Question 1

What is an intertemporal substitution effect and what can cause one?

Accepted Answer

The answer of What is an intertemporal substitution effect and...

Question 2

Real profit is zero when:

Accepted Answer

A) the interest rate is zero. 
B) the depreciation rate is high. 
C) the labour and capital markets clear. 
D) the labour and capital markets do not clear.

Question 3

Utility in economics is:

Accepted Answer

A) a product with a derived demand like electricity. 
B) usefulness. 
C) satisfaction or happiness. 
D) all of the above.

Question 4

Figure 7.1 
-In Figure 7.1 if the household moves from point I to point H on its budget, it would be:

Accepted Answer

A) saving and consuming more. 
B) saving less and consuming more. 
C) saving more and consuming less. 
D) saving and consuming less.

Question 5

If the household budget constraint is aggregated over all household, it shows that:

Accepted Answer

A) consumption less net investment equal net national product. 
B) consumption plus net investment equals real GDP less depreciation. 
C) C -  K = Y +  K 
D) all of the above.

Question 6

If a worker gets a promotion that doubles their salary, with the increase in salary we would expect them to:

Accepted Answer

A) save most of it. 
B) reject it. 
C) consume most of it. 
D) consume half of it and save half of it.

Question 7

Utility in economics:

Accepted Answer

A) used to mean happiness. 
B) used to mean satisfaction. 
C) is what a person gets from a good. 
D) all of the above.

Question 8

In the one period budget constraint the uses of funds include:

Accepted Answer

A) purchases of consumption goods. 
B) payment of wages. 
C) payment profits. 
D) all of the above.

Question 9

Derive the household's two period real budget constraint.

Accepted Answer

The answer of Derive the household's two period real budget...

Question 10

An increase in the interest rate:

Accepted Answer

A) makes consumption in period two relatively more expensive compared to consumption in period one. 
B) does not change relative cost of consuming in either period. 
C) makes consumption in period two relatively cheaper compared consumption in period one. 
D) discourages savings in each period.

Question 11

The marginal propensity to consume out of a temporary change in income is approximately:

Accepted Answer

A) 1 
B) 0.5 
C) 0 
D) none of the above.

Question 12

Figure 7.1 
-In Figure 7.1 if the household moves from point F to point H on its budget, it would be:

Accepted Answer

A) saving and consuming more. 
B) saving less and consuming more. 
C) saving more and consuming less. 
D) saving and consuming less.

Question 13

If a household consumes one less unit in period 1, they can consume:

Accepted Answer

A) on more unit in period two. 
B) (1 + i) more units in period two. 
C) one less unit in period two. 
D) no more in period two.

Question 14

If a worker receives a bonus every Christmas, we would expect them to:

Accepted Answer

A) save most of it. 
B) reject it. 
C) consume most of it. 
D) consume half of it and save half of it.

Question 15

€100 a year from now is equal in worth to €100 today.

Accepted Answer

A) True 
 B)False

Question 16

In the one period budget constraint the uses of funds include:

Accepted Answer

A) payment of transfers. 
B) payment of wages. 
C) purchases of bonds. 
D) all of the above.

Question 17

If the household budget constraint is aggregated over all household, it shows that:

Accepted Answer

A) consumption plus net investment equal net national product. 
B) consumption less net investment equals real GDP less depreciation. 
C) C -  K = Y +  K. 
D) all of the above.

Question 18

In the multi-year budget constraint the present value of consumption equals the value of initial assets plus the:

Accepted Answer

A) present value of savings. 
B) present value of final assets. 
C) present value of wage incomes. 
D) the present value of time.

Question 19

Figure 7.1 
-In Figure 7.1 if the household opts to consume all its income it will be at point:

Accepted Answer

A) F 
B) G 
C) H 
D) I

Question 20

In the one period budget constraint the uses of funds include:

Accepted Answer

A) payment of transfers. 
B) purchases of capital goods. 
C) payment of wages. 
D) all of the above.

Exam 8: Consumption, Saving, and Investment

What is an intertemporal substitution effect and what can cause one?

Real profit is zero when:

Utility in economics is:

Figure 7.1 -In Figure 7.1 if the household moves from point I to point H on its budget, it would be:

If the household budget constraint is aggregated over all household, it shows that:

If a worker gets a promotion that doubles their salary, with the increase in salary we would expect them to:

Utility in economics:

In the one period budget constraint the uses of funds include:

Derive the household's two period real budget constraint.

An increase in the interest rate:

The marginal propensity to consume out of a temporary change in income is approximately:

Figure 7.1 -In Figure 7.1 if the household moves from point F to point H on its budget, it would be:

If a household consumes one less unit in period 1, they can consume:

If a worker receives a bonus every Christmas, we would expect them to:

€100 a year from now is equal in worth to €100 today.

In the one period budget constraint the uses of funds include:

If the household budget constraint is aggregated over all household, it shows that:

In the multi-year budget constraint the present value of consumption equals the value of initial assets plus the:

Figure 7.1 -In Figure 7.1 if the household opts to consume all its income it will be at point:

In the one period budget constraint the uses of funds include: