Question 1

An unexpected decrease in wealth or nonlabor income leads to

Accepted Answer

A) an uncertain effect on labor supply. 
B) an increase in labor supply. 
C) a decrease in labor supply. 
D) a zero effect on labor supply. 
A) an uncertain effect on labor supply. 
B) an increase in labor supply. 
C) a decrease in labor supply. 
D) a zero effect on labor supply. B

Question 2

Which of the following is NOT one of the "slippages" between changes in output and changes in the unemployment rate?

Accepted Answer

A) As the size of the labor force increases,the interest rate increases,and therefore output falls. 
B) The percentage increase in the number of jobs is less than the percentage increase in output. 
C) The labor force increases when output increases. 
D) The change in the number of jobs and the change in the number of people employed are not equal. 
A) As the size of the labor force increases,the interest rate increases,and therefore output falls. 
B) The percentage increase in the number of jobs is less than the percentage increase in output. 
C) The labor force increases when output increases. 
D) The change in the number of jobs and the change in the number of people employed are not equal. A

Question 3

Holding everything else constant,the more wealth a household has,

Accepted Answer

A) the less it will consume,both now and in the future. 
B) the more it will consume now,but the less it will consume in the future. 
C) the less it will consume now,but the more it will consume in the future. 
D) the more it will consume,both now and in the future. 
A) the less it will consume,both now and in the future. 
B) the more it will consume now,but the less it will consume in the future. 
C) the less it will consume now,but the more it will consume in the future. 
D) the more it will consume,both now and in the future. D

Question 4

People who have two jobs,

Accepted Answer

A) are counted twice in the job data,but only once in the persons-employed data. 
B) are counted twice in both the job data and the persons-employed data. 
C) are counted once in the job data,but twice in the persons-employed data. 
D) are counted once in both the job data and the persons-employed data. 
A) are counted twice in the job data,but only once in the persons-employed data. 
B) are counted twice in both the job data and the persons-employed data. 
C) are counted once in the job data,but twice in the persons-employed data. 
D) are counted once in both the job data and the persons-employed data.

Question 5

Caroline's hourly wage rate was reduced from $22 to $16.As a result of the wage decrease,Caroline desires to work more hours and take fewer hours of leisure.For Caroline

Accepted Answer

A) the income effect must be zero. 
B) the substitution effect dominates the income effect. 
C) the income effect dominates the substitution effect. 
D) the substitution effect must equal the income effect. 
A) the income effect must be zero. 
B) the substitution effect dominates the income effect. 
C) the income effect dominates the substitution effect. 
D) the substitution effect must equal the income effect.

Question 6

The ________ refers to the amount a household actually works within a given period at the current wage rate.

Accepted Answer

A) constrained supply of labor 
B) labor-force participation rate 
C) natural rate of unemployment 
D) unconstrained supply of labor 
A) constrained supply of labor 
B) labor-force participation rate 
C) natural rate of unemployment 
D) unconstrained supply of labor

Question 7

Which of the following statements is TRUE?

Accepted Answer

A) Increases in the interest rate crowd out both consumption and investment spending,and this reduces the size of the multiplier. 
B) Increases in the interest rate crowd out both consumption and investment spending,and this increases the size of the multiplier. 
C) Increases in the interest rate have no effect on the size of the multiplier because higher interest rates cause consumption to increase,which offsets the crowding out of investment. 
D) Increases in the interest rate cause the size of the multiplier to be smaller if the economy is on the flat portion of the AS curve and to be larger if the economy is on the steep portion of the AS curve. 
A) Increases in the interest rate crowd out both consumption and investment spending,and this reduces the size of the multiplier. 
B) Increases in the interest rate crowd out both consumption and investment spending,and this increases the size of the multiplier. 
C) Increases in the interest rate have no effect on the size of the multiplier because higher interest rates cause consumption to increase,which offsets the crowding out of investment. 
D) Increases in the interest rate cause the size of the multiplier to be smaller if the economy is on the flat portion of the AS curve and to be larger if the economy is on the steep portion of the AS curve.

Question 8

Refer to the information provided in Table 16.1 below to answer the questions that follow.
Table 16.1  
-Refer to Table 16.1.From 2011 to 2013 nominal wages

Accepted Answer

A) rise. 
B) fall. 
C) stay the same. 
D) rise then fall. 
A) rise. 
B) fall. 
C) stay the same. 
D) rise then fall.

Question 9

Refer to the information provided in Figure 16.2 below to answer the questions that follow.   Figure 16.2
-Refer to Figure 16.2.Labor productivity at time t2 is

Accepted Answer

A) larger than labor productivity at time t1. 
B) less than labor productivity at time t4. 
C) less than labor productivity at time t3. 
D) larger than labor productivity at time t1,but less than labor productivity at time t3. 
A) larger than labor productivity at time t1. 
B) less than labor productivity at time t4. 
C) less than labor productivity at time t3. 
D) larger than labor productivity at time t1,but less than labor productivity at time t3.

Question 10

Suppose that the value of the multiplier has increased in recent years.Which of the following could have caused this?

Accepted Answer

A) Consumption has become more sensitive to changes in the interest rate. 
B) The costs of inventory storage have fallen. 
C) Changes in the way the unemployment compensation fund is financed have made it more expensive for firms to lay off workers. 
D) "Buy America" campaigns launched by many unions have succeeded in reducing the demand for imported goods. 
A) Consumption has become more sensitive to changes in the interest rate. 
B) The costs of inventory storage have fallen. 
C) Changes in the way the unemployment compensation fund is financed have made it more expensive for firms to lay off workers. 
D) "Buy America" campaigns launched by many unions have succeeded in reducing the demand for imported goods.

Question 11

Refer to the information provided in Figure 16.1 below to answer the questions that follow.   Figure 16.1
-Refer to Figure 16.1.Growth in aggregate output causes a ________ through the accelerator effect.

Accepted Answer

A) shift from I2 to I3 
B) shift from I3 to I2 
C) shift from Point C to Point B 
D) shift from Point B to Point C 
A) shift from I2 to I3 
B) shift from I3 to I2 
C) shift from Point C to Point B 
D) shift from Point B to Point C

Question 12

Any increase in nonlabor income unambiguously leads to a decrease in consumption and a decrease in labor supply.

Accepted Answer

A) True 
 B)False

Question 13

Provided that firms have sufficient capital and labor to support an output increase,monetary and fiscal policy are likely to be the most effective when

Accepted Answer

A) prices and inventory stocks are both high. 
B) output and inventory stocks are both high. 
C) output is low and inventory stocks are low. 
D) output is low and inventory stocks are high. 
A) prices and inventory stocks are both high. 
B) output and inventory stocks are both high. 
C) output is low and inventory stocks are low. 
D) output is low and inventory stocks are high.

Question 14

The wage rate that is adjusted for changes in the price level over time is the

Accepted Answer

A) expected future wage rate. 
B) nominal wage rate. 
C) real wage rate. 
D) money wage rate. 
A) expected future wage rate. 
B) nominal wage rate. 
C) real wage rate. 
D) money wage rate.

Question 15

Assume that households have positive wealth.Which of the following explains how the income effect of an interest rate increase affects consumption?

Accepted Answer

A) As the interest rate increases,the opportunity cost of current consumption falls,and therefore current consumption increases. 
B) As the interest rate increases,permanent income increases and future consumption increases. 
C) As the interest rate increases,expected future income increases and future consumption increases. 
D) As the interest rate increases,nonlabor income increases and current consumption increases. 
A) As the interest rate increases,the opportunity cost of current consumption falls,and therefore current consumption increases. 
B) As the interest rate increases,permanent income increases and future consumption increases. 
C) As the interest rate increases,expected future income increases and future consumption increases. 
D) As the interest rate increases,nonlabor income increases and current consumption increases.

Question 16

Refer to the information provided in Figure 16.1 below to answer the questions that follow.   Figure 16.1
-Refer to Figure 16.1.Suppose the economy is currently at Point B.If investors are optimistic about future growth in aggregate output,investment

Accepted Answer

A) moves to Point C. 
B) moves to Point A. 
C) moves to Point D. 
D) stays at Point B. 
A) moves to Point C. 
B) moves to Point A. 
C) moves to Point D. 
D) stays at Point B.

Question 17

Which of the following is TRUE of a change in nonlabor income?

Accepted Answer

A) There is no substitution effect because a change in nonlabor income does not change the trade-off between work and leisure. 
B) There is no income effect because a change in nonlabor income does not change the trade-off between work and leisure. 
C) There is no substitution effect because a change in nonlabor income does not change a household's permanent income. 
D) There is no income effect because a change in nonlabor income does not change a household's permanent income. 
A) There is no substitution effect because a change in nonlabor income does not change the trade-off between work and leisure. 
B) There is no income effect because a change in nonlabor income does not change the trade-off between work and leisure. 
C) There is no substitution effect because a change in nonlabor income does not change a household's permanent income. 
D) There is no income effect because a change in nonlabor income does not change a household's permanent income.

Question 18

Firms report that their workers are working six hours of overtime per week.The government reports that the unemployment rate is 3.5%.In this situation,the multiplier is likely to be

Accepted Answer

A) negative. 
B) large. 
C) small. 
D) infinitely large. 
A) negative. 
B) large. 
C) small. 
D) infinitely large.

Question 19

An increase in output will cause the unemployment rate to fall by a larger percentage if

Accepted Answer

A) firms are holding excess labor. 
B) firms aren't holding excess labor. 
C) firms have their workers work more overtime. 
D) firms hire workers who were already employed by other firms to work for them part-time. 
A) firms are holding excess labor. 
B) firms aren't holding excess labor. 
C) firms have their workers work more overtime. 
D) firms hire workers who were already employed by other firms to work for them part-time.

Question 20

The government spending multiplier is likely to be larger during periods of

Accepted Answer

A) high output and low unemployment. 
B) low output and low unemployment. 
C) low output and high unemployment. 
D) high output and high unemployment. 
A) high output and low unemployment. 
B) low output and low unemployment. 
C) low output and high unemployment. 
D) high output and high unemployment.

Exam 16: Household and Firm Behavior in the Macroeconomy: a Further Look

An unexpected decrease in wealth or nonlabor income leads to

Which of the following is NOT one of the "slippages" between changes in output and changes in the unemployment rate?

Holding everything else constant,the more wealth a household has,

People who have two jobs,

Caroline's hourly wage rate was reduced from $22 to $16.As a result of the wage decrease,Caroline desires to work more hours and take fewer hours of leisure.For Caroline

The ________ refers to the amount a household actually works within a given period at the current wage rate.

Which of the following statements is TRUE?

Refer to the information provided in Table 16.1 below to answer the questions that follow. Table 16.1 -Refer to Table 16.1.From 2011 to 2013 nominal wages

Refer to the information provided in Figure 16.2 below to answer the questions that follow. Figure 16.2 -Refer to Figure 16.2.Labor productivity at time t2 is

Suppose that the value of the multiplier has increased in recent years.Which of the following could have caused this?

Refer to the information provided in Figure 16.1 below to answer the questions that follow. Figure 16.1 -Refer to Figure 16.1.Growth in aggregate output causes a ________ through the accelerator effect.

Any increase in nonlabor income unambiguously leads to a decrease in consumption and a decrease in labor supply.

Provided that firms have sufficient capital and labor to support an output increase,monetary and fiscal policy are likely to be the most effective when

The wage rate that is adjusted for changes in the price level over time is the

Assume that households have positive wealth.Which of the following explains how the income effect of an interest rate increase affects consumption?

Refer to the information provided in Figure 16.1 below to answer the questions that follow. Figure 16.1 -Refer to Figure 16.1.Suppose the economy is currently at Point B.If investors are optimistic about future growth in aggregate output,investment

Which of the following is TRUE of a change in nonlabor income?

Firms report that their workers are working six hours of overtime per week.The government reports that the unemployment rate is 3.5%.In this situation,the multiplier is likely to be

An increase in output will cause the unemployment rate to fall by a larger percentage if

The government spending multiplier is likely to be larger during periods of

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Long-Run Growth

Alternative Views in Macroeconomics

International Trade,comparative Advantage,and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

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