Question 1

A firm is holding excess labor. This will

Accepted Answer

A)  increase the amount of capital employed. 
B)  decrease the productivity of capital. 
C)  increase labor productivity. 
D)  reduce labor productivity. 
A)  increase the amount of capital employed. 
B)  decrease the productivity of capital. 
C)  increase labor productivity. 
D)  reduce labor productivity.

Question 2

The labor supply will generally increase when the income tax rate ________ (if the substitution effect dominates) or transfer payments ________.

Accepted Answer

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

Question 3

The government spending multiplier is likely to be larger during periods of

Accepted Answer

A)  high output and low unemployment. 
B)  low output and low unemployment. 
C)  low output and high unemployment. 
D)  high output and high unemployment. 
A)  high output and low unemployment. 
B)  low output and low unemployment. 
C)  low output and high unemployment. 
D)  high output and high unemployment.

Question 4

Assume that the substitution effect dominates the income effect. An increase in both consumption and labor supply would result from

Accepted Answer

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

Question 5

Which of the following types of investments is the least volatile?

Accepted Answer

A)  inventory investment 
B)  plant and equipment investment 
C)  housing investment 
D)  all of the above are equally volatile 
A)  inventory investment 
B)  plant and equipment investment 
C)  housing investment 
D)  all of the above are equally volatile

Question 6

An inheritance is an example of ________ income.

Accepted Answer

A)  invisible 
B)  hourly 
C)  nonlabor 
D)  non-disposable 
A)  invisible 
B)  hourly 
C)  nonlabor 
D)  non-disposable

Question 7

When an economy expands, the unemployment rate is slow to drop because the labor force expands too.

Accepted Answer

A) True 
 B)False

Question 8

A firm holds excess labor if it can reduce the amount of labor it employs and still produce the same amount of output.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that output in an economy is 1,000 units and the number of hours worked in the economy is 40. If the economy enters an expansion, which of the following combinations of output and hours worked would best reflect the expansion?

Accepted Answer

A)  1,000 units of output and 40 hours worked 
B)  1,200 units of output and 50 hours worked 
C)  1,600 units of output and 60 hours worked 
D)  1,800 units of output and 75 hours worked 
A)  1,000 units of output and 40 hours worked 
B)  1,200 units of output and 50 hours worked 
C)  1,600 units of output and 60 hours worked 
D)  1,800 units of output and 75 hours worked

Question 10

Okun's Law has

Accepted Answer

A)  been proven to be completely incorrect-there isn't a negative relationship between GDP and the unemployment rate. 
B)  proven to be correct over time in that as GDP increases by 3%, there has been a 1 percentage point decline in unemployment. 
C)  not turned out to be a law-the relationship between changes in GDP and the unemployment rate is more complex than Okun's Law indicates. 
D)  been proven false, because there is a positive relationship between changes in GDP and the unemployment rate. 
A)  been proven to be completely incorrect-there isn't a negative relationship between GDP and the unemployment rate. 
B)  proven to be correct over time in that as GDP increases by 3%, there has been a 1 percentage point decline in unemployment. 
C)  not turned out to be a law-the relationship between changes in GDP and the unemployment rate is more complex than Okun's Law indicates. 
D)  been proven false, because there is a positive relationship between changes in GDP and the unemployment rate.

Question 11

On average, the inventory/sales ratio has been ________ over time.

Accepted Answer

A)  declining 
B)  increasing 
C)  unchanged 
D)  very volatile 
A)  declining 
B)  increasing 
C)  unchanged 
D)  very volatile

Question 12

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 t3 is

Accepted Answer

A)  larger than labor productivity at time t1. 
B)  less 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 t4. 
A)  larger than labor productivity at time t1. 
B)  less 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 t4.

Question 13

According to Okun's Law, if GDP increased by 12%, the unemployment rate would decrease by

Accepted Answer

A)  2 percentage point. 
B)  3 percentage points. 
C)  4 percentage points. 
D)  6 percentage points. 
A)  2 percentage point. 
B)  3 percentage points. 
C)  4 percentage points. 
D)  6 percentage points.

Question 14

Households are said to have ________ wealth when the value of their assets is less than the debts they owe.

Accepted Answer

A)  negative 
B)  positive 
C)  zero 
D)  undefinable 
A)  negative 
B)  positive 
C)  zero 
D)  undefinable

Question 15

Assume that the income effect dominates the substitution effect. When wages rise

Accepted Answer

A)  people will work more hours. 
B)  people will work fewer hours. 
C)  people will work the same number of hours. 
D)  the effect on the hours people work is ambiguous. 
A)  people will work more hours. 
B)  people will work fewer hours. 
C)  people will work the same number of hours. 
D)  the effect on the hours people work is ambiguous.

Question 16

The tendency for investment to decrease when aggregate output decreases 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 17

A decrease in corporate profits, resulting in a decline in dividend payments, will decrease consumption and decrease labor supply.

Accepted Answer

A) True 
 B)False

Question 18

Nancy's Nail Salon employs five workers. Each worker works eight hours per day. The five workers are able to serve 20 customers per day. The labor productivity is therefore ________ customer(s) per person/hour.

Accepted Answer

A)  0.5 
B)  1 
C)  2 
D)  4 
A)  0.5 
B)  1 
C)  2 
D)  4

Question 19

Caroline's hourly wage rate was reduced from $22 to $16. As a result of the wage decrease, Caroline desires to work more hours and take fewer hours of leisure. For Caroline

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 20

Suppose that the value of the multiplier has decreased in recent years. Which of the following could have caused this?

Accepted Answer

A)  Consumption has become less sensitive to changes in the interest rate. 
B)  The costs of inventory storage have risen. 
C)  Changes in the way the unemployment compensation fund is financed have made it less expensive for firms to lay off workers. 
D)  There has been an increase in the demand for imported goods. 
A)  Consumption has become less sensitive to changes in the interest rate. 
B)  The costs of inventory storage have risen. 
C)  Changes in the way the unemployment compensation fund is financed have made it less expensive for firms to lay off workers. 
D)  There has been an increase in the demand for imported goods.

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

A firm is holding excess labor. This will

The labor supply will generally increase when the income tax rate ________ (if the substitution effect dominates) or transfer payments ________.

The government spending multiplier is likely to be larger during periods of

Assume that the substitution effect dominates the income effect. An increase in both consumption and labor supply would result from

Which of the following types of investments is the least volatile?

An inheritance is an example of ________ income.

When an economy expands, the unemployment rate is slow to drop because the labor force expands too.

A firm holds excess labor if it can reduce the amount of labor it employs and still produce the same amount of output.

Suppose that output in an economy is 1,000 units and the number of hours worked in the economy is 40. If the economy enters an expansion, which of the following combinations of output and hours worked would best reflect the expansion?

Okun's Law has

On average, the inventory/sales ratio has been ________ over time.

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 t3 is

According to Okun's Law, if GDP increased by 12%, the unemployment rate would decrease by

Households are said to have ________ wealth when the value of their assets is less than the debts they owe.

Assume that the income effect dominates the substitution effect. When wages rise

The tendency for investment to decrease when aggregate output decreases is the result of the ________ effect.

A decrease in corporate profits, resulting in a decline in dividend payments, will decrease consumption and decrease labor supply.

Nancy's Nail Salon employs five workers. Each worker works eight hours per day. The five workers are able to serve 20 customers per day. The labor productivity is therefore ________ customer(s) per person/hour.

Caroline's hourly wage rate was reduced from $22 to $16. As a result of the wage decrease, Caroline desires to work more hours and take fewer hours of leisure. For Caroline

Suppose that the value of the multiplier has decreased in recent years. Which of the following could have caused this?

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

The labor supply will generally increase when the income tax rate (if the substitution effect dominates) or transfer payments .

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 t₃ is