Question 1

If increased immigration raises the labour force, the neoclassical theory of distribution predicts that:

Accepted Answer

A) the real wage will rise, and the real rental price of capital will fall. 
B) both the real wage and the real rental price of capital will fall. 
C) both the real wage and the real rental price of capital will rise. 
D) the real wage will fall, and the real rental price of capital will rise. 
A) the real wage will rise, and the real rental price of capital will fall. 
B) both the real wage and the real rental price of capital will fall. 
C) both the real wage and the real rental price of capital will rise. 
D) the real wage will fall, and the real rental price of capital will rise.

Question 2

A firm's economic profit is:

Accepted Answer

A) the price of output minus the wage minus the rental price of capital. 
B) revenue minus costs. 
C) revenue plus capital costs. 
D) the price of output minus labour costs. 
A) the price of output minus the wage minus the rental price of capital. 
B) revenue minus costs. 
C) revenue plus capital costs. 
D) the price of output minus labour costs.

Question 3

Government transfer payments:

Accepted Answer

A) are included as part of government purchases, G. 
B) can be viewed as negative tax payments, T. 
C) are received as payment for inputs in the factor market. 
D) do not affect the level of public or private saving. 
A) are included as part of government purchases, G. 
B) can be viewed as negative tax payments, T. 
C) are received as payment for inputs in the factor market. 
D) do not affect the level of public or private saving.

Question 4

Assuming that all firms maximize profits, economic profit is zero if:

Accepted Answer

A) all factors are paid their marginal products and the law of diminishing returns is valid. 
B) all factors are paid their marginal products, and there are constant returns to scale. 
C) no firms are competitive. 
D) all factors are paid their marginal products. 
A) all factors are paid their marginal products and the law of diminishing returns is valid. 
B) all factors are paid their marginal products, and there are constant returns to scale. 
C) no firms are competitive. 
D) all factors are paid their marginal products.

Question 5

In the classical model, what adjusts to eliminate any unemployment of labour in the economy?

Accepted Answer

A) the average price level 
B) the interest rate 
C) the real rental price of capital 
D) the real wage 
A) the average price level 
B) the interest rate 
C) the real rental price of capital 
D) the real wage

Question 6

Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500 + 0.6Y. Investment (I) is given by the equation I = 2,000 - 100r, where r is the real interest rate, in percent. In addition, assume that G=0. In this case, the equilibrium real interest rate is:

Accepted Answer

A) 2 percent. 
B) 5 percent. 
C) 10 percent. 
D) 20 percent. 
A) 2 percent. 
B) 5 percent. 
C) 10 percent. 
D) 20 percent.

Question 7

In examining the impact of fiscal policy, it is assumed that:

Accepted Answer

A) consumption, investment, and the interest rate are endogenous variables. 
B) consumption, investment, and the interest rate are exogenous variables. 
C) government purchases, taxes, and interest rates are endogenous variables. 
D) government purchases, taxes, and interest rates are exogenous variables. 
A) consumption, investment, and the interest rate are endogenous variables. 
B) consumption, investment, and the interest rate are exogenous variables. 
C) government purchases, taxes, and interest rates are endogenous variables. 
D) government purchases, taxes, and interest rates are exogenous variables.

Question 8

When government spending increases and taxes are increased by an equal amount, interest rates:

Accepted Answer

A) increase. 
B) remain the same. 
C) decrease. 
D) can vary wildly. 
A) increase. 
B) remain the same. 
C) decrease. 
D) can vary wildly.

Question 9

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then saving:

Accepted Answer

A) decreases by 0.85 units. 
B) decreases by 0.15 units. 
C) increases by 0.15 units. 
D) increases by 0.85 units. 
A) decreases by 0.85 units. 
B) decreases by 0.15 units. 
C) increases by 0.15 units. 
D) increases by 0.85 units.

Question 10

Assume that GDP (Y) is 6,000. Consumption (C) is given by the equation C = 600 + 0.6(Y - T). Investment (I) is given by the equation I = 2,000 - 100r, where r is the real rate of interest, in percent. Taxes (T) are 500, and government spending (G) is also 500.
​
a.What are the equilibrium values of C, I, and r?
b.What are the values of private saving, public saving, and national saving?
c.If government spending rises to 1,000, what are the new equilibrium values of C, I, and r?
d.What are the new equilibrium values of private saving, public saving, and national saving?​

Accepted Answer

a.3,900; 1,600; 4 pe

Question 11

In a closed economy, Y - C - G equals:

Accepted Answer

A) national saving. 
B) private saving. 
C) public saving. 
D) financial saving. 
A) national saving. 
B) private saving. 
C) public saving. 
D) financial saving.

Question 12

In the classical model with fixed income, a reduction in the government budget deficit will lead to a:

Accepted Answer

A) higher real interest rate. 
B) lower real interest rate. 
C) higher level of output. 
D) lower level of output. 
A) higher real interest rate. 
B) lower real interest rate. 
C) higher level of output. 
D) lower level of output.

Question 13

In a Cobb-Douglas production function, the marginal product of capital will increase if:

Accepted Answer

A) the quantity of labour increases. 
B) the quantity of capital increases. 
C) labour's share of output increases. 
D) average capital productivity decreases. 
A) the quantity of labour increases. 
B) the quantity of capital increases. 
C) labour's share of output increases. 
D) average capital productivity decreases.

Question 14

Since 1990, the share of income that flows to the bottom 50 percent of income earners has:

Accepted Answer

A) continuously increased in Canada. 
B) decreased in Canada. 
C) not changed in Canada. 
D) gone up and down in Canada. 
A) continuously increased in Canada. 
B) decreased in Canada. 
C) not changed in Canada. 
D) gone up and down in Canada.

Question 15

The nominal interest rate is the:

Accepted Answer

A) rate of interest that investors pay to borrow money. 
B) same as the real interest rate. 
C) rate of inflation minus the real rate of interest. 
D) real rate of interest minus the rate of inflation. 
A) rate of interest that investors pay to borrow money. 
B) same as the real interest rate. 
C) rate of inflation minus the real rate of interest. 
D) real rate of interest minus the rate of inflation.

Question 16

Crowding out occurs when an increase in government spending _____ the interest rate and investment _____.

Accepted Answer

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

Question 17

The neoclassical theory of distribution:

Accepted Answer

A) was developed by Karl Marx. 
B) is rejected by most economists today. 
C) shows that the national income of an economy is not equal to total output. 
D) is a theory of how national income is divided among the factors of production. 
A) was developed by Karl Marx. 
B) is rejected by most economists today. 
C) shows that the national income of an economy is not equal to total output. 
D) is a theory of how national income is divided among the factors of production.

Question 18

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by:

Accepted Answer

A) 0.15 units. 
B) 0.5 units. 
C) 0.85 units. 
D) 1 unit. 
A) 0.15 units. 
B) 0.5 units. 
C) 0.85 units. 
D) 1 unit.

Question 19

Since 1960, the Canadian ratio of labour income to total income has:

Accepted Answer

A) been about 2.5 to 1. 
B) remained relatively steady. 
C) increased steadily. 
D) decreased steadily. 
A) been about 2.5 to 1. 
B) remained relatively steady. 
C) increased steadily. 
D) decreased steadily.

Question 20

Accounting profit is:

Accepted Answer

A) economic profit minus the return to capital. 
B) equal to economic profit. 
C) economic profit plus the return to capital. 
D) equal to the economic return to capital. 
A) economic profit minus the return to capital. 
B) equal to economic profit. 
C) economic profit plus the return to capital. 
D) equal to the economic return to capital.

If increased immigration raises the labour force, the neoclassical theory of distribution predicts that:

A firm's economic profit is:

Government transfer payments:

Assuming that all firms maximize profits, economic profit is zero if:

In the classical model, what adjusts to eliminate any unemployment of labour in the economy?

Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500 + 0.6Y. Investment (I) is given by the equation I = 2,000 - 100r, where r is the real interest rate, in percent. In addition, assume that G=0. In this case, the equilibrium real interest rate is:

In examining the impact of fiscal policy, it is assumed that:

When government spending increases and taxes are increased by an equal amount, interest rates:

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then saving:

In a closed economy, Y - C - G equals:

In the classical model with fixed income, a reduction in the government budget deficit will lead to a:

In a Cobb-Douglas production function, the marginal product of capital will increase if:

Since 1990, the share of income that flows to the bottom 50 percent of income earners has:

The nominal interest rate is the:

Crowding out occurs when an increase in government spending _ the interest rate and investment _.

The neoclassical theory of distribution:

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by:

Since 1960, the Canadian ratio of labour income to total income has:

Accounting profit is:

The Science of Macroeconomics

The Data of Microeconomics

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

Aggregate Demand Ii: Applying the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Exam 3: National Income: Where It Comes From and Where It Goes

If increased immigration raises the labour force, the neoclassical theory of distribution predicts that:

A firm's economic profit is:

Government transfer payments:

Assuming that all firms maximize profits, economic profit is zero if:

In the classical model, what adjusts to eliminate any unemployment of labour in the economy?

Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500 + 0.6Y. Investment (I) is given by the equation I = 2,000 - 100r, where r is the real interest rate, in percent. In addition, assume that G=0. In this case, the equilibrium real interest rate is:

In examining the impact of fiscal policy, it is assumed that:

When government spending increases and taxes are increased by an equal amount, interest rates:

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then saving:

In a closed economy, Y - C - G equals:

In the classical model with fixed income, a reduction in the government budget deficit will lead to a:

In a Cobb-Douglas production function, the marginal product of capital will increase if:

Since 1990, the share of income that flows to the bottom 50 percent of income earners has:

The nominal interest rate is the:

Crowding out occurs when an increase in government spending _____ the interest rate and investment _____.

The neoclassical theory of distribution:

If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then C increases by:

Since 1960, the Canadian ratio of labour income to total income has:

Accounting profit is:

The Science of Macroeconomics

The Data of Microeconomics

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Islm Model

Aggregate Demand Ii: Applying the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Crowding out occurs when an increase in government spending _ the interest rate and investment _.