Question 1

The most volatile type of investment is inventory investment.

Accepted Answer

A) True 
 B)False

Question 2

In practice, the size of the ________ is about 1.4.

Accepted Answer

A)  APC 
B)  multiplier 
C)  inflation rate 
D)  natural rate of unemployment 
A)  APC 
B)  multiplier 
C)  inflation rate 
D)  natural rate of unemployment

Question 3

If discouraged workers were counted as unemployed, then as output increased the unemployment rate would

Accepted Answer

A)  not change at all. 
B)  fall by more than if discouraged workers are not counted as unemployed. 
C)  fall by less than if discouraged workers are not counted as unemployed. 
D)  increase by less than if discouraged workers are not counted as unemployed. 
A)  not change at all. 
B)  fall by more than if discouraged workers are not counted as unemployed. 
C)  fall by less than if discouraged workers are not counted as unemployed. 
D)  increase by less than if discouraged workers are not counted as unemployed.

Question 4

If the income effect is greater than the substitution effect, the labor supply curve

Accepted Answer

A)  is horizontal. 
B)  is vertical. 
C)  has a negative slope. 
D)  has a positive slope. 
A)  is horizontal. 
B)  is vertical. 
C)  has a negative slope. 
D)  has a positive slope.

Question 5

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. From 2015 to 2016 the real wage

Accepted Answer

A)  rises. 
B)  falls. 
C)  stays the same. 
D)  rises then falls. 
A)  rises. 
B)  falls. 
C)  stays the same. 
D)  rises then falls.

Question 6

The desired level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is

Accepted Answer

A)  greater than the extra gain (in interest revenue and decreased storage costs). 
B)  zero. 
C)  less than the extra gain in (in interest revenue and decreased storage costs). 
D)  just equal to the extra gain (in interest revenue and decreased storage costs). 
A)  greater than the extra gain (in interest revenue and decreased storage costs). 
B)  zero. 
C)  less than the extra gain in (in interest revenue and decreased storage costs). 
D)  just equal to the extra gain (in interest revenue and decreased storage costs).

Question 7

The presence of automatic stabilizers increases the size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 8

If the economy is on the flat part of the AS curve, the multiplier will be

Accepted Answer

A)  larger than it would be if the economy were on the steep portion of the AS curve. 
B)  smaller than it would be if the economy were on the steep portion of the AS curve. 
C)  constant regardless of where the economy is on the AS curve. 
D)  infinite, as compared to zero if the economy is on the steep portion of the AS curve. 
A)  larger than it would be if the economy were on the steep portion of the AS curve. 
B)  smaller than it would be if the economy were on the steep portion of the AS curve. 
C)  constant regardless of where the economy is on the AS curve. 
D)  infinite, as compared to zero if the economy is on the steep portion of the AS curve.

Question 9

The nonlabor income of households will increase, causing consumption to increase and labor supply to decrease, if the government

Accepted Answer

A)  decreases the corporate profits tax. 
B)  decreases transfer payments. 
C)  implements contractionary fiscal policy. 
D)  increases the personal income tax. 
A)  decreases the corporate profits tax. 
B)  decreases transfer payments. 
C)  implements contractionary fiscal policy. 
D)  increases the personal income tax.

Question 10

A fall in the interest rate

Accepted Answer

A)  decreases the opportunity cost of consuming today. 
B)  increases the opportunity cost of consuming in the future. 
C)  increases the opportunity cost of consuming today. 
D)  decreases the opportunity cost of consuming in the future. 
A)  decreases the opportunity cost of consuming today. 
B)  increases the opportunity cost of consuming in the future. 
C)  increases the opportunity cost of consuming today. 
D)  decreases the opportunity cost of consuming in the future.

Question 11

The portion of a corporation's profits that the firm pays out each period to shareholders is known as

Accepted Answer

A)  capital gains. 
B)  dividends. 
C)  interest. 
D)  retained earnings. 
A)  capital gains. 
B)  dividends. 
C)  interest. 
D)  retained earnings.

Question 12

The "crowding out" effect decreases planned investment and decreases the value of the multiplier.

Accepted Answer

A) True 
 B)False

Question 13

If the economy has automatic stabilizers built in, the multiplier will

Accepted Answer

A)  be smaller than it would have been in the absence of automatic stabilizers. 
B)  be larger than it would have been in the absence of automatic stabilizers. 
C)  be zero. 
D)  be infinitely larger than it would have been in the absence of automatic stabilizers. 
A)  be smaller than it would have been in the absence of automatic stabilizers. 
B)  be larger than it would have been in the absence of automatic stabilizers. 
C)  be zero. 
D)  be infinitely larger than it would have been in the absence of automatic stabilizers.

Question 14

The idea of the life-cycle theory of consumption is that people make ________ consumption plans.

Accepted Answer

A)  lifetime 
B)  yearly 
C)  seasonal 
D)  cyclical 
A)  lifetime 
B)  yearly 
C)  seasonal 
D)  cyclical

Question 15

A decrease in dividend payments will

Accepted Answer

A)  have no effect on labor supply. 
B)  lead to an increase in labor supply. 
C)  lead to a decrease in labor supply. 
D)  either lead to an increase or decrease in labor supply depending on the relative magnitude of the income and substitution effects. 
A)  have no effect on labor supply. 
B)  lead to an increase in labor supply. 
C)  lead to a decrease in labor supply. 
D)  either lead to an increase or decrease in labor supply depending on the relative magnitude of the income and substitution effects.

Question 16

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. Which of the following could cause a movement from Point B to Point C?

Accepted Answer

A)  an increase in the interest rate 
B)  positive growth in aggregate output 
C)  negative growth in aggregate output 
D)  a decrease in the interest rate 
A)  an increase in the interest rate 
B)  positive growth in aggregate output 
C)  negative growth in aggregate output 
D)  a decrease in the interest rate

Question 17

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 2016 as the base year?

Accepted Answer

A)  $11.20 
B)  $10.80 
C)  $6.65 
D)  $5.71 
A)  $11.20 
B)  $10.80 
C)  $6.65 
D)  $5.71

Question 18

Okun's law demonstrates the relationship between unemployment and inflation.

Accepted Answer

A) True 
 B)False

Question 19

The tendency for investment to increase when aggregate output increases is the result of the ________ effect.

Accepted Answer

A)  accelerator 
B)  multiplier 
C)  substitution 
D)  income 
A)  accelerator 
B)  multiplier 
C)  substitution 
D)  income

Question 20

According to the life-cycle theory of consumption, people tend to consume less than they earn during their main working years.

Accepted Answer

A) True 
 B)False

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

The most volatile type of investment is inventory investment.

In practice, the size of the ________ is about 1.4.

If discouraged workers were counted as unemployed, then as output increased the unemployment rate would

If the income effect is greater than the substitution effect, the labor supply curve

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. From 2015 to 2016 the real wage

The desired level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is

The presence of automatic stabilizers increases the size of the multiplier.

If the economy is on the flat part of the AS curve, the multiplier will be

The nonlabor income of households will increase, causing consumption to increase and labor supply to decrease, if the government

A fall in the interest rate

The portion of a corporation's profits that the firm pays out each period to shareholders is known as

The "crowding out" effect decreases planned investment and decreases the value of the multiplier.

If the economy has automatic stabilizers built in, the multiplier will

The idea of the life-cycle theory of consumption is that people make ________ consumption plans.

A decrease in dividend payments will

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. Which of the following could cause a movement from Point B to Point C?

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 2016 as the base year?

Okun's law demonstrates the relationship between unemployment and inflation.

The tendency for investment to increase when aggregate output increases is the result of the ________ effect.

According to the life-cycle theory of consumption, people tend to consume less than they earn during their main working years.

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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