Question 1

The total government expenditure multiplier is

Accepted Answer

A)  equal to the MPC. 
B)  equal to $\frac { 1 } { 1 - \mathrm { MPC } }$. 
C)  1 . 
D)  larger than 1 . 
E)  between 0 and 1 . 
A)  equal to the MPC. 
B)  equal to $\frac { 1 } { 1 - \mathrm { MPC } }$. 
C)  1 . 
D)  larger than 1 . 
E)  between 0 and 1 .

Question 2

When drawn against the real interest rate, the output supply curve is upward sloping because labour supply is

Accepted Answer

A) independent of the real interest rate and labour demand is increasing the real interest rate. 
B) increasing as the wage rate rises. 
C) independent of the real interest rate and labour demand is decreasing the real interest rate. 
D) increasing the real interest rate and labour demand is independent of the real interest rate. 
E) decreasing the real interest rate and labour demand is independent of the real interest rate. 
A) independent of the real interest rate and labour demand is increasing the real interest rate. 
B) increasing as the wage rate rises. 
C) independent of the real interest rate and labour demand is decreasing the real interest rate. 
D) increasing the real interest rate and labour demand is independent of the real interest rate. 
E) decreasing the real interest rate and labour demand is independent of the real interest rate.

Question 3

The marginal benefit from investment for a firm is equal to

Accepted Answer

A)  $\frac { M P ^ { \prime } { } _ { K } { } ^ { + 1 - d } } { ( 1 + r ) }$. 
B)  $\frac { M P ^ { \prime } { } _ { K } { } ^ { + 1 + d } } { ( 1 + r ) }$. 
C)  $\frac { M P ^ { \prime } { } _ { K } ^{( 1 - d ) }} { ( 1 + r ) }$. 
D)  $\frac { M P ^ { \prime } { } _ { K } ^{- 1 + d }} { ( 1 + r ) }$. 
E)  $\frac { M P ^ { \prime } { } _ { K } ^{- 1 - d } }{ ( 1 + r ) }$. 
A)  $\frac { M P ^ { \prime } { } _ { K } { } ^ { + 1 - d } } { ( 1 + r ) }$. 
B)  $\frac { M P ^ { \prime } { } _ { K } { } ^ { + 1 + d } } { ( 1 + r ) }$. 
C)  $\frac { M P ^ { \prime } { } _ { K } ^{( 1 - d ) }} { ( 1 + r ) }$. 
D)  $\frac { M P ^ { \prime } { } _ { K } ^{- 1 + d }} { ( 1 + r ) }$. 
E)  $\frac { M P ^ { \prime } { } _ { K } ^{- 1 - d } }{ ( 1 + r ) }$.

Question 4

The destruction of capital

Accepted Answer

A) may increase employment enough that output increases. 
B) has no effect on the economy at all. 
C) makes real interest rates go down. 
D) benefits an economy, as higher investment must make output go up. 
E) necessarily makes output go down. 
A) may increase employment enough that output increases. 
B) has no effect on the economy at all. 
C) makes real interest rates go down. 
D) benefits an economy, as higher investment must make output go up. 
E) necessarily makes output go down.

Question 5

The equilibrium effects of a prospective future increase in total factor productivity include

Accepted Answer

A) a decrease in the real wage only. 
B) a decrease in the real wage and a decrease in the real interest rate. 
C) an increase in the real wage and a decrease in the real interest rate. 
D) a decrease in the real wage and an increase in the real interest rate. 
E) an increase in the real wage and an increase in the real interest rate. 
A) a decrease in the real wage only. 
B) a decrease in the real wage and a decrease in the real interest rate. 
C) an increase in the real wage and a decrease in the real interest rate. 
D) a decrease in the real wage and an increase in the real interest rate. 
E) an increase in the real wage and an increase in the real interest rate.

Question 6

An individual stock price

Accepted Answer

A) determines the future performance of the firm. 
B) incorporates all news about the firm's future prospects. 
C) determines investment spending. 
D) is inversely related to the interest rate. 
E) mimics the information contained in the stock market index. 
A) determines the future performance of the firm. 
B) incorporates all news about the firm's future prospects. 
C) determines investment spending. 
D) is inversely related to the interest rate. 
E) mimics the information contained in the stock market index.

Question 7

The output supply curve is the relationship between output and

Accepted Answer

A) capital stock. 
B) total factor productivity. 
C) investment. 
D) labour supply. 
E) real interest rates. 
A) capital stock. 
B) total factor productivity. 
C) investment. 
D) labour supply. 
E) real interest rates.

Question 8

When drawn against the real interest rate, the output demand curve shifts to the right when

Accepted Answer

A) future taxes increase. 
B) the real interest rate increases. 
C) both future and current taxes increase. 
D) future income increases. 
E) the real interest rate decreases. 
A) future taxes increase. 
B) the real interest rate increases. 
C) both future and current taxes increase. 
D) future income increases. 
E) the real interest rate decreases.

Question 9

The assumption that current-period consumption demand is negatively related to the real interest rate is justified as long as the

Accepted Answer

A) substitution effect dominates the income effect. 
B) income effect dominates the substitution effect. 
C) income effect and substitution effects are equal. 
D) representative consumer is a lender. 
E) representative consumer is a borrower. 
A) substitution effect dominates the income effect. 
B) income effect dominates the substitution effect. 
C) income effect and substitution effects are equal. 
D) representative consumer is a lender. 
E) representative consumer is a borrower.

Question 10

The marginal rate of substitution of future leisure for future consumption must be equal to

Accepted Answer

A) the relative price of current consumption in terms of future consumption. 
B) the future real wage. 
C) one. 
D) savings in the current period. 
E) the real interest rate. 
A) the relative price of current consumption in terms of future consumption. 
B) the future real wage. 
C) one. 
D) savings in the current period. 
E) the real interest rate.

Question 11

When the real interest rate increases, the demand for current consumption

Accepted Answer

A) shifts down. 
B) moves along the demand curve. 
C) shifts up. 
D) increases for each level of current income. 
E) remains constant. 
A) shifts down. 
B) moves along the demand curve. 
C) shifts up. 
D) increases for each level of current income. 
E) remains constant.

Question 12

When drawn against the real interest rate, the output demand curve unambiguously shifts to the right if either or both of the following occur.

Accepted Answer

A) a decrease in current taxes and a decrease in future taxes 
B) an increase in current taxes and a reduction in interest rates 
C) an increase in current taxes and an increase in future taxes 
D) a decrease in current taxes and an increase in future taxes 
E) an increase in current taxes and a decrease in future taxes 
A) a decrease in current taxes and a decrease in future taxes 
B) an increase in current taxes and a reduction in interest rates 
C) an increase in current taxes and an increase in future taxes 
D) a decrease in current taxes and an increase in future taxes 
E) an increase in current taxes and a decrease in future taxes

Question 13

An asymmetric information problem arises when

Accepted Answer

A) the representative firm is unable to borrow. 
B) there are more bad firms than good firms that wish to borrow. 
C) interest rates exceed r. 
D) the lender is not able to distinguish between a good borrower and a bad borrower. 
E) the managers of bad firms consumer the borrowed funds as executive compensation. 
A) the representative firm is unable to borrow. 
B) there are more bad firms than good firms that wish to borrow. 
C) interest rates exceed r. 
D) the lender is not able to distinguish between a good borrower and a bad borrower. 
E) the managers of bad firms consumer the borrowed funds as executive compensation.

Question 14

The equilibrium effects of a temporary increase in total factor productivity include

Accepted Answer

A) only a decrease in the real interest rate. 
B) an increase in the real wage and an increase in the real interest rate. 
C) a decrease in the real wage and a decrease in the real interest rate. 
D) an increase in the real wage and a decrease in the real interest rate. 
E) a decrease in the real wage and an increase in the real interest rate. 
A) only a decrease in the real interest rate. 
B) an increase in the real wage and an increase in the real interest rate. 
C) a decrease in the real wage and a decrease in the real interest rate. 
D) an increase in the real wage and a decrease in the real interest rate. 
E) a decrease in the real wage and an increase in the real interest rate.

Question 15

An important feature of the financial market crisis was

Accepted Answer

A) increased investment by firms. 
B) an increase in the safe credit market interest rate, r. 
C) decreased interest rate spread on risky assets versus safe assets. 
D) increased financial market uncertainty. 
E) a lower opportunity cost of investment. 
A) increased investment by firms. 
B) an increase in the safe credit market interest rate, r. 
C) decreased interest rate spread on risky assets versus safe assets. 
D) increased financial market uncertainty. 
E) a lower opportunity cost of investment.

Question 16

$$\text { The condition } M R S _ { C } , C ^ { \prime } = 1 + r \text { describes the representative consumer's }$$

Accepted Answer

A) future consumption-savings decision. 
B) current period work-leisure decision. 
C) investment decision. 
D) future period work-leisure decision. 
E) current consumption-savings decision. 
A) future consumption-savings decision. 
B) current period work-leisure decision. 
C) investment decision. 
D) future period work-leisure decision. 
E) current consumption-savings decision.

Question 17

An increase in lifetime wealth is likely to

Accepted Answer

A) increase current labour supply and increase current consumption demand. 
B) decrease current labour supply and increase current leisure. 
C) decrease current labour supply and decrease current leisure. 
D) decrease current labour supply and decrease current consumption demand. 
E) increase current labour supply and decrease current consumption demand. 
A) increase current labour supply and increase current consumption demand. 
B) decrease current labour supply and increase current leisure. 
C) decrease current labour supply and decrease current leisure. 
D) decrease current labour supply and decrease current consumption demand. 
E) increase current labour supply and decrease current consumption demand.

Question 18

Which one of the following is a key determinant of aggregate economic activity in the present?

Accepted Answer

A) social security developments 
B) news about future incomes 
C) future taxes 
D) future government spending 
E) expectations about future monetary policy 
A) social security developments 
B) news about future incomes 
C) future taxes 
D) future government spending 
E) expectations about future monetary policy

Question 19

The marginal benefit from investment is

Accepted Answer

A) what one unit of investment in the current period adds to the present value of profits. 
B) related to economic activity and the real interest rate. 
C) the ratio of investment to expected future profits. 
D) what one unit of investment costs when funds are borrowed. 
E) what one unit of investment adds to the current capital stock. 
A) what one unit of investment in the current period adds to the present value of profits. 
B) related to economic activity and the real interest rate. 
C) the ratio of investment to expected future profits. 
D) what one unit of investment costs when funds are borrowed. 
E) what one unit of investment adds to the current capital stock.

Question 20

Any increase in the present value of taxes for the consumer implies

Accepted Answer

A) a decrease in lifetime wealth and an increase in current labour supply. 
B) a decrease in lifetime wealth and a decrease in current consumption demand. 
C) an increase in lifetime wealth and a decrease in current labour supply. 
D) a decrease in lifetime wealth and a decrease in current labour supply. 
E) an increase in lifetime wealth and an increase in current labour supply. 
A) a decrease in lifetime wealth and an increase in current labour supply. 
B) a decrease in lifetime wealth and a decrease in current consumption demand. 
C) an increase in lifetime wealth and a decrease in current labour supply. 
D) a decrease in lifetime wealth and a decrease in current labour supply. 
E) an increase in lifetime wealth and an increase in current labour supply.

The total government expenditure multiplier is

When drawn against the real interest rate, the output supply curve is upward sloping because labour supply is

The marginal benefit from investment for a firm is equal to

The destruction of capital

The equilibrium effects of a prospective future increase in total factor productivity include

An individual stock price

The output supply curve is the relationship between output and

When drawn against the real interest rate, the output demand curve shifts to the right when

The assumption that current-period consumption demand is negatively related to the real interest rate is justified as long as the

The marginal rate of substitution of future leisure for future consumption must be equal to

When the real interest rate increases, the demand for current consumption

When drawn against the real interest rate, the output demand curve unambiguously shifts to the right if either or both of the following occur.

An asymmetric information problem arises when

The equilibrium effects of a temporary increase in total factor productivity include

An important feature of the financial market crisis was

$\text { The condition } M R S _ { C } , C ^ { \prime } = 1 + r \text { describes the representative consumer's }$

An increase in lifetime wealth is likely to

Which one of the following is a key determinant of aggregate economic activity in the present?

The marginal benefit from investment is

Any increase in the present value of taxes for the consumer implies

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters

Exam 11: A Real Intertemporal Model With Investment

The total government expenditure multiplier is

When drawn against the real interest rate, the output supply curve is upward sloping because labour supply is

The marginal benefit from investment for a firm is equal to

The destruction of capital

The equilibrium effects of a prospective future increase in total factor productivity include

An individual stock price

The output supply curve is the relationship between output and

When drawn against the real interest rate, the output demand curve shifts to the right when

The assumption that current-period consumption demand is negatively related to the real interest rate is justified as long as the

The marginal rate of substitution of future leisure for future consumption must be equal to

When the real interest rate increases, the demand for current consumption

When drawn against the real interest rate, the output demand curve unambiguously shifts to the right if either or both of the following occur.

An asymmetric information problem arises when

The equilibrium effects of a temporary increase in total factor productivity include

An important feature of the financial market crisis was

The condition MRSC,C′=1+r describes the representative consumer’s \text { The condition } M R S _ { C } , C ^ { \prime } = 1 + r \text { describes the representative consumer's } The condition MRSC​,C′=1+r describes the representative consumer’s

An increase in lifetime wealth is likely to

Which one of the following is a key determinant of aggregate economic activity in the present?

The marginal benefit from investment is

Any increase in the present value of taxes for the consumer implies

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: the Workleisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: the Consumptionsavings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

Money, Banking, Prices, and Monetary Policy

Business Cycle Models With Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: a Deeper Look

Filters

$\text { The condition } M R S _ { C } , C ^ { \prime } = 1 + r \text { describes the representative consumer's }$