Question 1

The substitution effect of a wage rate increase suggests that

Accepted Answer

A)  individuals will supply more work. 
B)  individuals will supply less work. 
C)  individuals will consume more leisure. 
D)  individuals will supply more work and consume more leisure. 
A)  individuals will supply more work. 
B)  individuals will supply less work. 
C)  individuals will consume more leisure. 
D)  individuals will supply more work and consume more leisure. A

Question 2

If the substitution effect is greater than the income effect, a decrease in interest rates will

Accepted Answer

A)  increase saving and decrease consumption spending by households. 
B)  decrease saving and increase consumption spending by households. 
C)  decrease both saving and consumption spending by households. 
D)  increase both saving and consumption spending by households. 
A)  increase saving and decrease consumption spending by households. 
B)  decrease saving and increase consumption spending by households. 
C)  decrease both saving and consumption spending by households. 
D)  increase both saving and consumption spending by households. B

Question 3

When the substitution effect is greater than the income effect, Donna will supply more work if

Accepted Answer

A)  the wage rate and the price level increase proportionately. 
B)  the percentage increase in the price level is greater than the percentage change in wages. 
C)  wages are falling faster than prices. 
D)  none of the above 
A)  the wage rate and the price level increase proportionately. 
B)  the percentage increase in the price level is greater than the percentage change in wages. 
C)  wages are falling faster than prices. 
D)  none of the above D

Question 4

Refer to the information provided in Table 15.1 below to answer the questions that follow.
Table 15.1  
-Refer to Table 15.1. What is the real wage rate in 2014 using 2016 as the base year?

Accepted Answer

A)  $6.00 
B)  $6.84 
C)  $11.40 
D)  $13.30 
A)  $6.00 
B)  $6.84 
C)  $11.40 
D)  $13.30

Question 5

Monetary policy is ________ it was in the past ________ the income effect of an interest rate change on consumption has increased.

Accepted Answer

A)  equally effective as; even though 
B)  less effective than; because 
C)  more effective than; because 
D)  more effective than; even though 
A)  equally effective as; even though 
B)  less effective than; because 
C)  more effective than; because 
D)  more effective than; even though

Question 6

Which of the following causes an increase in labor supply?

Accepted Answer

A)  when wages and the price level increase proportionately 
B)  a decrease in income tax rates 
C)  a decrease in the general price level 
D)  a decrease in transfer payments 
A)  when wages and the price level increase proportionately 
B)  a decrease in income tax rates 
C)  a decrease in the general price level 
D)  a decrease in transfer payments

Question 7

Refer to the information provided in Table 15.2 below to answer the questions that follow.
Table 15.2  
-Refer to Table 15.2. What is the real wage rate in 2015 using 2016 as the base year?

Accepted Answer

A)  $11.20 
B)  $10.80 
C)  $6.65 
D)  $5.71 
A)  $11.20 
B)  $10.80 
C)  $6.65 
D)  $5.71

Question 8

As the economy expands, the labor force ________, and as the economy contracts, the labor force ________.

Accepted Answer

A)  increases; decreases 
B)  increases; increases 
C)  decreases; decreases 
D)  decreases; increases 
A)  increases; decreases 
B)  increases; increases 
C)  decreases; decreases 
D)  decreases; increases

Question 9

Which of the following causes an individual to increase his/her supply of labor?

Accepted Answer

A)  a decrease in the real wage 
B)  an increase in his/her wealth 
C)  a decrease in nonlabor income 
D)  Both A and C are correct. 
A)  a decrease in the real wage 
B)  an increase in his/her wealth 
C)  a decrease in nonlabor income 
D)  Both A and C are correct.

Question 10

The path of consumption over a lifetime is likely to be much more stable than the path of income.

Accepted Answer

A) True 
 B)False

Question 11

When the economy is in a slump, labor productivity tends to fall because firms have

Accepted Answer

A)  excess capital. 
B)  excess labor. 
C)  too little capital. 
D)  too little labor. 
A)  excess capital. 
B)  excess labor. 
C)  too little capital. 
D)  too little labor.

Question 12

If inventory stocks are ________ and firms have enough capital and labor to support an output increase, monetary and fiscal policy will be ________.

Accepted Answer

A)  low; very effective 
B)  high; very effective 
C)  low; ineffective 
D)  zero; useless 
A)  low; very effective 
B)  high; very effective 
C)  low; ineffective 
D)  zero; useless

Question 13

The theory that the unemployment rate decreases about 1% for every 3% increase in real GDP is

Accepted Answer

A)  Ockham's razor. 
B)  Say's law. 
C)  Okun's law. 
D)  the Laffer postulate. 
A)  Ockham's razor. 
B)  Say's law. 
C)  Okun's law. 
D)  the Laffer postulate.

Question 14

The government reduces the corporate profits tax. As a result, corporate profits increase. This will

Accepted Answer

A)  have no effect on households. 
B)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase. 
C)  increase the nonlabor income of households, causing consumption to increase and labor supply to decrease. 
D)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase or decrease depending on the relative magnitude of the income and substitution effects. 
A)  have no effect on households. 
B)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase. 
C)  increase the nonlabor income of households, causing consumption to increase and labor supply to decrease. 
D)  increase the nonlabor income of households, causing consumption to increase and labor supply to increase or decrease depending on the relative magnitude of the income and substitution effects.

Question 15

Refer to the information provided in Figure 15.1 below to answer the questions that follow.   Figure 15.1
-Refer to Figure 15.1. 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 16

The decline in the measured unemployment rate that results when people who want to work, but who cannot find work, drop out of the ranks of the unemployed and the labor force is the

Accepted Answer

A)  leisure-preference effect. 
B)  discouraged-worker effect. 
C)  surplus labor effect. 
D)  disguised unemployment effect. 
A)  leisure-preference effect. 
B)  discouraged-worker effect. 
C)  surplus labor effect. 
D)  disguised unemployment effect.

Question 17

When the substitution effect is greater than the income effect, Juanita will not supply more work if

Accepted Answer

A)  the wage rate and the price level increase proportionately. 
B)  the percentage increase in the price level is greater than the percentage change in wages. 
C)  wages are falling faster than prices. 
D)  all of the above 
A)  the wage rate and the price level increase proportionately. 
B)  the percentage increase in the price level is greater than the percentage change in wages. 
C)  wages are falling faster than prices. 
D)  all of the above

Question 18

Transfer payments are cash payments made by ________ directly to ________.

Accepted Answer

A)  firms; the government 
B)  the government; households 
C)  households; firms 
D)  firms; households 
A)  firms; the government 
B)  the government; households 
C)  households; firms 
D)  firms; households

Question 19

At the beginning of 2017, Albert planned to buy a new home theater system, laptop computer, and hybrid car by borrowing money. Albert already owes $9,000 on other loans. He also planned to buy a new iPod and humidor out of current income. A decrease in interest rates during 2017 will most likely

Accepted Answer

A)  cause Albert to decide to borrow less money, but not change what he planned to spend on goods purchased with current income. 
B)  cause Albert to decide to borrow more money and to spend more on goods purchased with current income. 
C)  cause Albert to decide to borrow more money, but not change what he planned to spend on goods purchased with current income. 
D)  cause Albert to decide to borrow less money and to spend less on goods purchased with current income. 
A)  cause Albert to decide to borrow less money, but not change what he planned to spend on goods purchased with current income. 
B)  cause Albert to decide to borrow more money and to spend more on goods purchased with current income. 
C)  cause Albert to decide to borrow more money, but not change what he planned to spend on goods purchased with current income. 
D)  cause Albert to decide to borrow less money and to spend less on goods purchased with current income.

Question 20

Refer to the information provided in Table 15.2 below to answer the questions that follow.
Table 15.2  
-Refer to Table 15.2. From 2015 to 2016 the real wage

Accepted Answer

A)  rises. 
B)  falls. 
C)  stays the same. 
D)  rises then falls. 
A)  rises. 
B)  falls. 
C)  stays the same. 
D)  rises then falls.

Exam 15: Household and Firm Behavior in the Macroeconomy: a Further Look

The substitution effect of a wage rate increase suggests that

If the substitution effect is greater than the income effect, a decrease in interest rates will

When the substitution effect is greater than the income effect, Donna will supply more work if

Refer to the information provided in Table 15.1 below to answer the questions that follow. Table 15.1 -Refer to Table 15.1. What is the real wage rate in 2014 using 2016 as the base year?

Monetary policy is ________ it was in the past ________ the income effect of an interest rate change on consumption has increased.

Which of the following causes an increase in labor supply?

Refer to the information provided in Table 15.2 below to answer the questions that follow. Table 15.2 -Refer to Table 15.2. What is the real wage rate in 2015 using 2016 as the base year?

As the economy expands, the labor force ________, and as the economy contracts, the labor force ________.

Which of the following causes an individual to increase his/her supply of labor?

The path of consumption over a lifetime is likely to be much more stable than the path of income.

When the economy is in a slump, labor productivity tends to fall because firms have

If inventory stocks are ________ and firms have enough capital and labor to support an output increase, monetary and fiscal policy will be ________.

The theory that the unemployment rate decreases about 1% for every 3% increase in real GDP is

The government reduces the corporate profits tax. As a result, corporate profits increase. This will

Refer to the information provided in Figure 15.1 below to answer the questions that follow. Figure 15.1 -Refer to Figure 15.1. Suppose the economy is currently at Point B. If investors are optimistic about future growth in aggregate output, investment

The decline in the measured unemployment rate that results when people who want to work, but who cannot find work, drop out of the ranks of the unemployed and the labor force is the

When the substitution effect is greater than the income effect, Juanita will not supply more work if

Transfer payments are cash payments made by ________ directly to ________.

At the beginning of 2017, Albert planned to buy a new home theater system, laptop computer, and hybrid car by borrowing money. Albert already owes $9,000 on other loans. He also planned to buy a new iPod and humidor out of current income. A decrease in interest rates during 2017 will most likely

Refer to the information provided in Table 15.2 below to answer the questions that follow. Table 15.2 -Refer to Table 15.2. From 2015 to 2016 the real wage

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

Money, the Federal Reserve, and the Interest Rate

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

Policy Effects and Cost 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 Economies

Critical Thinking About Research

Filters

Monetary policy is it was in the past the income effect of an interest rate change on consumption has increased.

As the economy expands, the labor force , and as the economy contracts, the labor force .

If inventory stocks are and firms have enough capital and labor to support an output increase, monetary and fiscal policy will be .

Transfer payments are cash payments made by directly to .