Question 1

The marginal product of capital is:

Accepted Answer

A) output divided by capital input. 
B) additional output produced when one additional unit of capital is added. 
C) additional output produced when one additional unit of capital and one additional unit of labour are added. 
D) the value of additional output when one dollar's worth of additional capital is added. 
A) output divided by capital input. 
B) additional output produced when one additional unit of capital is added. 
C) additional output produced when one additional unit of capital and one additional unit of labour are added. 
D) the value of additional output when one dollar's worth of additional capital is added.

Question 2

Consider a production function for an economy:
Y = 20(L.5K.4N.1)
where L is labour, K is capital, and N is land. In this economy, the factors of production are in fixed supply with L = 100, K = 100, and N = 100.
​
a.What is the level of output in this country?
b.Does this production function exhibit constant returns to scale? Demonstrate by example.
c.If the economy is competitive so that factors of production are paid the value of their marginal products, what is the share of total income that will go to land?​

Accepted Answer

a.2,000
b.Yes, the production

Question 3

The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, public saving:

Accepted Answer

A) rises by $100 billion. 
B) rises by $60 billion. 
C) falls by $60 billion. 
D) falls by $100 billion. 
A) rises by $100 billion. 
B) rises by $60 billion. 
C) falls by $60 billion. 
D) falls by $100 billion.

Question 4

In the classical model with fixed income a decrease in the real interest rate could be the result of:

Accepted Answer

A) an increase in government spending. 
B) an increase in desired investment. 
C) an increase in taxes. 
D) a decrease in taxes. 
A) an increase in government spending. 
B) an increase in desired investment. 
C) an increase in taxes. 
D) a decrease in taxes.

Question 5

The price received by each factor of production is determined by:

Accepted Answer

A) demand for output and supply of factors. 
B) demand for factors and supply of output. 
C) demand and supply of output. 
D) demand and supply of factors. 
A) demand for output and supply of factors. 
B) demand for factors and supply of output. 
C) demand and supply of output. 
D) demand and supply of factors.

Question 6

According to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed:

Accepted Answer

A) only to the labour used in production. 
B) partly between labour and capital used in production, with the surplus going to the owners of the firm as profits. 
C) equally between the labour and capital used in production. 
D) between the labour and capital used in production, according to their marginal productivities. 
A) only to the labour used in production. 
B) partly between labour and capital used in production, with the surplus going to the owners of the firm as profits. 
C) equally between the labour and capital used in production. 
D) between the labour and capital used in production, according to their marginal productivities.

Question 7

When the demand for loanable funds exceeds the supply of loanable funds, households want to save _____ than firms want to invest, and the interest rate _____.

Accepted Answer

A) more; rises 
B) more; falls 
C) less; rises 
D) less; falls 
A) more; rises 
B) more; falls 
C) less; rises 
D) less; falls

Question 8

Assume that an economy is described by a Cobb-Douglas production function. If average labour productivity is growing rapidly:

Accepted Answer

A) labour's share of total income will be increasing. 
B) labour's share of total income will be decreasing. 
C) workers will experience high rates of real wage growth. 
D) economic profits will be positive. 
A) labour's share of total income will be increasing. 
B) labour's share of total income will be decreasing. 
C) workers will experience high rates of real wage growth. 
D) economic profits will be positive.

Question 9

If an earthquake destroys some of the capital stock, 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 10

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labour depending on their:

Accepted Answer

A) supply. 
B) equilibrium growth rates. 
C) relative political power. 
D) marginal productivities. 
A) supply. 
B) equilibrium growth rates. 
C) relative political power. 
D) marginal productivities.

Question 11

The demand for loanable funds is equivalent to:

Accepted Answer

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

Question 12

Exhibit: Saving, Investment, and the Interest Rate 1   The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government cuts spending, holding other factors constant?

Accepted Answer

A) point A 
B) point B 
C) point C 
D) point D 
A) point A 
B) point B 
C) point C 
D) point D

Question 13

National saving refers to:

Accepted Answer

A) disposable income minus consumption. 
B) taxes minus government spending. 
C) income minus consumption minus government purchases. 
D) income minus investment. 
A) disposable income minus consumption. 
B) taxes minus government spending. 
C) income minus consumption minus government purchases. 
D) income minus investment.

Question 14

In the classical model with fixed income, an increase in the real interest rate could be the result of:

Accepted Answer

A) an increase in government spending. 
B) a decrease in government spending. 
C) a decrease in desired investment. 
D) an increase in taxes. 
A) an increase in government spending. 
B) a decrease in government spending. 
C) a decrease in desired investment. 
D) an increase in taxes.

Question 15

In the classical model with fixed income, if households want to save more than firms want to invest, then:

Accepted Answer

A) the interest rate rises. 
B) the interest rate falls. 
C) output increases. 
D) output falls. 
A) the interest rate rises. 
B) the interest rate falls. 
C) output increases. 
D) output falls.

Question 16

Since 1990, the share of income that flows to the top 1 percent of income earners has:

Accepted Answer

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

Question 17

Exhibit: Saving, Investment, and the Interest Rate 2   The economy begins in equilibrium at point E, representing the real interest rate r1 at which saving S1 equals desired investment I1. What will be the new equilibrium combination of real interest rate, saving, and investment if there is a tax law change that makes investment projects less profitable and decreases the demand for investment goods (but does not change the amount of taxes collected in the economy)?

Accepted Answer

A) point A 
B) point B 
C) point C 
D) point D 
A) point A 
B) point B 
C) point C 
D) point D

Question 18

In an economy with flexible prices, competitive factor markets, and fixed supplies of the factors of production, graphically illustrate the impact of a change in immigration policy in a country that permits a huge influx of foreign workers into the labour market, ceteris paribus. Be sure to label the axes, the curves, the initial equilibrium values, the direction the curve's shift, and the terminal equilibrium values. Explain in words how the equilibrium values of labour, the real wage, saving, investment, and the real interest rate change.

Accepted Answer

@#IMG-DLM& The supply of labour force increases, w

Question 19

In a closed economy with fixed output, when government spending increases:

Accepted Answer

A) private saving decreases. 
B) private saving increases. 
C) public saving decreases. 
D) public saving increases. 
A) private saving decreases. 
B) private saving increases. 
C) public saving decreases. 
D) public saving increases.

Question 20

Public saving:

Accepted Answer

A) is always positive. 
B) is the overall level of household wealth held in government bonds 
C) is decided by the Bank of Canada. 
D) depends on the government's tax collections relative to its expenditures. 
A) is always positive. 
B) is the overall level of household wealth held in government bonds 
C) is decided by the Bank of Canada. 
D) depends on the government's tax collections relative to its expenditures.

The marginal product of capital is:

The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, public saving:

In the classical model with fixed income a decrease in the real interest rate could be the result of:

The price received by each factor of production is determined by:

According to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed:

When the demand for loanable funds exceeds the supply of loanable funds, households want to save _ than firms want to invest, and the interest rate _.

Assume that an economy is described by a Cobb-Douglas production function. If average labour productivity is growing rapidly:

If an earthquake destroys some of the capital stock, the neoclassical theory of distribution predicts that:

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labour depending on their:

The demand for loanable funds is equivalent to:

National saving refers to:

In the classical model with fixed income, an increase in the real interest rate could be the result of:

In the classical model with fixed income, if households want to save more than firms want to invest, then:

Since 1990, the share of income that flows to the top 1 percent of income earners has:

In a closed economy with fixed output, when government spending increases:

Public saving:

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

The marginal product of capital is:

The government raises lump-sum taxes on income by $100 billion, and the neoclassical economy adjusts so that output does not change. If the marginal propensity to consume is 0.6, public saving:

In the classical model with fixed income a decrease in the real interest rate could be the result of:

The price received by each factor of production is determined by:

According to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed:

When the demand for loanable funds exceeds the supply of loanable funds, households want to save _____ than firms want to invest, and the interest rate _____.

Assume that an economy is described by a Cobb-Douglas production function. If average labour productivity is growing rapidly:

If an earthquake destroys some of the capital stock, the neoclassical theory of distribution predicts that:

According to the neoclassical theory of distribution, total output is divided between payments to capital and payments to labour depending on their:

The demand for loanable funds is equivalent to:

National saving refers to:

In the classical model with fixed income, an increase in the real interest rate could be the result of:

In the classical model with fixed income, if households want to save more than firms want to invest, then:

Since 1990, the share of income that flows to the top 1 percent of income earners has:

In a closed economy with fixed output, when government spending increases:

Public saving:

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

When the demand for loanable funds exceeds the supply of loanable funds, households want to save _ than firms want to invest, and the interest rate _.