Question 1

During economic expansions

Accepted Answer

A)  employment rises by a higher percentage than output, and the ratio of output to workers falls. 
B)  output rises by a larger percentage than employment, and the ratio of output to workers rises. 
C)  employment rises by a larger percentage than output, and the ratio of output to workers rises. 
D)  output rises by a larger percentage than employment, and the ratio of output to workers falls. 
A)  employment rises by a higher percentage than output, and the ratio of output to workers falls. 
B)  output rises by a larger percentage than employment, and the ratio of output to workers rises. 
C)  employment rises by a larger percentage than output, and the ratio of output to workers rises. 
D)  output rises by a larger percentage than employment, and the ratio of output to workers falls. B

Question 2

The closer the economy is to full employment, the larger the multiplier is.

Accepted Answer

A) True 
 B)False  False

Question 3

If firms believe that a downturn in sales and output is ________, the most likely course of action would be to reassign their workers to different jobs.

Accepted Answer

A)  temporary 
B)  long-lasting 
C)  permanent 
D)  unlikely 
A)  temporary 
B)  long-lasting 
C)  permanent 
D)  unlikely A

Question 4

Refer to the information provided in Figure 30.1 below to answer the question(s) that follow.   Figure 30.1
-Refer to Figure 30.1. Growth in aggregate output causes a ________ through the accelerator effect.

Accepted Answer

A)  shift from I2 to I3 
B)  shift from I3 to I2 
C)  shift from Point C to Point B 
D)  shift from Point B to Point C 
A)  shift from I2 to I3 
B)  shift from I3 to I2 
C)  shift from Point C to Point B 
D)  shift from Point B to Point C

Question 5

Over time, spending on nondurable goods is ________ spending on durable goods.

Accepted Answer

A)  more erratic than 
B)  smoother than 
C)  roughly equal to 
D)  economically wiser than 
A)  more erratic than 
B)  smoother than 
C)  roughly equal to 
D)  economically wiser than

Question 6

If a firm is able to produce ________ output even after reducing its labor workforce, this implies that the firm has excess labor.

Accepted Answer

A)  more 
B)  less 
C)  the same amount of 
D)  no 
A)  more 
B)  less 
C)  the same amount of 
D)  no

Question 7

According to the life-cycle theory of consumption, people tend to ________ during their early and later years.

Accepted Answer

A)  dissave 
B)  save 
C)  consume less than they earn 
D)  save less than they invest 
A)  dissave 
B)  save 
C)  consume less than they earn 
D)  save less than they invest

Question 8

At the beginning of 2017, Albert planned to buy a new home theater system, laptop computer, and hybrid car by borrowing money. Albert already owes $9,000 on other loans. He also planned to buy a new iPod and humidor out of current income. A decrease in interest rates during 2017 will most likely

Accepted Answer

A)  cause Albert to decide to borrow less money, but not change what he planned to spend on goods purchased with current income. 
B)  cause Albert to decide to borrow more money and to spend more on goods purchased with current income. 
C)  cause Albert to decide to borrow more money, but not change what he planned to spend on goods purchased with current income. 
D)  cause Albert to decide to borrow less money and to spend less on goods purchased with current income. 
A)  cause Albert to decide to borrow less money, but not change what he planned to spend on goods purchased with current income. 
B)  cause Albert to decide to borrow more money and to spend more on goods purchased with current income. 
C)  cause Albert to decide to borrow more money, but not change what he planned to spend on goods purchased with current income. 
D)  cause Albert to decide to borrow less money and to spend less on goods purchased with current income.

Question 9

The costs that a firm incurs when it changes its production level are adjustment costs.

Accepted Answer

A) True 
 B)False

Question 10

The goods and services that firms purchase and turn into final goods and services are called

Accepted Answer

A)  inputs. 
B)  outputs. 
C)  exports. 
D)  none of the above. 
A)  inputs. 
B)  outputs. 
C)  exports. 
D)  none of the above.

Question 11

Recent research and data have shown that the relationship between output and unemployment is as stable as Okun's Law predicts.

Accepted Answer

A) True 
 B)False

Question 12

People who have two jobs,

Accepted Answer

A)  are counted twice in the job data, but only once in the persons-employed data. 
B)  are counted twice in both the job data and the persons-employed data. 
C)  are counted once in the job data, but twice in the persons-employed data. 
D)  are counted once in both the job data and the persons-employed data. 
A)  are counted twice in the job data, but only once in the persons-employed data. 
B)  are counted twice in both the job data and the persons-employed data. 
C)  are counted once in the job data, but twice in the persons-employed data. 
D)  are counted once in both the job data and the persons-employed data.

Question 13

If the wage rate decreases, the substitution effect is for a person to work more and the income effect is for a person to take more leisure.

Accepted Answer

A) True 
 B)False

Question 14

Consumption depends solely on income.

Accepted Answer

A) True 
 B)False

Question 15

The labor force increases when output increases because discouraged workers re-enter the labor force.

Accepted Answer

A) True 
 B)False

Question 16

If the income effect is less than the substitution effect and the wage rate increases, individuals

Accepted Answer

A)  will supply more work. 
B)  will supply less work. 
C)  will consume more leisure. 
D)  cannot be determined from the given information 
A)  will supply more work. 
B)  will supply less work. 
C)  will consume more leisure. 
D)  cannot be determined from the given information

Question 17

Assume households have positive wealth. If the income effect is ________ the substitution effect, a decrease in interest rates will increase saving and decrease consumption spending by households.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  unrelated to 
A)  greater than 
B)  less than 
C)  equal to 
D)  unrelated to

Question 18

Refer to the information provided in Table 30.2 below to answer the question(s) that follow.
Table 30.2  
-Refer to Table 30.2. What is the real wage rate in 2015 using 2017 as the base year?

Accepted Answer

A)  $4.21 
B)  $8.40 
C)  $11.40 
D)  $15.20 
A)  $4.21 
B)  $8.40 
C)  $11.40 
D)  $15.20

Question 19

If inventory stocks are low and firms have enough capital and labor to support an output increase,

Accepted Answer

A)  monetary and fiscal policy will be very effective. 
B)  fiscal policy will be effective, but monetary policy will be ineffective. 
C)  monetary policy will be effective, but fiscal policy will be ineffective. 
D)  neither monetary nor fiscal policy will be effective. 
A)  monetary and fiscal policy will be very effective. 
B)  fiscal policy will be effective, but monetary policy will be ineffective. 
C)  monetary policy will be effective, but fiscal policy will be ineffective. 
D)  neither monetary nor fiscal policy will be effective.

Question 20

Refer to the information provided in Table 30.1 below to answer the question(s) that follow.
Table 30.1  
-Refer to Table 30.1. What is the real wage rate in 2016 using 2015 as the base year?

Accepted Answer

A)  $9.28 
B)  $9.58 
C)  $17.64 
D)  $19.00 
A)  $9.28 
B)  $9.58 
C)  $17.64 
D)  $19.00

Exam 30: Household and Firm Behavior in the Macroeconomy: a Further Look

During economic expansions

The closer the economy is to full employment, the larger the multiplier is.

If firms believe that a downturn in sales and output is ________, the most likely course of action would be to reassign their workers to different jobs.

Refer to the information provided in Figure 30.1 below to answer the question(s) that follow. Figure 30.1 -Refer to Figure 30.1. Growth in aggregate output causes a ________ through the accelerator effect.

Over time, spending on nondurable goods is ________ spending on durable goods.

If a firm is able to produce ________ output even after reducing its labor workforce, this implies that the firm has excess labor.

According to the life-cycle theory of consumption, people tend to ________ during their early and later years.

At the beginning of 2017, Albert planned to buy a new home theater system, laptop computer, and hybrid car by borrowing money. Albert already owes $9,000 on other loans. He also planned to buy a new iPod and humidor out of current income. A decrease in interest rates during 2017 will most likely

The costs that a firm incurs when it changes its production level are adjustment costs.

The goods and services that firms purchase and turn into final goods and services are called

Recent research and data have shown that the relationship between output and unemployment is as stable as Okun's Law predicts.

People who have two jobs,

If the wage rate decreases, the substitution effect is for a person to work more and the income effect is for a person to take more leisure.

Consumption depends solely on income.

The labor force increases when output increases because discouraged workers re-enter the labor force.

If the income effect is less than the substitution effect and the wage rate increases, individuals

Assume households have positive wealth. If the income effect is ________ the substitution effect, a decrease in interest rates will increase saving and decrease consumption spending by households.

Refer to the information provided in Table 30.2 below to answer the question(s) that follow. Table 30.2 -Refer to Table 30.2. What is the real wage rate in 2015 using 2017 as the base year?

If inventory stocks are low and firms have enough capital and labor to support an output increase,

Refer to the information provided in Table 30.1 below to answer the question(s) that follow. Table 30.1 -Refer to Table 30.1. What is the real wage rate in 2016 using 2015 as the base year?

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

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