Question 1

In making employment decisions, profits are maximized

Accepted Answer

A)   wherever the marginal product of labor is an increasing function of employment.
B)   at the level of employment where the marginal product of labor equals the nominal wage rate.
C)   at the level of employment where the marginal product of labor equals the real wage rate.
D)   at the level of employment where the marginal product of labor equals the average product of labor.
E)   none of the above.

Question 2

A higher real wage rate

Accepted Answer

A)   increases the opportunity cost of leisure.
B)   increases the ability of workers to consume leisure.
C)   increases the number of hours worked.
D)   all of the above.
E)   a and b.

Question 3

An important conclusion from Solow's work on long-run growth is that

Accepted Answer

A)   in the steady state, both capital stock and output grow at a slower rate than the labor force.
B)   the economy's growth rate does not depend on the savings rate.
C)   economies that save more experience a higher growth rate.
D)   in the steady state, both capital stock and output grow at the same rate as the labor force.
E)   b and d.

Question 4

Empirical evidence about the labor supply curve suggests

Accepted Answer

A)   a small, positive elasticity with respect to the real wage.
B)   a small, negative elasticity with respect to the real wage.
C)   a large, positive elasticity with respect to the real wage.
D)   a large, negative elasticity with respect to the real wage.
E)   none of the above, because the supply of labor depends on the nominal wage and not the real wage.

Question 5

The determinants of aggregate supply include

Accepted Answer

A)   the number of people available to work.
B)   the productivity of the available labor force.
C)   the underlying technology of the existing economy.
D)   the size of the existing capital stock including equipment, structures, and land.
E)   all of the above.

Question 6

The Malthusian model of economic growth did well at explaining the experience of all of the following time periods except

Accepted Answer

A)   500-800 AD.
B)   800-1100 AD.
C)   1100-1400 AD.
D)   1400-1700 AD.
E)   1700-1900 AD.

Question 7

Each of the following statements is true except

Accepted Answer

A)   balanced growth occurs when the labor force, capital stock, and real output all grow at the same rate.
B)   Solow showed that the balanced growth path is stable: If the economy is off a balanced growth path, it will naturally tend to return to that path.
C)   a higher population growth rate lowers GDP per capita, in the Solow growth model, but does not permanently lower the growth rate.
D)   all of the above.
E)   none of the above.

Question 8

In the Solow growth model, the engine of economic growth is

Accepted Answer

A)   population growth.
B)   labor force increases.
C)   capital stock increases.
D)   new finds of natural resources.
E)   technological progress.

Question 9

Malthusian stagnation occurs

Accepted Answer

A)   whenever output falls below the subsistence level.
B)   whenever output is above the subsistence level.
C)   regardless of deviations of output.
D)   all of the above.
E)   none of the above.

Question 10

Suppose that a labor market were initially in equilibrium and wages and prices were perfectly flexible. If nominal wages and prices were to increase by 10 percent in response to a change in the money supply, then

Accepted Answer

A)   equilibrium employment would immediately fall in response to the new, lower real wage rate.
B)   equilibrium employment would immediately increase in response to the new, higher nominal wage.
C)   equilibrium employment would remain at the original level despite uncertain short-term variability in the real wage.
D)   equilibrium employment would immediately fall in response to the price effect despite a constant real wage.
E)   equilibrium would remain at the original level because no change in the real wage would occur.

Question 11

An increase in the saving rate, in Solow's neoclassical growth model,

Accepted Answer

A)   increases the rate of growth of output over the long run.
B)   decreases the rate of growth of output over the long run.
C)   increases the rate of growth of output temporarily.
D)   decreases the rate of growth of output temporarily.
E)   none of the above.

Question 12

When determining potential GDP, economists define the workforce as fully employed when

Accepted Answer

A)   each worker who wants to work has a job.
B)   each worker who has a job is working up to his or her full potential.
C)   the real wage is such that the demand and supply of labor are equal.
D)   all of the above.
E)   none of the above.

Question 13

Suppose that real GDP in a country is 10 trillion in the year 2005. With a growth rate of 2.5 perc e n t , wh at will be the per- c apita GDP in the year 2010?

Accepted Answer

A)   10.3 trillion
B)   11.3 trillion
C)   11.5 trillion
D)   12.5 trillion
E)   Not enough information to calculate

Question 14

A production function in macroeconomic theory provides information about

Accepted Answer

A)   how much capital is required to maintain the natural rate of unemployment over the short term.
B)   how much capital is required to maintain the natural rate of unemployment over the long term.
C)   how much output can be produced from various combinations of capital and labor regardless of the feasibility of those combinations.
D)   how much output can be produced from various feasible combinations of capital and labor near full capacity and potential employment.
E)   none of the above.

Question 15

Each of the following statements is true except

Accepted Answer

A)   balanced growth occurs when the labor force, capital stock, and real output all grow at the same rate.
B)   along a balanced growth path, the ratio of capital to output equals the ratio of the saving rate to the labor force growth rate.
C)   Solow showed that the balanced growth path is stable: If the economy is off a balanced growth path, it will naturally tend to return to that path.
D)   A higher saving rate raises GDP, in Solow's analysis of the long-run growth model, and permanently raises the growth rate.
E)   A higher population growth rate lowers GDP per capita, in the Solow growth model, but does not permanently lower the growth rate.

Question 16

According to the rule of 70, a country growing at 3 percent per year doubles its GDP per capita approximately every

Accepted Answer

A)   17 years.
B)   20 years.
C)   23 years.
D)   25 years.
E)   30 years.

Question 17

All of the following were components of the Malthusian growth model except

Accepted Answer

A)   land.
B)   diminishing marginal product of labor.
C)   capital.
D)   technology.
E)   constant returns to scale.

Question 18

According to the Malthusian growth model, improvements in technology

Accepted Answer

A)   allow an improvement in living standards.
B)   cause fertility rates to increase.
C)   provide no escape from Malthusian stagnation.
D)   all of the above.
E)   only a and b.

Question 19

The modern growth regime, beginning in the 1920s, is distinguished by its

Accepted Answer

A)   technological progress.
B)   increased technological progress.
C)   fertility reductions.
D)   increased accumulation of capital stock.
E)   all of the above.

Question 20

The tendency to move to the subsistence line derives from

Accepted Answer

A)   the combination of fertility and mortality.
B)   population increases when output is above the subsistence line.
C)   decreasing employment when output is below the subsistence line.
D)   all of the above.
E)   only b and c.

Exam 4: Long-Run Economic Growth

Suppose that a labor market were initially in equilibrium and wages and prices were perfectly flexible. If nominal wages and prices were to increase by 10 percent in response to a change in the money supply, then

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The Malthusian model of economic growth did well at explaining the experience of all of the following time periods except

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When determining potential GDP, economists define the workforce as fully employed when

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Empirical evidence about the labor supply curve suggests

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An increase in the saving rate, in Solow's neoclassical growth model,

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In making employment decisions, profits are maximized

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Malthusian stagnation occurs

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According to the Malthusian growth model, improvements in technology

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A production function in macroeconomic theory provides information about

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A higher real wage rate

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Each of the following statements is true except

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The determinants of aggregate supply include

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According to the rule of 70, a country growing at 3 percent per year doubles its GDP per capita approximately every

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An important conclusion from Solow's work on long-run growth is that

Correct AnswerverifiedShow Answer

In the Solow growth model, the engine of economic growth is

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Suppose that real GDP in a country is 10 trillion in the year 2005. With a growth rate of 2.5 perc e n t , wh at will be the per- c apita GDP in the year 2010?

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The tendency to move to the subsistence line derives from

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Each of the following statements is true except

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The modern growth regime, beginning in the 1920s, is distinguished by its

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All of the following were components of the Malthusian growth model except

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