Question 1

Which of the following statements is true?

Accepted Answer

A)  Production and sales will fluctuate by the same amount and in the same direction over time. 
B)  Production will not fluctuate over time, but a firm's sales will fluctuate over time. 
C)  Production will fluctuate somewhat over time, but not as much as sales fluctuates over time. 
D)  Production and sales will both fluctuate by the same amount over time, but in different directions. 
A)  Production and sales will fluctuate by the same amount and in the same direction over time. 
B)  Production will not fluctuate over time, but a firm's sales will fluctuate over time. 
C)  Production will fluctuate somewhat over time, but not as much as sales fluctuates over time. 
D)  Production and sales will both fluctuate by the same amount over time, but in different directions.

Question 2

Production minus sales equals

Accepted Answer

A)  net profits. 
B)  total revenue. 
C)  change in inventories. 
D)  depreciation. 
A)  net profits. 
B)  total revenue. 
C)  change in inventories. 
D)  depreciation.

Question 3

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

Accepted Answer

A)  earn 
B)  spend 
C)  desire 
D)  invest 
A)  earn 
B)  spend 
C)  desire 
D)  invest

Question 4

The ________ labor-force participation rate is among prime-age ________.

Accepted Answer

A)  highest; women 
B)  highest; men 
C)  lowest; women 
D)  lowest; men 
A)  highest; women 
B)  highest; men 
C)  lowest; women 
D)  lowest; men

Question 5

When interest rates increase, the substitution effect suggests that individuals will

Accepted Answer

A)  consume less today. 
B)  save less today. 
C)  consume less in the future. 
D)  save more and consume more today. 
A)  consume less today. 
B)  save less today. 
C)  consume less in the future. 
D)  save more and consume more today.

Question 6

If the income effect is equal to 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 7

An unexpected decrease in inventories has a positive effect on future production.

Accepted Answer

A) True 
 B)False

Question 8

Empirical data suggest that during recessions, individuals ________ their consumption of durable goods.

Accepted Answer

A)  increase 
B)  reduce 
C)  do not change 
D)  eliminate 
A)  increase 
B)  reduce 
C)  do not change 
D)  eliminate

Question 9

Although the relationship between output and the unemployment rate is not as simple as Okun's Law represents it to be, it is true that

Accepted Answer

A)  a 1% increase in output tends to correspond to a greater than 1% decrease in the unemployment rate. 
B)  a 1% increase in output tends to correspond to a less than 1% decrease in the unemployment rate. 
C)  a 1% increase in output tends to correspond to a 1% decrease in the unemployment rate. 
D)  a 1% increase in output will have no effect on the unemployment rate. 
A)  a 1% increase in output tends to correspond to a greater than 1% decrease in the unemployment rate. 
B)  a 1% increase in output tends to correspond to a less than 1% decrease in the unemployment rate. 
C)  a 1% increase in output tends to correspond to a 1% decrease in the unemployment rate. 
D)  a 1% increase in output will have no effect on the unemployment rate.

Question 10

The constrained supply of labor refers to the amount a household ________ in a given period at the current wage rate.

Accepted Answer

A)  would like to work 
B)  chooses not to work 
C)  is forced to work 
D)  actually works 
A)  would like to work 
B)  chooses not to work 
C)  is forced to work 
D)  actually works

Question 11

The government reduces the corporate profits tax. As a result, corporate profits increase. This will

Accepted Answer

A)  have no effect on households. 
B)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase. 
C)  increase the nonlabor income of households, causing consumption to increase and labor supply to decrease. 
D)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase or decrease depending on the relative magnitude of the income and substitution effects. 
A)  have no effect on households. 
B)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase. 
C)  increase the nonlabor income of households, causing consumption to increase and labor supply to decrease. 
D)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase or decrease depending on the relative magnitude of the income and substitution effects.

Question 12

The slippage between ________ occurs because the unemployment rate is calculated from data on the number of people employed.

Accepted Answer

A)  supply and demand 
B)  imports and exports 
C)  output and the unemployment rate 
D)  consumption and saving 
A)  supply and demand 
B)  imports and exports 
C)  output and the unemployment rate 
D)  consumption and saving

Question 13

Related to the Economics in Practice on p. 607: The Case-Shiller index of housing prices

Accepted Answer

A)  increased by 125% from 1996 to 2006. 
B)  fell by 38% from 2006-2011. 
C)  showed an annual increase of over 7% in 2012 and early 2013. 
D)  All of the above are correct. 
A)  increased by 125% from 1996 to 2006. 
B)  fell by 38% from 2006-2011. 
C)  showed an annual increase of over 7% in 2012 and early 2013. 
D)  All of the above are correct.

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. If the economy is currently at Point C, ________ in aggregate output moves the economy to I3.

Accepted Answer

A)  optimism about past growth 
B)  pessimism about past growth 
C)  optimism about future growth 
D)  pessimism about future growth 
A)  optimism about past growth 
B)  pessimism about past growth 
C)  optimism about future growth 
D)  pessimism about future growth

Question 15

Sammy won the Quartermania jackpot in Las Vegas and decided to work less. This is an example of the impact of

Accepted Answer

A)  labor income on Sammy's decision. 
B)  nonlabor income on Sammy's decision. 
C)  labor and nonlabor income on Sammy's decision. 
D)  all of the above 
A)  labor income on Sammy's decision. 
B)  nonlabor income on Sammy's decision. 
C)  labor and nonlabor income on Sammy's decision. 
D)  all of the above

Question 16

The government spending multiplier is likely to be ________ during periods of high output and low unemployment.

Accepted Answer

A)  larger 
B)  smaller 
C)  infinite 
D)  zero 
A)  larger 
B)  smaller 
C)  infinite 
D)  zero

Question 17

A medical student is likely to consume more than a high school student because the

Accepted Answer

A)  medical student bases consumption on current income while the high school student does not. 
B)  high school student bases consumption on permanent income while the medical student does not. 
C)  medical student's permanent income is likely higher than the high school student's permanent income. 
D)  medical student and the high school student both base consumption on current income. 
A)  medical student bases consumption on current income while the high school student does not. 
B)  high school student bases consumption on permanent income while the medical student does not. 
C)  medical student's permanent income is likely higher than the high school student's permanent income. 
D)  medical student and the high school student both base consumption on current income.

Question 18

Firms believe that the current economic downturn will be long-lasting and have decided to hold very little excess labor. The government reports that the unemployment rate is 12.5%. The government has decided to stimulate the economy by increasing government spending. 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 19

Which of the following causes an increase in labor supply?

Accepted Answer

A)  when wages and the price level increase proportionately 
B)  a decrease in income tax rates 
C)  a decrease in the general price level 
D)  a decrease in transfer payments 
A)  when wages and the price level increase proportionately 
B)  a decrease in income tax rates 
C)  a decrease in the general price level 
D)  a decrease in transfer payments

Question 20

From 1970 to 2014, plant and equipment investment of the firm sector of the U.S. economy reached its peak in the

Accepted Answer

A)  1970s. 
B)  1980s. 
C)  1990s. 
D)  2000s. 
A)  1970s. 
B)  1980s. 
C)  1990s. 
D)  2000s.

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

Which of the following statements is true?

Production minus sales equals

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

The ________ labor-force participation rate is among prime-age ________.

When interest rates increase, the substitution effect suggests that individuals will

If the income effect is equal to the substitution effect, the labor supply curve

An unexpected decrease in inventories has a positive effect on future production.

Empirical data suggest that during recessions, individuals ________ their consumption of durable goods.

Although the relationship between output and the unemployment rate is not as simple as Okun's Law represents it to be, it is true that

The constrained supply of labor refers to the amount a household ________ in a given period at the current wage rate.

The government reduces the corporate profits tax. As a result, corporate profits increase. This will

The slippage between ________ occurs because the unemployment rate is calculated from data on the number of people employed.

Related to the Economics in Practice on p. 607: The Case-Shiller index of housing prices

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. If the economy is currently at Point C, ________ in aggregate output moves the economy to I3.

Sammy won the Quartermania jackpot in Las Vegas and decided to work less. This is an example of the impact of

The government spending multiplier is likely to be ________ during periods of high output and low unemployment.

A medical student is likely to consume more than a high school student because the

Which of the following causes an increase in labor supply?

From 1970 to 2014, plant and equipment investment of the firm sector of the U.S. economy reached its peak in the

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-force participation rate is among prime-age .

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. If the economy is currently at Point C, ________ in aggregate output moves the economy to I₃.