Question 1

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

Accepted Answer

A)  What determines the composition of real GDP? 
B)  What determines the level of consumption spending? 
C)  What determines the fluctuations in real GDP? 
D)  What determines the level of investment spending? 
A)  What determines the composition of real GDP? 
B)  What determines the level of consumption spending? 
C)  What determines the fluctuations in real GDP? 
D)  What determines the level of investment spending?

Question 2

The movement of stock market prices tends to be _____________ of investment spending.

Accepted Answer

A)  a leading indicator 
B)  a lagging indicator 
C)  not an indicator 
D)  unrelated to 
A)  a leading indicator 
B)  a lagging indicator 
C)  not an indicator 
D)  unrelated to

Question 3

In order to maximize its profits, a typical firm should follow the following formula:

Accepted Answer

A)  P x L = W x Y 
B)  P x W = L x Y 
C)  P x MPL = W 
D)  P x Y = W x L 
A)  P x L = W x Y 
B)  P x W = L x Y 
C)  P x MPL = W 
D)  P x Y = W x L

Question 4

If I0 is equal to $3 trillion, Ir is equal to $15000 billion, and r is 5%, investment spending would equal

Accepted Answer

A)  $750 billion. 
B)  $3.75 trillion. 
C)  $14850 billion. 
D)  $2.25 billion. 
A)  $750 billion. 
B)  $3.75 trillion. 
C)  $14850 billion. 
D)  $2.25 billion.

Question 5

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 volatile and can take many forms. 
C)  the labor market can be out of equilibrium, causing involuntary unemployment. 
D)  shocks to aggregate demand will change the composition but not the level of GDP. 
A)  wages and prices can be "sticky" or "fixed." 
B)  expectations are volatile and can take many forms. 
C)  the labor market can be out of equilibrium, causing involuntary unemployment. 
D)  shocks to aggregate demand will change the composition but not the level of GDP.

Question 6

The investment function consists of

Accepted Answer

A)  a baseline level of investment (I0) and a term consisting of the real interest rate times the MPC. 
B)  a baseline level of investment (I0) and a term consisting of the real interest rate times Ir (the slope-of-. the-investment function parameter). 
C)  a baseline level of investment (I0) and the real interest rate. 
D)  a baseline level of investment (I0) and a term consisting of the real interest rate times disposable income. 
A)  a baseline level of investment (I0) and a term consisting of the real interest rate times the MPC. 
B)  a baseline level of investment (I0) and a term consisting of the real interest rate times Ir (the slope-of-. the-investment function parameter). 
C)  a baseline level of investment (I0) and the real interest rate. 
D)  a baseline level of investment (I0) and a term consisting of the real interest rate times disposable income.

Question 7

If the baseline level of investment expenditures, I0, increases by $1 trillion, then investment spending will

Accepted Answer

A)  decrease by $1 trillion. 
B)  increase by $1 trillion times the real interest rate. 
C)  increase by $1 trillion. 
D)  remain the same. 
A)  decrease by $1 trillion. 
B)  increase by $1 trillion times the real interest rate. 
C)  increase by $1 trillion. 
D)  remain the same.

Question 8

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

Accepted Answer

A)  What determines the growth rate of an economy? 
B)  What determines the level of consumption spending? 
C)  What determines the level of real GDP? 
D)  What determines the level of investment spending? 
A)  What determines the growth rate of an economy? 
B)  What determines the level of consumption spending? 
C)  What determines the level of real GDP? 
D)  What determines the level of investment spending?

Question 9

Two sets of factors determine the levels of potential (and actual) output and of real wages in the flexible-price model of the macroeconomy:

Accepted Answer

A)  the production function balance of exports and imports. 
B)  the production function and the balance of savings and investment. 
C)  the production function and the balance of supply and demand in the labor market. 
D)  the production function and the balance of supply and demand in the stock market. 
A)  the production function balance of exports and imports. 
B)  the production function and the balance of savings and investment. 
C)  the production function and the balance of supply and demand in the labor market. 
D)  the production function and the balance of supply and demand in the stock market.

Question 10

The interest rate most relevant to determining investment spending

Accepted Answer

A)  is the short-term, nominal, risk-free interest rate. 
B)  is the long-term, nominal, risky interest rate. 
C)  is the short-term, real, risky interest rate. 
D)  is the long-term, real, risky interest rate. 
A)  is the short-term, nominal, risk-free interest rate. 
B)  is the long-term, nominal, risky interest rate. 
C)  is the short-term, real, risky interest rate. 
D)  is the long-term, real, risky interest rate.

Question 11

Economists categorize investment spending in each of following uses except

Accepted Answer

A)  inventory investment. 
B)  residential construction. 
C)  purchase of land. 
D)  equipment investment. 
A)  inventory investment. 
B)  residential construction. 
C)  purchase of land. 
D)  equipment investment.

Question 12

If there are N firms for the whole economy, the employment-wide employment for the Cobb-Douglas production function with K=1 is

Accepted Answer

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

Question 13

Ones's permanent income is

Accepted Answer

A)  the average level that you expect your level of income to be in the future. 
B)  the temporary fluctuations in income that occur. 
C)  income that never changes. 
D)  income that is permanently given to you. 
A)  the average level that you expect your level of income to be in the future. 
B)  the temporary fluctuations in income that occur. 
C)  income that never changes. 
D)  income that is permanently given to you.

Question 14

The demand for imports will ________ if __________ increases.

Accepted Answer

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

Question 15

The real foreign exchange rate will ________ if _________ decreases.

Accepted Answer

A)  decrease; the interest rate differential between domestic and foreign interest rates 
B)  increase; the interest rate differential between domestic and foreign interest rates 
C)  increase; the average foreign exchange trader's opinion of what the exchange rate should be if there were no interest rate differentials 
D)  not be affected; the average foreign exchange trader's opinion of what the exchange rate should be if there were no interest rate differentials 
A)  decrease; the interest rate differential between domestic and foreign interest rates 
B)  increase; the interest rate differential between domestic and foreign interest rates 
C)  increase; the average foreign exchange trader's opinion of what the exchange rate should be if there were no interest rate differentials 
D)  not be affected; the average foreign exchange trader's opinion of what the exchange rate should be if there were no interest rate differentials

Question 16

Other determinants of consumption spending include each of the following except

Accepted Answer

A)  household wealth. 
B)  expectations of income growth. 
C)  real exchange rate. 
D)  permanent vs. transitory income. 
A)  household wealth. 
B)  expectations of income growth. 
C)  real exchange rate. 
D)  permanent vs. transitory income.

Question 17

Other determinants of consumption spending include each of the following except

Accepted Answer

A)  household wealth. 
B)  nondiscretionary income. 
C)  income distribution. 
D)  relative optimism or pessimism. 
A)  household wealth. 
B)  nondiscretionary income. 
C)  income distribution. 
D)  relative optimism or pessimism.

Question 18

The baseline level of consumption (C0)

Accepted Answer

A)  is the amount by which consumption spending changes in response to a $1 change in total income. 
B)  is the amount households would spend on consumption goods if they had no income at all. 
C)  is the amount by which consumption spending changes in response to a $1 change in disposable income. 
D)  is the amount by which consumption spending would change in response to a $1 change in household wealth. 
A)  is the amount by which consumption spending changes in response to a $1 change in total income. 
B)  is the amount households would spend on consumption goods if they had no income at all. 
C)  is the amount by which consumption spending changes in response to a $1 change in disposable income. 
D)  is the amount by which consumption spending would change in response to a $1 change in household wealth.

Question 19

If C0 is $2 trillion, Cy is .8, the tax rate is .10, and the level of national income is $15 trillion, consumption spending would equal

Accepted Answer

A)  $14 trillion. 
B)  $12 trillion. 
C)  $12.8 trillion. 
D)  $10.8 trillion. 
A)  $14 trillion. 
B)  $12 trillion. 
C)  $12.8 trillion. 
D)  $10.8 trillion.

Question 20

If C0 is $1 trillion, Cy is .75, the tax rate is .20, and the level of national income is $10 trillion, the level of savings would equal

Accepted Answer

A)  $1 trillion. 
B)  $3 trillion. 
C)  $2.5 trillion. 
D)  $2 trillion. 
A)  $1 trillion. 
B)  $3 trillion. 
C)  $2.5 trillion. 
D)  $2 trillion.

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

The movement of stock market prices tends to be _____________ of investment spending.

In order to maximize its profits, a typical firm should follow the following formula:

If I₀ is equal to $3 trillion, I_r is equal to $15000 billion, and r is 5%, investment spending would equal

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

The investment function consists of

If the baseline level of investment expenditures, I₀, increases by $1 trillion, then investment spending will

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

Two sets of factors determine the levels of potential (and actual) output and of real wages in the flexible-price model of the macroeconomy:

The interest rate most relevant to determining investment spending

Economists categorize investment spending in each of following uses except

If there are N firms for the whole economy, the employment-wide employment for the Cobb-Douglas production function with K=1 is

Ones's permanent income is

The demand for imports will if __ increases.

The real foreign exchange rate will if _ decreases.

Other determinants of consumption spending include each of the following except

Other determinants of consumption spending include each of the following except

The baseline level of consumption (C₀)

If C₀ is $2 trillion, C_y is .8, the tax rate is .10, and the level of national income is $15 trillion, consumption spending would equal

If C₀ is $1 trillion, C_y is .75, the tax rate is .20, and the level of national income is $10 trillion, the level of savings would equal

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

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

The movement of stock market prices tends to be _____________ of investment spending.

In order to maximize its profits, a typical firm should follow the following formula:

If I0 is equal to $3 trillion, Ir is equal to $15000 billion, and r is 5%, investment spending would equal

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

The investment function consists of

If the baseline level of investment expenditures, I0, increases by $1 trillion, then investment spending will

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

Two sets of factors determine the levels of potential (and actual) output and of real wages in the flexible-price model of the macroeconomy:

The interest rate most relevant to determining investment spending

Economists categorize investment spending in each of following uses except

If there are N firms for the whole economy, the employment-wide employment for the Cobb-Douglas production function with K=1 is

Ones's permanent income is

The demand for imports will ________ if __________ increases.

The real foreign exchange rate will ________ if _________ decreases.

Other determinants of consumption spending include each of the following except

Other determinants of consumption spending include each of the following except

The baseline level of consumption (C0)

If C0 is $2 trillion, Cy is .8, the tax rate is .10, and the level of national income is $15 trillion, consumption spending would equal

If C0 is $1 trillion, Cy is .75, the tax rate is .20, and the level of national income is $10 trillion, the level of savings would equal

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

If I₀ is equal to $3 trillion, I_r is equal to $15000 billion, and r is 5%, investment spending would equal

If the baseline level of investment expenditures, I₀, increases by $1 trillion, then investment spending will

The demand for imports will if __ increases.

The real foreign exchange rate will if _ decreases.

The baseline level of consumption (C₀)

If C₀ is $2 trillion, C_y is .8, the tax rate is .10, and the level of national income is $15 trillion, consumption spending would equal

If C₀ is $1 trillion, C_y is .75, the tax rate is .20, and the level of national income is $10 trillion, the level of savings would equal