Question 1

When firms hold excess labor, the value of the multiplier increases.

Accepted Answer

A) True 
 B)False

Question 2

As the economy ________, the size of the multiplier will become smaller.

Accepted Answer

A)  goes into a recession 
B)  slows 
C)  experiences stagflation 
D)  approaches full employment 
A)  goes into a recession 
B)  slows 
C)  experiences stagflation 
D)  approaches full employment

Question 3

The two channels through which ________ policy can influence behavior in the goods market are investment and consumption.

Accepted Answer

A)  fiscal 
B)  monetary 
C)  trade 
D)  regulatory 
A)  fiscal 
B)  monetary 
C)  trade 
D)  regulatory

Question 4

According to the life-cycle theory of consumption, people tend to save during their main working years.

Accepted Answer

A) True 
 B)False

Question 5

The idea of the "Invisible Hand" is that people make lifetime consumption plans.

Accepted Answer

A) True 
 B)False

Question 6

Jenny's hourly wage rate was increased from $17 to $21. As a result of the wage increase, Jenny desires to work fewer hours and take more hours of leisure. For Jenny

Accepted Answer

A)  the income effect must be zero. 
B)  the substitution effect dominates the income effect. 
C)  the income effect dominates the substitution effect. 
D)  the substitution effect must equal the income effect. 
A)  the income effect must be zero. 
B)  the substitution effect dominates the income effect. 
C)  the income effect dominates the substitution effect. 
D)  the substitution effect must equal the income effect.

Question 7

If a firm's sales turn out to be ________, inventories will be higher than expected, and there will be less production in the future.

Accepted Answer

A)  more than expected 
B)  less than expected 
C)  as expected 
D)  negative 
A)  more than expected 
B)  less than expected 
C)  as expected 
D)  negative

Question 8

The less inventories firms hold, the larger the multiplier.

Accepted Answer

A) True 
 B)False

Question 9

An unexpected increase in inventories has a negative effect on future production.

Accepted Answer

A) True 
 B)False

Question 10

Assume that Krystal has positive wealth. As the interest rate increased, Krystal increased her current consumption. For Krystal

Accepted Answer

A)  the substitution effect of an interest rate increase outweighs the income effect. 
B)  the income effect of an interest rate increase outweighs the substitution effect. 
C)  the substitution effect of an interest rate increase must be zero. 
D)  the income effect of an interest rate increase must equal the substitution effect. 
A)  the substitution effect of an interest rate increase outweighs the income effect. 
B)  the income effect of an interest rate increase outweighs the substitution effect. 
C)  the substitution effect of an interest rate increase must be zero. 
D)  the income effect of an interest rate increase must equal the substitution effect.

Question 11

Which of the following statements is true?

Accepted Answer

A)  The multiplier effects for policy changes that are perceived to be temporary are smaller than those for policy changes that are perceived to be permanent. 
B)  The multiplier effects for policy changes that are perceived to be temporary are larger than those for policy changes that are perceived to be permanent. 
C)  The multiplier effects for policy changes that are perceived to be temporary are the same as those for policy changes that are perceived to be permanent. 
D)  There is no relationship between the size of the multiplier effect and whether policy changes are perceived to be temporary or permanent. 
A)  The multiplier effects for policy changes that are perceived to be temporary are smaller than those for policy changes that are perceived to be permanent. 
B)  The multiplier effects for policy changes that are perceived to be temporary are larger than those for policy changes that are perceived to be permanent. 
C)  The multiplier effects for policy changes that are perceived to be temporary are the same as those for policy changes that are perceived to be permanent. 
D)  There is no relationship between the size of the multiplier effect and whether policy changes are perceived to be temporary or permanent.

Question 12

The opportunity cost of leisure will rise if

Accepted Answer

A)  the wage rate increases. 
B)  the wage rate decreases. 
C)  nonlabor income increases. 
D)  nonlabor income decreases. 
A)  the wage rate increases. 
B)  the wage rate decreases. 
C)  nonlabor income increases. 
D)  nonlabor income decreases.

Question 13

A decrease in consumption and an increase in labor supply would result from

Accepted Answer

A)  a decrease in tax rates. 
B)  a decrease in transfer payments. 
C)  an increase in transfer payments. 
D)  an increase in government spending. 
A)  a decrease in tax rates. 
B)  a decrease in transfer payments. 
C)  an increase in transfer payments. 
D)  an increase in government spending.

Question 14

The unemployment rate is

Accepted Answer

A)  the difference between the number of people in the labor force and the number of people employed. 
B)  one plus the employment rate. 
C)  one minus the employment rate. 
D)  the ratio of the labor force to the number of people unemployed. 
A)  the difference between the number of people in the labor force and the number of people employed. 
B)  one plus the employment rate. 
C)  one minus the employment rate. 
D)  the ratio of the labor force to the number of people unemployed.

Question 15

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. Suppose the economy is currently at Point B. If investors are optimistic about future growth in aggregate output, investment

Accepted Answer

A)  moves to Point C. 
B)  moves to Point A. 
C)  moves to Point D. 
D)  stays at Point B. 
A)  moves to Point C. 
B)  moves to Point A. 
C)  moves to Point D. 
D)  stays at Point B.

Question 16

Firms believe that the current economic upturn will be long-lasting and have decided to hold a significant amount of excess labor. The government reports that the unemployment rate is 2.5%. The government has decided it needs to take very little action to stimulate the economy. In this situation the multiplier is likely to be

Accepted Answer

A)  negative. 
B)  zero. 
C)  small. 
D)  large. 
A)  negative. 
B)  zero. 
C)  small. 
D)  large.

Question 17

The collective decisions of firms determine output, labor demand, and investment.

Accepted Answer

A) True 
 B)False

Question 18

The idea of the ________ is that people make lifetime consumption plans.

Accepted Answer

A)  life-cycle theory of consumption 
B)  invisible hand 
C)  law of demand 
D)  classical theory of investment 
A)  life-cycle theory of consumption 
B)  invisible hand 
C)  law of demand 
D)  classical theory of investment

Question 19

When the substitution effect is greater than the income effect, Juanita will not supply more work if

Accepted Answer

A)  the wage rate and the price level increase proportionately. 
B)  the percentage increase in the price level is greater than the percentage change in wages. 
C)  wages are falling faster than prices. 
D)  all of the above 
A)  the wage rate and the price level increase proportionately. 
B)  the percentage increase in the price level is greater than the percentage change in wages. 
C)  wages are falling faster than prices. 
D)  all of the above

Question 20

Which of the following relationships is correct?

Accepted Answer

A)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) - Production + Sales 
B)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) - Production - Sales 
C)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) + Production - Sales 
D)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) + Production + Sales 
A)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) - Production + Sales 
B)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) - Production - Sales 
C)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) + Production - Sales 
D)  Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) + Production + Sales

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

When firms hold excess labor, the value of the multiplier increases.

As the economy ________, the size of the multiplier will become smaller.

The two channels through which ________ policy can influence behavior in the goods market are investment and consumption.

According to the life-cycle theory of consumption, people tend to save during their main working years.

The idea of the "Invisible Hand" is that people make lifetime consumption plans.

Jenny's hourly wage rate was increased from $17 to $21. As a result of the wage increase, Jenny desires to work fewer hours and take more hours of leisure. For Jenny

If a firm's sales turn out to be ________, inventories will be higher than expected, and there will be less production in the future.

The less inventories firms hold, the larger the multiplier.

An unexpected increase in inventories has a negative effect on future production.

Assume that Krystal has positive wealth. As the interest rate increased, Krystal increased her current consumption. For Krystal

Which of the following statements is true?

The opportunity cost of leisure will rise if

A decrease in consumption and an increase in labor supply would result from

The unemployment rate is

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. Suppose the economy is currently at Point B. If investors are optimistic about future growth in aggregate output, investment

The collective decisions of firms determine output, labor demand, and investment.

The idea of the ________ is that people make lifetime consumption plans.

When the substitution effect is greater than the income effect, Juanita will not supply more work if

Which of the following relationships is correct?

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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