Question 1

Capital has a life that typically

Accepted Answer

A)  lasts for less than 1 year. 
B)  never expires. 
C)  expires as it is being used. 
D)  extends over many years. 
A)  lasts for less than 1 year. 
B)  never expires. 
C)  expires as it is being used. 
D)  extends over many years.

Question 2

If Okun's Law holds true, then a 3% increase in GDP would lead to a ________ percentage point decrease in the unemployment rate.

Accepted Answer

A)  9 
B)  6 
C)  3 
D)  1 
A)  9 
B)  6 
C)  3 
D)  1

Question 3

The optimal level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is greater than the gain (in interest revenue and decreased storage costs).

Accepted Answer

A) True 
 B)False

Question 4

Purchases of new houses are the most volatile type of expenditures because they are very sensitive to ________, which is highly volatile.

Accepted Answer

A)  the interest rate 
B)  disposable income 
C)  the inflation rate 
D)  GDP 
A)  the interest rate 
B)  disposable income 
C)  the inflation rate 
D)  GDP

Question 5

The substitution effect of a wage rate increase suggests that

Accepted Answer

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

Question 6

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 C to Point B?

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 7

If an individual is a debtor, an increase in the interest rate

Accepted Answer

A)  increases current consumption. 
B)  decreases current consumption. 
C)  has no effect on current consumption. 
D)  will either increase or decrease current consumption depending on the size of the income and substitution effects. 
A)  increases current consumption. 
B)  decreases current consumption. 
C)  has no effect on current consumption. 
D)  will either increase or decrease current consumption depending on the size of the income and substitution effects.

Question 8

Megan took a pay cut from $10 an hour to $7 an hour. As a result of the wage decrease, Megan desires to work less hours and take more hours of leisure. For Megan

Accepted Answer

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

Question 9

According to the accelerator effect, there is a tendency for investment to decrease when aggregate output decreases, thus accelerating the decline of output.

Accepted Answer

A) True 
 B)False

Question 10

Okun's Law states that the ________ decreases about 1 percentage point for every 3% increase in ________.

Accepted Answer

A)  inflation rate; the unemployment rate 
B)  GDP; the inflation rate 
C)  unemployment rate; GDP 
D)  inflation rate; GDP 
A)  inflation rate; the unemployment rate 
B)  GDP; the inflation rate 
C)  unemployment rate; GDP 
D)  inflation rate; GDP

Question 11

Investment is a very stable component of GP.

Accepted Answer

A) True 
 B)False

Question 12

Cash payments made by the government directly to households are

Accepted Answer

A)  dividends. 
B)  transfer payments. 
C)  compensating differential payments. 
D)  national income payments. 
A)  dividends. 
B)  transfer payments. 
C)  compensating differential payments. 
D)  national income payments.

Question 13

Assume that households have positive wealth. As the interest rate ________, nonlabor income ________ and current consumption ________.

Accepted Answer

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

Question 14

If it becomes less expensive for firms to hold excess capital and labor, the multiplier will

Accepted Answer

A)  decrease. 
B)  remain unchanged. 
C)  increase. 
D)  either increase or decrease depending on the value of the MPC. 
A)  decrease. 
B)  remain unchanged. 
C)  increase. 
D)  either increase or decrease depending on the value of the MPC.

Question 15

The employment rate is

Accepted Answer

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

Question 16

Because many events cannot be foreseen, investment is made with imperfect knowledge.

Accepted Answer

A) True 
 B)False

Question 17

The path of ________ over a lifetime is likely to be much more stable than the path of ________.

Accepted Answer

A)  consumption; income 
B)  income; consumption 
C)  saving; consumption 
D)  saving; income 
A)  consumption; income 
B)  income; consumption 
C)  saving; consumption 
D)  saving; income

Question 18

The income effect of a wage rate increase should lead to

Accepted Answer

A)  an increase in the quantity of labor supplied and a decrease in leisure. 
B)  an increase in the quantity of labor supplied and an increase in leisure. 
C)  a decrease in quantity of labor supplied and an increase in leisure. 
D)  a decrease in the quantity of labor supplied and a decrease in leisure. 
A)  an increase in the quantity of labor supplied and a decrease in leisure. 
B)  an increase in the quantity of labor supplied and an increase in leisure. 
C)  a decrease in quantity of labor supplied and an increase in leisure. 
D)  a decrease in the quantity of labor supplied and a decrease in leisure.

Question 19

The discouraged worker effect reflects

Accepted Answer

A)  a decline in the measured employment rate. 
B)  an increase in the measured employment rate. 
C)  a decrease in the population. 
D)  an increase in the labor force. 
A)  a decline in the measured employment rate. 
B)  an increase in the measured employment rate. 
C)  a decrease in the population. 
D)  an increase in the labor force.

Question 20

The largest increase in the labor-force participation rate since 1970 is among

Accepted Answer

A)  prime-age men. 
B)  teenagers over the age of 16. 
C)  prime-age women. 
D)  males in their 20s. 
A)  prime-age men. 
B)  teenagers over the age of 16. 
C)  prime-age women. 
D)  males in their 20s.

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

Capital has a life that typically

If Okun's Law holds true, then a 3% increase in GDP would lead to a ________ percentage point decrease in the unemployment rate.

The optimal level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is greater than the gain (in interest revenue and decreased storage costs).

Purchases of new houses are the most volatile type of expenditures because they are very sensitive to ________, which is highly volatile.

The substitution effect of a wage rate increase suggests that

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 C to Point B?

If an individual is a debtor, an increase in the interest rate

Megan took a pay cut from $10 an hour to $7 an hour. As a result of the wage decrease, Megan desires to work less hours and take more hours of leisure. For Megan

According to the accelerator effect, there is a tendency for investment to decrease when aggregate output decreases, thus accelerating the decline of output.

Okun's Law states that the ________ decreases about 1 percentage point for every 3% increase in ________.

Investment is a very stable component of GP.

Cash payments made by the government directly to households are

Assume that households have positive wealth. As the interest rate ________, nonlabor income ________ and current consumption ________.

If it becomes less expensive for firms to hold excess capital and labor, the multiplier will

The employment rate is

Because many events cannot be foreseen, investment is made with imperfect knowledge.

The path of ________ over a lifetime is likely to be much more stable than the path of ________.

The income effect of a wage rate increase should lead to

The discouraged worker effect reflects

The largest increase in the labor-force participation rate since 1970 is among

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

Okun's Law states that the decreases about 1 percentage point for every 3% increase in .

Assume that households have positive wealth. As the interest rate , nonlabor income and current consumption .

The path of over a lifetime is likely to be much more stable than the path of .