Question 1

Governments seeking to boost investment spending

Accepted Answer

A)  can try to induce the country's central bank to raise real interest rates. 
B)  can try to increase the baseline level of investment spending by encouraging private decision makers by trying to increase sources of risk.. 
C)  can try to increase the baseline level of investment spending by encouraging private decision makers by trying to reduce sources of risk. 
D)  can try to induce the country's central bank to reduce the rate of growth of the money supply. 
A)  can try to induce the country's central bank to raise real interest rates. 
B)  can try to increase the baseline level of investment spending by encouraging private decision makers by trying to increase sources of risk.. 
C)  can try to increase the baseline level of investment spending by encouraging private decision makers by trying to reduce sources of risk. 
D)  can try to induce the country's central bank to reduce the rate of growth of the money supply.

Question 2

The marginal product of labor is (holding capital stock constant)

Accepted Answer

A)  the difference between what the firm can produce with its current labor force and what it would produce if it hired one more worker. 
B)  the product between what the firm can produce with its current labor force and what it would produce if it hired one more worker. 
C)  the sum of what the firm can produce with its current labor force and what it would produce if it hired one more worker. 
D)  the ratio of between what the firm can produce with its current labor force and what it would produce if it hired one more worker. 
A)  the difference between what the firm can produce with its current labor force and what it would produce if it hired one more worker. 
B)  the product between what the firm can produce with its current labor force and what it would produce if it hired one more worker. 
C)  the sum of what the firm can produce with its current labor force and what it would produce if it hired one more worker. 
D)  the ratio of between what the firm can produce with its current labor force and what it would produce if it hired one more worker.

Question 3

Net exports will ________ if _________ increases.

Accepted Answer

A)  increase; domestic real GDP 
B)  increase; foreign real GDP 
C)  decrease; foreign real GDP 
D)  decrease; foreign real interest rates 
A)  increase; domestic real GDP 
B)  increase; foreign real GDP 
C)  decrease; foreign real GDP 
D)  decrease; foreign real interest rates

Question 4

Each of the following is a key question which chapter 6 seeks to answer except

Accepted Answer

A)  What economic forces keep real GDP at its equilibrium level? 
B)  What determines the rate of growth of the capital-labor ratio? 
C)  What determines the level of real GDP? 
D)  What determines the level of the exchange rate? 
A)  What economic forces keep real GDP at its equilibrium level? 
B)  What determines the rate of growth of the capital-labor ratio? 
C)  What determines the level of real GDP? 
D)  What determines the level of the exchange rate?

Question 5

The Classical assumption that prices adjust rapidly to eliminate gaps between quantities demanded and quantities supplied means

Accepted Answer

A)  that businesses find inventories of unsold goods piling up. 
B)  that unemployment exists at the equilibrium wage in the labor market. 
C)  that no businesses find inventories of unsold goods piling up. 
D)  that businesses find increasing delays in receiving goods ordered from suppliers. 
A)  that businesses find inventories of unsold goods piling up. 
B)  that unemployment exists at the equilibrium wage in the labor market. 
C)  that no businesses find inventories of unsold goods piling up. 
D)  that businesses find increasing delays in receiving goods ordered from suppliers.

Question 6

The value of demand for imports

Accepted Answer

A)  depends on the real income of our trading partners (Yf). 
B)  depends on domestic real GDP. 
C)  depends on domestic real GDP and foreign real interest rates. 
D)  depends on the level of exports. 
A)  depends on the real income of our trading partners (Yf). 
B)  depends on domestic real GDP. 
C)  depends on domestic real GDP and foreign real interest rates. 
D)  depends on the level of exports.

Question 7

Foreign exchange speculators must balance ________ and ________ in their job of trading currencies.

Accepted Answer

A)  fear; greed 
B)  appreciation; depreciation 
C)  inflation; unemployment 
D)  recession; growth 
A)  fear; greed 
B)  appreciation; depreciation 
C)  inflation; unemployment 
D)  recession; growth

Question 8

Using the Cobb-Douglas production function, the real wage in equilibrium will be

Accepted Answer

A)  (1-    ) x (K/L). 
B)  (1-    ) x (Y/L). 
C)  (1-    ) x (L/Y). 
D)  (1-    ) x (L/K). 
A)  (1-    ) x (K/L). 
B)  (1-    ) x (Y/L). 
C)  (1-    ) x (L/Y). 
D)  (1-    ) x (L/K).

Question 9

Each of the following is a key question which chapter 6 seeks to answer except

Accepted Answer

A)  What is a full employment analysis? 
B)  What determines the level of consumption spending? 
C)  What determines the level of real GDP? 
D)  What determines the rate of growth of the money supply? 
A)  What is a full employment analysis? 
B)  What determines the level of consumption spending? 
C)  What determines the level of real GDP? 
D)  What determines the rate of growth of the money supply?

Question 10

The Keynesian assumptions of the macroeconomy include each of the following except

Accepted Answer

A)  wages and prices can be "sticky" or "fixed." 
B)  expectations are consistent with full employment. 
C)  the labor market can be out of equilibrium, causing involuntary unemployment. 
D)  shocks to aggregate demand will change the composition and the level of GDP. 
A)  wages and prices can be "sticky" or "fixed." 
B)  expectations are consistent with full employment. 
C)  the labor market can be out of equilibrium, causing involuntary unemployment. 
D)  shocks to aggregate demand will change the composition and the level of GDP.

Question 11

Net exports will ________ if _________ increase(s).

Accepted Answer

A)  increase; domestic real GDP 
B)  decrease; domestic real interest rates 
C)  decrease; foreign real GDP 
D)  decrease; foreign real interest rates 
A)  increase; domestic real GDP 
B)  decrease; domestic real interest rates 
C)  decrease; foreign real GDP 
D)  decrease; foreign real interest rates

Question 12

Net exports will ________ if _________ increase(s).

Accepted Answer

A)  increase; domestic real interest rates 
B)  increase; domestic real GDP 
C)  decrease; foreign real GDP 
D)  increase; foreign real interest rates 
A)  increase; domestic real interest rates 
B)  increase; domestic real GDP 
C)  decrease; foreign real GDP 
D)  increase; foreign real interest rates

Question 13

The cost of hiring the last worker is

Accepted Answer

A)  his or her wage. 
B)  his or her marginal product. 
C)  the value of his or her marginal product. 
D)  his or her profit. 
A)  his or her wage. 
B)  his or her marginal product. 
C)  the value of his or her marginal product. 
D)  his or her profit.

Question 14

A business invests because its managers believe that the investment project

Accepted Answer

A)  will be socially useful. 
B)  will be profitable. 
C)  will provide an adequate interest rate. 
D)  can be sold at a higher price in the future. 
A)  will be socially useful. 
B)  will be profitable. 
C)  will provide an adequate interest rate. 
D)  can be sold at a higher price in the future.

Question 15

The Classical assumptions of the macroeconomy include each of the following except

Accepted Answer

A)  wages and prices are fully flexible. 
B)  expectations are consistent with full employment. 
C)  the labor market can be out of equilibrium causing involuntary employment. 
D)  shocks to aggregate demand will change the composition but not the level of GDP. 
A)  wages and prices are fully flexible. 
B)  expectations are consistent with full employment. 
C)  the labor market can be out of equilibrium causing involuntary employment. 
D)  shocks to aggregate demand will change the composition but not the level of GDP.

Question 16

In a full employment economy, the real incomes of those who don't own any capital stock will ________ if     _________.

Accepted Answer

A)  decrease; increases 
B)  decrease; decreases 
C)  increase; increases 
D)  none of the above 
A)  decrease; increases 
B)  decrease; decreases 
C)  increase; increases 
D)  none of the above

Question 17

If the value of Cy, the MPC, is equal to .75

Accepted Answer

A)  the marginal propensity to save is equal to .25. 
B)  the marginal propensity to save is equal to .75. 
C)  the tax rate is equal to .1. 
D)  the marginal propensity to save is equal to 0. 
A)  the marginal propensity to save is equal to .25. 
B)  the marginal propensity to save is equal to .75. 
C)  the tax rate is equal to .1. 
D)  the marginal propensity to save is equal to 0.

Question 18

Other determinants of consumption spending include each of the following except

Accepted Answer

A)  government purchases. 
B)  expectations of income growth. 
C)  household wealth. 
D)  permanent vs. transitory income. 
A)  government purchases. 
B)  expectations of income growth. 
C)  household wealth. 
D)  permanent vs. transitory income.

Question 19

In the model developed in the text, consumption spending (C) is equal to

Accepted Answer

A)  C0 + Cy x YD. 
B)  C0 + Cy x Y. 
C)  C0 + Cy x (1-t)YD. 
D)  Cy x YD. 
A)  C0 + Cy x YD. 
B)  C0 + Cy x Y. 
C)  C0 + Cy x (1-t)YD. 
D)  Cy x YD.

Question 20

In the model developed in the text, consumption spending (C) is broken down into

Accepted Answer

A)  a baseline level of consumption (C0) plus a fraction (Cy) of total income. 
B)  a baseline level of consumption (C0) plus a fraction (Cy) of disposable income. 
C)  a baseline level of consumption (C0) plus a fraction (Cy x (1-t)) of disposable income. 
D)  a fraction (Cy) of disposable income. 
A)  a baseline level of consumption (C0) plus a fraction (Cy) of total income. 
B)  a baseline level of consumption (C0) plus a fraction (Cy) of disposable income. 
C)  a baseline level of consumption (C0) plus a fraction (Cy x (1-t)) of disposable income. 
D)  a fraction (Cy) of disposable income.

Governments seeking to boost investment spending

The marginal product of labor is (holding capital stock constant)

Net exports will if _ increases.

Each of the following is a key question which chapter 6 seeks to answer except

The Classical assumption that prices adjust rapidly to eliminate gaps between quantities demanded and quantities supplied means

The value of demand for imports

Foreign exchange speculators must balance and in their job of trading currencies.

Using the Cobb-Douglas production function, the real wage in equilibrium will be

Each of the following is a key question which chapter 6 seeks to answer except

The Keynesian assumptions of the macroeconomy include each of the following except

Net exports will if _ increase(s).

Net exports will if _ increase(s).

The cost of hiring the last worker is

A business invests because its managers believe that the investment project

The Classical assumptions of the macroeconomy include each of the following except

In a full employment economy, the real incomes of those who don't own any capital stock will if _.

If the value of C_y, the MPC, is equal to .75

Other determinants of consumption spending include each of the following except

In the model developed in the text, consumption spending (C) is equal to

In the model developed in the text, consumption spending (C) is broken down into

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 6: Building Blocks of the Flexible-Price Model

Governments seeking to boost investment spending

The marginal product of labor is (holding capital stock constant)

Net exports will ________ if _________ increases.

Each of the following is a key question which chapter 6 seeks to answer except

The Classical assumption that prices adjust rapidly to eliminate gaps between quantities demanded and quantities supplied means

The value of demand for imports

Foreign exchange speculators must balance ________ and ________ in their job of trading currencies.

Using the Cobb-Douglas production function, the real wage in equilibrium will be

Each of the following is a key question which chapter 6 seeks to answer except

The Keynesian assumptions of the macroeconomy include each of the following except

Net exports will ________ if _________ increase(s).

Net exports will ________ if _________ increase(s).

The cost of hiring the last worker is

A business invests because its managers believe that the investment project

The Classical assumptions of the macroeconomy include each of the following except

In a full employment economy, the real incomes of those who don't own any capital stock will ________ if _________.

If the value of Cy, the MPC, is equal to .75

Other determinants of consumption spending include each of the following except

In the model developed in the text, consumption spending (C) is equal to

In the model developed in the text, consumption spending (C) is broken down into

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Net exports will if _ increases.

Foreign exchange speculators must balance and in their job of trading currencies.

Net exports will if _ increase(s).

Net exports will if _ increase(s).

In a full employment economy, the real incomes of those who don't own any capital stock will if _.

If the value of C_y, the MPC, is equal to .75