Question 1

The left hand side of the Euler equation,   
,represents total lifetime consumption,in dollars.

Accepted Answer

A) True 
 B)False  False

Question 2

Between 1970 and 2008 household consumption ___________ of GDP.Over this period,___________ to about ___________ of GDP.

Accepted Answer

A) grew from 63 percent to 70 percent;personal savings rose;7 percent 
B) remained at about two-thirds;personal savings fell;-3 percent 
C) shrank as a percentage;personal savings rose;12 percent 
D) grew from 63 percent to 70 percent;household debt rose;100 percent 
E) fell from 66 percent to 63 percent;household debt rose;70 percent 
A) grew from 63 percent to 70 percent;personal savings rose;7 percent 
B) remained at about two-thirds;personal savings fell;-3 percent 
C) shrank as a percentage;personal savings rose;12 percent 
D) grew from 63 percent to 70 percent;household debt rose;100 percent 
E) fell from 66 percent to 63 percent;household debt rose;70 percent D

Question 3

If  
Then:

Accepted Answer

A)    and consumption shrinks. 
B)    and consumption grows. 
C)    and you decide to save. 
D)    because you make higher income in the future. 
E)    because you have drawn your savings down to zero. 
A)    and consumption shrinks. 
B)    and consumption grows. 
C)    and you decide to save. 
D)    because you make higher income in the future. 
E)    because you have drawn your savings down to zero. B

Question 4

Because people can't perfectly foresee income changes over their lifetime,consumption should:

Accepted Answer

A) be smooth. 
B) be predictable. 
C) be constant throughout one's lifetime. 
D) follow a random walk. 
E) rise throughout one's lifetime. 
A) be smooth. 
B) be predictable. 
C) be constant throughout one's lifetime. 
D) follow a random walk. 
E) rise throughout one's lifetime.

Question 5

The equation  
Is called:

Accepted Answer

A) the Euler equation. 
B) the Fisher relation. 
C) the quantity equation. 
D) Ricardian equivalence. 
E) transition dynamics. 
A) the Euler equation. 
B) the Fisher relation. 
C) the quantity equation. 
D) Ricardian equivalence. 
E) transition dynamics.

Question 6

For the following questions refer to Figure 15.3 below.  
-Consider Figure 15.3.A possible cause for the change in the saving rate after,about,2007 is:

Accepted Answer

A) precautionary saving. 
B) consumption smoothing. 
C) a falling discount factor. 
D) rising marginal utility of consumption. 
E) the aging of the baby boomers. 
A) precautionary saving. 
B) consumption smoothing. 
C) a falling discount factor. 
D) rising marginal utility of consumption. 
E) the aging of the baby boomers.

Question 7

In 1992,the first Bush administration was worried about a lingering recession.The administration announced that households would receive a reduction in their taxes for the year 1992.However,this was not accompanied by a reduction in tax rates,and the taxes would have to be repaid when households filed their taxes in April 1993.Explain what the impact of such a policy would be.

Accepted Answer

This is a classic example of Ricardian e

Question 8

If an individual has no access to credit markets:

Accepted Answer

A) her marginal propensity to consume is one. 
B) she saves much less. 
C) she can consumption smooth. 
D) her marginal propensity to consume is equal to 1/T if she lives T periods. 
E) her future consumption is equal to zero. 
A) her marginal propensity to consume is one. 
B) she saves much less. 
C) she can consumption smooth. 
D) her marginal propensity to consume is equal to 1/T if she lives T periods. 
E) her future consumption is equal to zero.

Question 9

The  
In the lifetime utility function represents __________.

Accepted Answer

A) expected future wealth 
B) the risk parameter 
C) any number greater than one 
D) the amount of future discount 
E) life expectancy 
A) expected future wealth 
B) the risk parameter 
C) any number greater than one 
D) the amount of future discount 
E) life expectancy

Question 10

The left-hand side of the Euler equation,  
,represents the:

Accepted Answer

A) growth rate of income. 
B) total lifetime consumption,in dollars. 
C) the lifetime utility function. 
D) discount factor. 
E) growth rate of consumption. 
A) growth rate of income. 
B) total lifetime consumption,in dollars. 
C) the lifetime utility function. 
D) discount factor. 
E) growth rate of consumption.

Question 11

Which of the following represents human wealth?

Accepted Answer

A) the present value of labor income 
B) the level of educational attainment 
C) skills gained over time 
D) the total stock of assets owned 
E) the value of savings 
A) the present value of labor income 
B) the level of educational attainment 
C) skills gained over time 
D) the total stock of assets owned 
E) the value of savings

Question 12

Consider two time periods: t and k.Which of the following would represent the "future's" budget constraint?

Accepted Answer

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

Question 13

-Consider Figure 15.4 below,which shows the U.S.personal savings rate.A likely explanation for the rise in savings rates after 2009 is the continued strength in stock and housing markets.

Accepted Answer

A) True 
 B)False

Question 14

Use Figure 15.2 to answer the following questions.  
-In Figure 15.2,the point c is equal to ___________ and implies __________.

Accepted Answer

A) the utility of the average of   and
  ;consumption smoothing 
B) the utility associated with consuming   ;risk neutrality 
C) the utility of consumption;Ricardian equivalence 
D) average utility of   and
  ;a borrowing constraint 
E) the utility of the average of   and
  ;a low discount factor 
A) the utility of the average of   and
  ;consumption smoothing 
B) the utility associated with consuming   ;risk neutrality 
C) the utility of consumption;Ricardian equivalence 
D) average utility of   and
  ;a borrowing constraint 
E) the utility of the average of   and
  ;a low discount factor

Question 15

Using the neoclassical model of consumption,an implication of the permanent income hypothesis is ___________ because of __________.

Accepted Answer

A) consumption smoothing;diminishing marginal utility 
B) permanent income follows a random walk;aggregate demand shocks 
C) wealth is constant;real interest rates are,more or less,constant 
D) a low discount factor;the borrowing constraint 
E) no borrowing;income in the future is higher 
A) consumption smoothing;diminishing marginal utility 
B) permanent income follows a random walk;aggregate demand shocks 
C) wealth is constant;real interest rates are,more or less,constant 
D) a low discount factor;the borrowing constraint 
E) no borrowing;income in the future is higher

Question 16

One of the implications of the intertemporal budget constraint is that:

Accepted Answer

A) current consumption does not have to equal current income. 
B) there are no income transfers between today and the future. 
C) lifetime consumption equals total wealth. 
D) current and future consumption must be equal. 
E) a and c 
A) current consumption does not have to equal current income. 
B) there are no income transfers between today and the future. 
C) lifetime consumption equals total wealth. 
D) current and future consumption must be equal. 
E) a and c

Question 17

According to the neoclassical model ___________ over their lifetime,however one study showed that ___________ at retirement.This puzzle was solved when two economist tested the neoclassical model using __________.

Accepted Answer

A) hold consumption constant;consumption rises sharply;purchases of RVs. 
B) slow their consumption;consumption rises;data from Brazil 
C) consumption smooth;consumption falls 17 percent;food consumption 
D) don't maximize lifetime utility;they have zero income;dividend receipts 
E) rely on transitory income;the discount factor is one;cost minimization 
A) hold consumption constant;consumption rises sharply;purchases of RVs. 
B) slow their consumption;consumption rises;data from Brazil 
C) consumption smooth;consumption falls 17 percent;food consumption 
D) don't maximize lifetime utility;they have zero income;dividend receipts 
E) rely on transitory income;the discount factor is one;cost minimization

Question 18

If moving an extra unit of future consumption to today's consumption improves your lifetime utility you are not:

Accepted Answer

A) saving enough. 
B) spending all your future income. 
C) maximizing your lifetime utility. 
D) earning income today. 
E) discounting the future. 
A) saving enough. 
B) spending all your future income. 
C) maximizing your lifetime utility. 
D) earning income today. 
E) discounting the future.

Question 19

With logarithmic utility,the Euler equation is given by:

Accepted Answer

A)    . 
B)    
C)    . 
D) either c or e 
E)    . 
A)    . 
B)    
C)    . 
D) either c or e 
E)    .

Question 20

With logarithmic utility,the Euler equation is given by:

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
E) (   . 
A)    . 
B)    . 
C)    . 
D)    . 
E) (   .

The left hand side of the Euler equation, ,represents total lifetime consumption,in dollars.

Between 1970 and 2008 household consumption _____ of GDP.Over this period,_ to about _______ of GDP.

If Then:

Because people can't perfectly foresee income changes over their lifetime,consumption should:

The equation Is called:

For the following questions refer to Figure 15.3 below. -Consider Figure 15.3.A possible cause for the change in the saving rate after,about,2007 is:

If an individual has no access to credit markets:

The In the lifetime utility function represents __________.

The left-hand side of the Euler equation, ,represents the:

Which of the following represents human wealth?

Consider two time periods: t and k.Which of the following would represent the "future's" budget constraint?

-Consider Figure 15.4 below,which shows the U.S.personal savings rate.A likely explanation for the rise in savings rates after 2009 is the continued strength in stock and housing markets.

Use Figure 15.2 to answer the following questions. -In Figure 15.2,the point c is equal to _ and implies .

Using the neoclassical model of consumption,an implication of the permanent income hypothesis is _ because of .

One of the implications of the intertemporal budget constraint is that:

According to the neoclassical model _____ over their lifetime,however one study showed that _ at retirement.This puzzle was solved when two economist tested the neoclassical model using ______.

If moving an extra unit of future consumption to today's consumption improves your lifetime utility you are not:

With logarithmic utility,the Euler equation is given by:

With logarithmic utility,the Euler equation is given by:

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 15: Consumption

The left hand side of the Euler equation, ,represents total lifetime consumption,in dollars.

Between 1970 and 2008 household consumption ___________ of GDP.Over this period,___________ to about ___________ of GDP.

If Then:

Because people can't perfectly foresee income changes over their lifetime,consumption should:

The equation Is called:

For the following questions refer to Figure 15.3 below. -Consider Figure 15.3.A possible cause for the change in the saving rate after,about,2007 is:

If an individual has no access to credit markets:

The In the lifetime utility function represents __________.

The left-hand side of the Euler equation, ,represents the:

Which of the following represents human wealth?

Consider two time periods: t and k.Which of the following would represent the "future's" budget constraint?

-Consider Figure 15.4 below,which shows the U.S.personal savings rate.A likely explanation for the rise in savings rates after 2009 is the continued strength in stock and housing markets.

Use Figure 15.2 to answer the following questions. -In Figure 15.2,the point c is equal to ___________ and implies __________.

Using the neoclassical model of consumption,an implication of the permanent income hypothesis is ___________ because of __________.

One of the implications of the intertemporal budget constraint is that:

According to the neoclassical model ___________ over their lifetime,however one study showed that ___________ at retirement.This puzzle was solved when two economist tested the neoclassical model using __________.

If moving an extra unit of future consumption to today's consumption improves your lifetime utility you are not:

With logarithmic utility,the Euler equation is given by:

With logarithmic utility,the Euler equation is given by:

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Between 1970 and 2008 household consumption _____ of GDP.Over this period,_ to about _______ of GDP.

Use Figure 15.2 to answer the following questions. -In Figure 15.2,the point c is equal to _ and implies .

Using the neoclassical model of consumption,an implication of the permanent income hypothesis is _ because of .

According to the neoclassical model _____ over their lifetime,however one study showed that _ at retirement.This puzzle was solved when two economist tested the neoclassical model using ______.