Question 1

In the text,   is given by:

Accepted Answer

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

Question 2

To analyze Ricardian equivalence using the neoclassical consumption model, we must:

Accepted Answer

A)  remove taxes from the present value of wealth. 
B)  include inflation in the intertemporal budget constraint. 
C)  treat the discount factor as greater than one. 
D)  use nominal, rather than real, interest rates. 
E)  assume that marginal utility is constant. 
A)  remove taxes from the present value of wealth. 
B)  include inflation in the intertemporal budget constraint. 
C)  treat the discount factor as greater than one. 
D)  use nominal, rather than real, interest rates. 
E)  assume that marginal utility is constant. A

Question 3

An implication of Figure 16.2 is that consumers:

Accepted Answer

A)  smooth consumption. 
B)  are risk takers. 
C)  save all their income in period 1. 
D)  are risk neutral. 
E)  always consume   . 
A)  smooth consumption. 
B)  are risk takers. 
C)  save all their income in period 1. 
D)  are risk neutral. 
E)  always consume   . A

Question 4

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 the impact of such a policy.

Accepted Answer

This is a classic example of Ricardian e

Question 5

The equation   is called:

Accepted Answer

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

Question 6

Refer to the following figure when answering the following questions.
Figure 16.4: Personal Saving Rate: 1990-2010  
-Consider Figure 16.4. A possible cause for the fall in the saving rate between 1990 and 2005 is:

Accepted Answer

A)  precautionary saving. 
B)  consumption smoothing. 
C)  the changing composition of households' savings portfolios. 
D)  increasing competition among commercial banks. 
E)  less access to credit markets. 
A)  precautionary saving. 
B)  consumption smoothing. 
C)  the changing composition of households' savings portfolios. 
D)  increasing competition among commercial banks. 
E)  less access to credit markets.

Question 7

Figure 16.8: Personal Savings Rates   (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-Your high school economics teacher recently saw the graph of personal savings rates above. She knows you are taking economics in college and is curious to hear your opinion about what is causing the general trends in savings rates from 1990-2012. What do you tell her?

Accepted Answer

First, consider the years 1990-2005. Mor

Question 8

Your lifetime utility is a function of:

Accepted Answer

A)  today's consumption only. 
B)  the present value of future consumption only. 
C)  today's consumption and the present value of future consumption. 
D)  the amount of wealth in the utility function. 
E)  your lifetime income. 
A)  today's consumption only. 
B)  the present value of future consumption only. 
C)  today's consumption and the present value of future consumption. 
D)  the amount of wealth in the utility function. 
E)  your lifetime income.

Question 9

Consider Figure 16.7 below, which shows the federal funds rate and household consumption. For your answers, use a logarithmic utility function.
(a) What is the relationship between consumption growth and the interest rate according to
the Euler equation?
(b) Does the data in the figure support or reject this relationship for the entire period? Explain.
(c) What might help explain consumption behavior, particularly in 2008-2009?Figure 16.7: Federal Funds Rate and Household Consumption: 2002-2016   
(Source: Federal Reserve Economic Data, St. Louis Federal Reserve)

Accepted Answer

We will use the notation 0 = today and 1

Question 10

Consider consumption in two periods,   
and   
. Consumption smoothing implies people prefer to consume   
if   
and R = 0.

Accepted Answer

A) True 
 B)False

Question 11

If $\beta$=1 and R=0, and if you prefer   in each period 1 and 2 rather than u(c1) + u(c2), then you are:

Accepted Answer

A)  discounting the future. 
B)  risk neutral. 
C)  consumption smoothing. 
D)  satiating. 
E)  irrational. 
A)  discounting the future. 
B)  risk neutral. 
C)  consumption smoothing. 
D)  satiating. 
E)  irrational.

Question 12

The consumer's lifetime utility is given as

Accepted Answer

A) True 
 B)False

Question 13

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 14

Behavioral economics blends economics with:

Accepted Answer

A)  psychology. 
B)  marketing. 
C)  physics. 
D)  anthropology. 
E)  statistics. 
A)  psychology. 
B)  marketing. 
C)  physics. 
D)  anthropology. 
E)  statistics.

Question 15

As a college student, you are likely to be impatient; therefore, your consumption growth rate
Would be:

Accepted Answer

A)  relatively slow. 
B)  relatively fast. 
C)  solely dependent on the amount of future income. 
D)  inversely related to the interest rate. 
E)  Not enough information is given. 
A)  relatively slow. 
B)  relatively fast. 
C)  solely dependent on the amount of future income. 
D)  inversely related to the interest rate. 
E)  Not enough information is given.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Behavioral economics treats all households as heterogeneous.

Accepted Answer

A) True 
 B)False

Question 18

In the intertemporal budget   
, is today's saving for the future.

Accepted Answer

A) True 
 B)False

Question 19

According to the consumption function in Figure 16.2:

Accepted Answer

A)  people's lifetime utilities are equal to   . 
B)  people prefer to consume the average over their lifetimes rather than   and   . 
C)  the utility associated with consuming the average over both periods is less than the average of   and   . 
D)    . 
E)  the marginal propensity to consume is greater than one. 
A)  people's lifetime utilities are equal to   . 
B)  people prefer to consume the average over their lifetimes rather than   and   . 
C)  the utility associated with consuming the average over both periods is less than the average of   and   . 
D)    . 
E)  the marginal propensity to consume is greater than one.

Question 20

Refer to the following figure when answering the following questions.
Figure 16.1: Consumption Function  
-Consider the utility functions in Figure 16.1. Curve b exhibits:

Accepted Answer

A)  risk-taking behavior. 
B)  constant marginal utility. 
C)  diminishing marginal utility. 
D)  consumption smoothing. 
E)  None of these answers is correct. 
A)  risk-taking behavior. 
B)  constant marginal utility. 
C)  diminishing marginal utility. 
D)  consumption smoothing. 
E)  None of these answers is correct.

In the text, is given by:

To analyze Ricardian equivalence using the neoclassical consumption model, we must:

An implication of Figure 16.2 is that consumers:

The equation is called:

Refer to the following figure when answering the following questions. Figure 16.4: Personal Saving Rate: 1990-2010 -Consider Figure 16.4. A possible cause for the fall in the saving rate between 1990 and 2005 is:

Your lifetime utility is a function of:

Consider consumption in two periods, and . Consumption smoothing implies people prefer to consume if and R = 0.

If $\beta$ =1 and R=0, and if you prefer $If \beta =1 and R=0, and if you prefer in each period 1 and 2 rather than u(c<sub>1</sub>) + u(c<sub>2</sub>), then you are:$ in each period 1 and 2 rather than u(c₁) + u(c₂), then you are:

The consumer's lifetime utility is given as

The in the lifetime utility function represents:

Behavioral economics blends economics with:

As a college student, you are likely to be impatient; therefore, your consumption growth rate Would be:

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

Behavioral economics treats all households as heterogeneous.

In the intertemporal budget , is today's saving for the future.

According to the consumption function in Figure 16.2:

Refer to the following figure when answering the following questions. Figure 16.1: Consumption Function -Consider the utility functions in Figure 16.1. Curve b exhibits:

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

Dsge Models: the Frontier of Business Cycle Research

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 16: Consumption

In the text, is given by:

To analyze Ricardian equivalence using the neoclassical consumption model, we must:

An implication of Figure 16.2 is that consumers:

The equation is called:

Refer to the following figure when answering the following questions. Figure 16.4: Personal Saving Rate: 1990-2010 -Consider Figure 16.4. A possible cause for the fall in the saving rate between 1990 and 2005 is:

Your lifetime utility is a function of:

Consider consumption in two periods, and . Consumption smoothing implies people prefer to consume if and R = 0.

If β\betaβ =1 and R=0, and if you prefer in each period 1 and 2 rather than u(c1) + u(c2), then you are:

The consumer's lifetime utility is given as

The in the lifetime utility function represents:

Behavioral economics blends economics with:

As a college student, you are likely to be impatient; therefore, your consumption growth rate Would be:

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

Behavioral economics treats all households as heterogeneous.

In the intertemporal budget , is today's saving for the future.

According to the consumption function in Figure 16.2:

Refer to the following figure when answering the following questions. Figure 16.1: Consumption Function -Consider the utility functions in Figure 16.1. Curve b exhibits:

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

Dsge Models: the Frontier of Business Cycle Research

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

If $\beta$ =1 and R=0, and if you prefer $If \beta =1 and R=0, and if you prefer in each period 1 and 2 rather than u(c<sub>1</sub>) + u(c<sub>2</sub>), then you are:$ in each period 1 and 2 rather than u(c₁) + u(c₂), then you are: