the income effect dominates.

Question 6

The slope of the demand for consumption goods is

Accepted Answer

A)  greater than 1. 
B)  equal to 1. 
C)  the MPC. 
D)  the MRS. 
E)  equal to the wage rate. 
A)  greater than 1. 
B)  equal to 1. 
C)  the MPC. 
D)  the MRS. 
E)  equal to the wage rate.

Question 7

The marginal cost of investment for the firm is equal to

Accepted Answer

A)  1. 
B)  -1. 
C)  MP'K. 
D)  - MP'K. 
E)  1/MP'K. 
A)  1. 
B)  -1. 
C)  MP'K. 
D)  - MP'K. 
E)  1/MP'K.

Question 8

The equilibrium effects of a prospective future increase in total factor productivity include

Accepted Answer

A)  an increase in the real wage and an increase in the real interest rate. 
B)  an increase in the real wage and a decrease in the real interest rate. 
C)  a decrease in the real wage and an increase in the real interest rate. 
D)  a decrease in the real wage and a decrease in the real interest rate. 
E)  a decrease in the real wage only. 
A)  an increase in the real wage and an increase in the real interest rate. 
B)  an increase in the real wage and a decrease in the real interest rate. 
C)  a decrease in the real wage and an increase in the real interest rate. 
D)  a decrease in the real wage and a decrease in the real interest rate. 
E)  a decrease in the real wage only.

Question 9

The marginal benefit from investment is

Accepted Answer

A)  the ratio of investment to expected future profits. 
B)  related to economic activity and the real interest rate. 
C)  what one unit of investment in the current period adds to the present value of profits. 
D)  what one unit of investment adds to the current capital stock. 
E)  what one unit of investment costs when funds are borrowed. 
A)  the ratio of investment to expected future profits. 
B)  related to economic activity and the real interest rate. 
C)  what one unit of investment in the current period adds to the present value of profits. 
D)  what one unit of investment adds to the current capital stock. 
E)  what one unit of investment costs when funds are borrowed.

Question 10

The total government expenditure multiplier is

Accepted Answer

A)  larger than 1. 
B)  between 0 and 1. 
C)  equal to the MPC. 
D)  equal to   
E)  1. 
A)  larger than 1. 
B)  between 0 and 1. 
C)  equal to the MPC. 
D)  equal to   
E)  1.

Question 11

A key determinant of investment is

Accepted Answer

A)  the expected rate of future total factor productivity. 
B)  the level of economic activity. 
C)  the level of government spending. 
D)  the potential for exports. 
E)  the real interest rate. 
A)  the expected rate of future total factor productivity. 
B)  the level of economic activity. 
C)  the level of government spending. 
D)  the potential for exports. 
E)  the real interest rate.

Question 12

In the real intertemporal model, an increase in credit market risk implies

Accepted Answer

A)  output demand shifts left and output supply shifts right, increasing the real interest rate. 
B)  output demand shifts right and output supply shifts left, the real interest rate is constant. 
C)  output demand shifts left and output supply shifts left, decreasing the real interest rate. 
D)  output demand shifts left and output supply is constant, increasing the real interest rate. 
E)  output demand shifts left and output supply shifts right, decreasing the real interest rate. 
A)  output demand shifts left and output supply shifts right, increasing the real interest rate. 
B)  output demand shifts right and output supply shifts left, the real interest rate is constant. 
C)  output demand shifts left and output supply shifts left, decreasing the real interest rate. 
D)  output demand shifts left and output supply is constant, increasing the real interest rate. 
E)  output demand shifts left and output supply shifts right, decreasing the real interest rate.

Question 13

A temporary increase in government spending that leads to only a small decline in lifetime wealth likely shifts the output demand curve to the

Accepted Answer

A)  right by more than the rightward shift in output supply. 
B)  right by less than the rightward shift in output supply. 
C)  left by more than the leftward shift in output supply. 
D)  left by less than the leftward shift in output supply. 
E)  right by the same amount as the rightward shift in output supply. 
A)  right by more than the rightward shift in output supply. 
B)  right by less than the rightward shift in output supply. 
C)  left by more than the leftward shift in output supply. 
D)  left by less than the leftward shift in output supply. 
E)  right by the same amount as the rightward shift in output supply.

Question 14

Any increase in the present value of taxes for the consumer implies

Accepted Answer

A)  an increase in lifetime wealth and an increase in current labour supply. 
B)  an increase in lifetime wealth and a decrease in current labour supply. 
C)  a decrease in lifetime wealth and an increase in current labour supply. 
D)  a decrease in lifetime wealth and a decrease in current labour supply. 
E)  a decrease in lifetime wealth and a decrease in current consumption demand. 
A)  an increase in lifetime wealth and an increase in current labour supply. 
B)  an increase in lifetime wealth and a decrease in current labour supply. 
C)  a decrease in lifetime wealth and an increase in current labour supply. 
D)  a decrease in lifetime wealth and a decrease in current labour supply. 
E)  a decrease in lifetime wealth and a decrease in current consumption demand.

Question 15

The equilibrium effects of a temporary increase in total factor productivity include

Accepted Answer

A)  an increase in the real wage and an increase in the real interest rate. 
B)  an increase in the real wage and a decrease in the real interest rate. 
C)  a decrease in the real wage and an increase in the real interest rate. 
D)  a decrease in the real wage and a decrease in the real interest rate. 
E)  only a decrease in the real interest rate. 
A)  an increase in the real wage and an increase in the real interest rate. 
B)  an increase in the real wage and a decrease in the real interest rate. 
C)  a decrease in the real wage and an increase in the real interest rate. 
D)  a decrease in the real wage and a decrease in the real interest rate. 
E)  only a decrease in the real interest rate.

Question 16

The response of output following a natural disaster includes

Accepted Answer

A)  an increase in output demand and an increase in output supply. 
B)  an increase in output demand and a decrease in output supply. 
C)  a decrease in output demand and an increase in output supply. 
D)  a decrease in output demand and a decrease in output supply. 
E)  only a decrease in output demand. 
A)  an increase in output demand and an increase in output supply. 
B)  an increase in output demand and a decrease in output supply. 
C)  a decrease in output demand and an increase in output supply. 
D)  a decrease in output demand and a decrease in output supply. 
E)  only a decrease in output demand.

Question 17

When drawn against the real interest rate, the output demand curve unambiguously shifts to the right if either or both of the following occur.

Accepted Answer

A)  an increase in current taxes and an increase in future taxes 
B)  an increase in current taxes and a decrease in future taxes 
C)  a decrease in current taxes and an increase in future taxes 
D)  a decrease in current taxes and a decrease in future taxes 
E)  an increase in current taxes and a reduction in interest rates 
A)  an increase in current taxes and an increase in future taxes 
B)  an increase in current taxes and a decrease in future taxes 
C)  a decrease in current taxes and an increase in future taxes 
D)  a decrease in current taxes and a decrease in future taxes 
E)  an increase in current taxes and a reduction in interest rates

Question 18

When the real interest rate increases, the demand for current consumption

Accepted Answer

A)  shifts up. 
B)  remains constant. 
C)  moves along the demand curve. 
D)  shifts down. 
E)  increases for each level of current income. 
A)  shifts up. 
B)  remains constant. 
C)  moves along the demand curve. 
D)  shifts down. 
E)  increases for each level of current income.

Question 19

If government spending increases then, given the real interest rate,

Accepted Answer

A)  the demand for goods increases more than one-for-one. 
B)  the demand for goods increases less than one-for-one. 
C)  the demand for goods is unchanged, due to crowding out. 
D)  the demand for goods increases one-for-one. 
E)  the demand for goods doubles. 
A)  the demand for goods increases more than one-for-one. 
B)  the demand for goods increases less than one-for-one. 
C)  the demand for goods is unchanged, due to crowding out. 
D)  the demand for goods increases one-for-one. 
E)  the demand for goods doubles.

Question 20

The equilibrium effects of a temporary increase in government spending include

Accepted Answer

A)  an increase in the real wage and an increase in the real interest rate. 
B)  an increase in the real wage and a decrease in the real interest rate. 
C)  a decrease in the real wage and an increase in the real interest rate. 
D)  a decrease in the real wage and a decrease in the real interest rate. 
E)  real wages and the real interest rate remaining unchanged. 
A)  an increase in the real wage and an increase in the real interest rate. 
B)  an increase in the real wage and a decrease in the real interest rate. 
C)  a decrease in the real wage and an increase in the real interest rate. 
D)  a decrease in the real wage and a decrease in the real interest rate. 
E)  real wages and the real interest rate remaining unchanged.

The total government expenditure multiplier

The marginal benefit from investment comes from

The representative consumer's current labour supply curve slopes upward under the assumption that

When drawn against the real interest rate, the optimal investment schedule shifts to the right if the

If firm-level asymmetric information becomes more severe, then

The slope of the demand for consumption goods is

The marginal cost of investment for the firm is equal to

The equilibrium effects of a prospective future increase in total factor productivity include

The marginal benefit from investment is

The total government expenditure multiplier is

A key determinant of investment is

In the real intertemporal model, an increase in credit market risk implies

A temporary increase in government spending that leads to only a small decline in lifetime wealth likely shifts the output demand curve to the

Any increase in the present value of taxes for the consumer implies

The equilibrium effects of a temporary increase in total factor productivity include

The response of output following a natural disaster includes

When drawn against the real interest rate, the output demand curve unambiguously shifts to the right if either or both of the following occur.

When the real interest rate increases, the demand for current consumption

If government spending increases then, given the real interest rate,

The equilibrium effects of a temporary increase in government spending include

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

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

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

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 11: A Real Intertemporal Model with Investment

The total government expenditure multiplier

The marginal benefit from investment comes from

The representative consumer's current labour supply curve slopes upward under the assumption that

When drawn against the real interest rate, the optimal investment schedule shifts to the right if the

If firm-level asymmetric information becomes more severe, then

The slope of the demand for consumption goods is

The marginal cost of investment for the firm is equal to

The equilibrium effects of a prospective future increase in total factor productivity include

The marginal benefit from investment is

The total government expenditure multiplier is

A key determinant of investment is

In the real intertemporal model, an increase in credit market risk implies

A temporary increase in government spending that leads to only a small decline in lifetime wealth likely shifts the output demand curve to the

Any increase in the present value of taxes for the consumer implies

The equilibrium effects of a temporary increase in total factor productivity include

The response of output following a natural disaster includes

When drawn against the real interest rate, the output demand curve unambiguously shifts to the right if either or both of the following occur.

When the real interest rate increases, the demand for current consumption

If government spending increases then, given the real interest rate,

The equilibrium effects of a temporary increase in government spending include

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

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

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

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