Question 1

A firm is less likely to invest in new capital if

Accepted Answer

A)  the productivity of capital is high. 
B)  it has no excess capital. 
C)  it does not expect future sales to grow. 
D)  it is expanding into new markets. 
A)  the productivity of capital is high. 
B)  it has no excess capital. 
C)  it does not expect future sales to grow. 
D)  it is expanding into new markets.

Question 2

Suppose that output in an economy is 50 units and the number of hours worked in the economy is 25. If the economy enters an expansion, which of the following combinations of output and hours worked would best reflect the expansion?

Accepted Answer

A)  50 units of output and 25 hours worked 
B)  60 units of output and 40 hours worked 
C)  80 units of output and 40 hours worked 
D)  70 units of output and 30 hours worked 
A)  50 units of output and 25 hours worked 
B)  60 units of output and 40 hours worked 
C)  80 units of output and 40 hours worked 
D)  70 units of output and 30 hours worked

Question 3

Refer to the information provided in Figure 30.2 below to answer the question(s) that follow.   Figure 30.2
-Refer to Figure 30.2. Labor productivity at time t1 is

Accepted Answer

A)  larger than labor productivity at time t3. 
B)  larger than labor productivity at time t4. 
C)  larger than labor productivity at time t2. 
D)  larger than labor productivity at time t2, but less than labor productivity at time t3. 
A)  larger than labor productivity at time t3. 
B)  larger than labor productivity at time t4. 
C)  larger than labor productivity at time t2. 
D)  larger than labor productivity at time t2, but less than labor productivity at time t3.

Question 4

For every 3% growth in output, the unemployment rate always declines 1%.

Accepted Answer

A) True 
 B)False

Question 5

If taxes are a fixed amount rather than dependant on income, the size of the multiplier is decreased.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that output in an economy is 1,000 units and the number of hours worked in the economy is 40. What is the value of labor productivity?

Accepted Answer

A)  0.04 units per worker hour. 
B)  25 units per worker hour 
C)  125 units per worker hour. 
D)  1,000 units per worker hour. 
A)  0.04 units per worker hour. 
B)  25 units per worker hour 
C)  125 units per worker hour. 
D)  1,000 units per worker hour.

Question 7

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

Accepted Answer

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

Question 8

If you have more than one job, you are counted more than once in the persons-employed data.

Accepted Answer

A) True 
 B)False

Question 9

Holding everything else constant, the less wealth a household has

Accepted Answer

A)  the less it will consume, both now and in the future. 
B)  the more it will consume now, but the less it will consume in the future. 
C)  the less it will consume now, but the more it will consume in the future. 
D)  the more it will consume, both now and in the future. 
A)  the less it will consume, both now and in the future. 
B)  the more it will consume now, but the less it will consume in the future. 
C)  the less it will consume now, but the more it will consume in the future. 
D)  the more it will consume, both now and in the future.

Question 10

An increase in consumption and a decrease in labor supply would result from

Accepted Answer

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

Question 11

The government reduces the corporate profits tax. As a result, corporate profits increase. This will ________ the nonlabor income of households, causing consumption to ________ and labor supply to ________.

Accepted Answer

A)  decrease; decrease; increase 
B)  decrease; decrease; decrease 
C)  increase; increase; decrease 
D)  increase; increase; increase 
A)  decrease; decrease; increase 
B)  decrease; decrease; decrease 
C)  increase; increase; decrease 
D)  increase; increase; increase

Question 12

The substitution effect of a wage rate decrease suggests that

Accepted Answer

A)  individuals will supply more work. 
B)  individuals will supply less work. 
C)  individuals will consume less leisure. 
D)  individuals will supply more work and consume less leisure. 
A)  individuals will supply more work. 
B)  individuals will supply less work. 
C)  individuals will consume less leisure. 
D)  individuals will supply more work and consume less leisure.

Question 13

According to the life-cycle theory of consumption, people tend to dissave during their retirement years.

Accepted Answer

A) True 
 B)False

Question 14

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 A?

Accepted Answer

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

Question 15

According to Okun's law, if output increased by 15 percent, unemployment should decrease by 3 percent.

Accepted Answer

A) True 
 B)False

Question 16

An unexpected decrease in nonlabor income will have ________ effect on a household's consumption.

Accepted Answer

A)  an uncertain 
B)  a negative 
C)  a positive 
D)  no 
A)  an uncertain 
B)  a negative 
C)  a positive 
D)  no

Question 17

If the number of people employed is 190 million and the number of people in the labor force is 200 million, then the employment rate is

Accepted Answer

A)  5%. 
B)  10%. 
C)  90%. 
D)  95%. 
A)  5%. 
B)  10%. 
C)  90%. 
D)  95%.

Question 18

If the substitution effect dominates the income effect, an increase in transfer payments will have a positive effect on both consumption and labor supply.

Accepted Answer

A) True 
 B)False

Question 19

Assume households have positive wealth. If the income effect is greater than the substitution effect, a decrease in interest rates will

Accepted Answer

A)  increase saving and decrease consumption spending by households. 
B)  decrease saving and increase consumption spending by households. 
C)  decrease both saving and consumption spending by households. 
D)  increase both saving and consumption spending by households. 
A)  increase saving and decrease consumption spending by households. 
B)  decrease saving and increase consumption spending by households. 
C)  decrease both saving and consumption spending by households. 
D)  increase both saving and consumption spending by households.

Question 20

If the substitution effect dominates the income effect, a decrease in transfer payments will have a negative effect on both consumption and labor supply.

Accepted Answer

A) True 
 B)False

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

A firm is less likely to invest in new capital if

Suppose that output in an economy is 50 units and the number of hours worked in the economy is 25. If the economy enters an expansion, which of the following combinations of output and hours worked would best reflect the expansion?

Refer to the information provided in Figure 30.2 below to answer the question(s) that follow. Figure 30.2 -Refer to Figure 30.2. Labor productivity at time t1 is

For every 3% growth in output, the unemployment rate always declines 1%.

If taxes are a fixed amount rather than dependant on income, the size of the multiplier is decreased.

Suppose that output in an economy is 1,000 units and the number of hours worked in the economy is 40. What is the value of labor productivity?

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

If you have more than one job, you are counted more than once in the persons-employed data.

Holding everything else constant, the less wealth a household has

An increase in consumption and a decrease in labor supply would result from

The government reduces the corporate profits tax. As a result, corporate profits increase. This will ________ the nonlabor income of households, causing consumption to ________ and labor supply to ________.

The substitution effect of a wage rate decrease suggests that

According to the life-cycle theory of consumption, people tend to dissave during their retirement years.

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 A?

According to Okun's law, if output increased by 15 percent, unemployment should decrease by 3 percent.

An unexpected decrease in nonlabor income will have ________ effect on a household's consumption.

If the number of people employed is 190 million and the number of people in the labor force is 200 million, then the employment rate is

If the substitution effect dominates the income effect, an increase in transfer payments will have a positive effect on both consumption and labor supply.

Assume households have positive wealth. If the income effect is greater than the substitution effect, a decrease in interest rates will

If the substitution effect dominates the income effect, a decrease in transfer payments will have a negative effect on both consumption and labor supply.

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

Filters

Refer to the information provided in Figure 30.2 below to answer the question(s) that follow. Figure 30.2 -Refer to Figure 30.2. Labor productivity at time t₁ is

The government reduces the corporate profits tax. As a result, corporate profits increase. This will the nonlabor income of households, causing consumption to and labor supply to .