Question 1

The real wage rate measures the amount that wages can buy in current dollars.

Accepted Answer

A) True 
 B)False

Question 2

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.

Question 3

Which of the following is an example of nonlabor income?

Accepted Answer

A)  proprietors' income 
B)  wages 
C)  inheritance 
D)  a month-pay bonus

Question 4

The quantity of labor supplied by households depends on factors such as the wage rate, prices, wealth, and nonlabor income.

Accepted Answer

A) True 
 B)False

Question 5

An unexpected ________ in inventories has ________ effect on future production.

Accepted Answer

A)  decrease; no 
B)  decrease; a positive 
C)  increase; a positive 
D)  increase; no

Question 6

Refer to the information provided in Table 30.1 below to answer the question(s) that follow.
Table 30.1 
-Refer to Table 30.1. From 2014 to 2016 nominal wages

Accepted Answer

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

Question 7

________ reaches its peak about 9-12 months after a spending increase began.

Accepted Answer

A)  Income 
B)  The inflation rate 
C)  The multiplier 
D)  GDP

Question 8

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.

Question 9

The idea of the life-cycle theory of consumption is that people make lifetime consumption plans.

Accepted Answer

A) True 
 B)False

Question 10

Permanent income is

Accepted Answer

A)  current income. 
B)  expected future income. 
C)  the average level of expected future income. 
D)  accumulated wealth.

Question 11

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

Question 12

If firms believe that a downturn in sales and output is temporary and that increased output will be needed in the future, they may choose to

Accepted Answer

A)  fire all their workers. 
B)  sell off the plant. 
C)  close a plant permanently. 
D)  reassign their workers to different jobs.

Question 13

Firms have inventories that they can draw down to meet an increase in demand. This will

Accepted Answer

A)  have no effect on the multiplier, because the MPC remains unchanged. 
B)  increase the size of the multiplier, because firms will be able to respond more quickly to a change in demand. 
C)  decrease the size of the multiplier, because output will not immediately respond to changes in demand. 
D)  either increase or decrease the multiplier, depending on the size of the MPC.

Question 14

Over time, spending on ________ is "smoother" than spending on ________.

Accepted Answer

A)  durable goods; services 
B)  nondurable goods; durable goods 
C)  services; nondurable goods 
D)  durable goods; service

Question 15

The average level of one's ________ income stream is permanent income.

Accepted Answer

A)  current 
B)  expected future 
C)  known past 
D)  disposable

Question 16

If the unemployment rate is 13%, then the employment rate is

Accepted Answer

A)  13%. 
B)  87%. 
C)  113%. 
D)  unknown based on the information given.

Question 17

An increase in wealth will usually cause an individual to ________ his supply of labor.

Accepted Answer

A)  increase 
B)  decrease 
C)  not change 
D)  reduce to zero

Question 18

An increase in dividend payments will

Accepted Answer

A)  have no effect on labor supply. 
B)  lead to an increase in labor supply. 
C)  lead to a decrease in labor supply. 
D)  either lead to an increase or decrease in labor supply depending on the relative magnitude of the income and substitution effects.

Question 19

Empirical evidence with respect to the labor supply decision suggests that

Accepted Answer

A)  the income effect seems to dominate for most people, which means that the aggregate labor supply responds negatively to an increase in the wage rate. 
B)  the substitution effect seems to dominate for most people, which means that the aggregate labor supply responds positively to an increase in the wage rate. 
C)  the substitution effect seems to dominate for most people, which means that the aggregate labor supply responds negatively to an increase in the wage rate. 
D)  the income effect seems to dominate for most people, which means that the aggregate labor supply responds positively to an increase in the wage rate.

Question 20

Purchases of ________ are the most volatile type of expenditures because they are very sensitive to the interest rate, which is highly volatile.

Accepted Answer

A)  new houses 
B)  new cars 
C)  stocks 
D)  nondurables

Exam 30: Household and Firm Behavior in the Macroeconomy: a Further Look

The real wage rate measures the amount that wages can buy in current dollars.

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

Which of the following is an example of nonlabor income?

The quantity of labor supplied by households depends on factors such as the wage rate, prices, wealth, and nonlabor income.

An unexpected in inventories has effect on future production.

Refer to the information provided in Table 30.1 below to answer the question(s) that follow. Table 30.1 -Refer to Table 30.1. From 2014 to 2016 nominal wages

________ reaches its peak about 9-12 months after a spending increase began.

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

The idea of the life-cycle theory of consumption is that people make lifetime consumption plans.

Permanent income is

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

If firms believe that a downturn in sales and output is temporary and that increased output will be needed in the future, they may choose to

Firms have inventories that they can draw down to meet an increase in demand. This will

Over time, spending on is "smoother" than spending on .

The average level of one's ________ income stream is permanent income.

If the unemployment rate is 13%, then the employment rate is

An increase in wealth will usually cause an individual to ________ his supply of labor.

An increase in dividend payments will

Empirical evidence with respect to the labor supply decision suggests that

Purchases of ________ are the most volatile type of expenditures because they are very sensitive to the interest rate, which is highly volatile.