Question 1

For the economy as a whole, investment represents a tradeoff between

Accepted Answer

A)  government spending and issuing debt.
B)  interest rates and taxes.
C)  present and future consumption.
D)  savings and investment.
E)  real interest rates and GDP.

Question 2

What are three factors that determine current labour supply?

Accepted Answer

Labour supply is the amount of labour th...

Question 3

In response to a temporary increase in government spending, the representative consumer consumes

Accepted Answer

A)  more and takes less leisure.
B)  more and takes more leisure.
C)  the same amount as leisure.
D)  less and takes more leisure.
E)  less and takes less leisure.

Question 4

An increase in G or G' shifts the output supply curve to the right because

Accepted Answer

A)  lifetime wealth decreases, a negative income effect that shifts labour supply to the right.
B)  the decrease in the real interest rate shifts output supply.
C)  lifetime wealth decreases, a negative income effect that shifts labour supply to the left.
D)  lifetime wealth increases, a positive income effect that shifts labour supply to the right.
E)  the increase in the real interest rate shifts output supply.

Question 5

When drawn against the current real wage, the labour demand curve is

Accepted Answer

A)  upward sloping because the marginal product of labour rises with the quantity of labour employed.
B)  downward sloping because the marginal product of labour declines with the quantity of labour employed.
C)  upward sloping because the marginal product of labour declines with the quantity of labour employed.
D)  downward sloping because the marginal product of labour is constant.
E)  downward sloping because the marginal product of labour rises with the quantity of labour employed.

Question 6

Investment will be more variable if the real interest rate is

Accepted Answer

A)  more variable and future total factor productivity is more variable.
B)  less variable and future total factor productivity is less variable.
C)  more variable and future total factor productivity is less variable.
D)  less variable and future total factor productivity is more variable.
E)  constant with total factor productivity.

Question 7

When there is a temporary increase in total factor productivity

Accepted Answer

A)  labour demand decreases and output demand increases.
B)  labour demand increases and output supply increases.
C)  labour demand decreases and output supply decreases.
D)  labour demand increases and output supply decreases.
E)  labour demand increases and output demand increases.

Question 8

An increase in total factor productivity causes

Accepted Answer

A)  real interest rates to rise.
B)  the production function to shift up.
C)  the output supply curve to shift left.
D)  real wages to rise.
E)  labour supply to fall.

Question 9

The partial expenditure multiplier

Accepted Answer

A)  equals the MPC.
B)  is the ratio of total increase in demand for goods to the increase in government spending.
C)  equals (1 - MP
C)  .
D)  is the total increase in government spending.
E)  is the total increase in the demand for goods.

Question 10

When drawn against current income, the slope of the  Cd(r) +Id(r) +G curve is equal to the C d ( r )  + I d ( r )  + G 	ext { curve is equal to the }Cd(r) +Id(r) +G curve is equal to the   marginal

Accepted Answer

A)  product of labour.
B)  propensity to save.
C)  benefit from investment.
D)  product of capital.
E)  propensity to consume.

Question 11

When drawn against the real interest rate, the optimal investment schedule shifts to the right if

Accepted Answer

A)  future total factor productivity z' decreases.
B)  future total factor productivity z' remains constant.
C)  current total factor productivity z decreases.
D)  future total factor productivity z' increases.
E)  current total factor productivity z increases.

Question 12

The intertemporal substitution of leisure effect is used to justify the assumption that current labour supply increases when the

Accepted Answer

A)  real interest rate decreases.
B)  current real wage increases.
C)  current real wage decreases.
D)  real interest rate increases.
E)  current real wage and real investment rate decreases.

Question 13

A temporary increase in government spending that leads to only a small decline in lifetime wealth likely shifts the output demand curve to the

Accepted Answer

A)  right by less than the rightward shift in output supply.
B)  left by less than the leftward shift in output supply.
C)  right by more than the rightward shift in output supply.
D)  right by the same amount as the rightward shift in output supply.
E)  left by more than the leftward shift in output supply.

Question 14

A rational bubble is

Accepted Answer

A)  when everyone behaves optimally and an asset price departs from its fundamental value.
B)  when asset prices are entirely explained by fundamental factors.
C)  never observed.
D)  always temporary.
E)  how Robert Shiller explains asset market behaviour.

Question 15

An increase in the real interest rate

Accepted Answer

A)  shifts the current labour supply curve to the left.
B)  reduces savings.
C)  reduces the real wage.
D)  reduces the labour supply.
E)  shifts the current labour supply curve to the right.

Question 16

A firm that is a lender finances its lending

Accepted Answer

A)  through credit market imperfections.
B)  with a default premium.
C)  with the spread between borrowing and lending rates.
D)  in the bond market.
E)  with retained earnings.

Question 17

Investment will be more variable if

Accepted Answer

A)  there is variability in z'' that causes movements along the investment schedule over time.
B)  there is variability in r that shifts the investment schedule over time.
C)  stock prices remain sufficiently volatile.
D)  there is variability in z'' that shifts the investment schedule over time.
E)  the real interest rate remains below the return on stocks.

Question 18

The slope of the demand for consumption goods is

Accepted Answer

A)  equal to 1.
B)  greater than 1.
C)  equal to the wage rate.
D)  the MPC.
E)  the MRS.

Question 19

The total government expenditure multiplier

Accepted Answer

A)   is the ratio of total increase in demand for goods to the increase in government spending.
B)   equals the MPC.
C)   equals  11−MPC\frac { 1 } { 1 - \mathrm { MPC } }1−MPC1​ .
D)   is the total increase in the demand for goods.
E)   is the ratio of total increase in real output to the increase in government spending.

Question 20

When drawn against the real interest rate, the output supply curve unambiguously shifts to the right if either or both of the following occur.

Accepted Answer

A)  an increase in current government spending and a decrease in future government spending
B)  a decrease in current government spending and an increase in the real interest rate
C)  a decrease in current government spending and a decrease in future government spending
D)  an increase in current government spending and an increase in future government spending
E)  a decrease in current government spending and an increase in future government spending

Exam 11: A Real Intertemporal Model With Investment

What are three factors that determine current labour supply?

Correct AnswerverifiedLabour supply is the amount of labour th...View AnswerShow Answer

An increase in total factor productivity causes

Correct AnswerverifiedShow Answer

An increase in G or G' shifts the output supply curve to the right because

Correct AnswerverifiedShow Answer

When there is a temporary increase in total factor productivity

Correct AnswerverifiedShow Answer

In response to a temporary increase in government spending, the representative consumer consumes

Correct AnswerverifiedShow Answer

When drawn against current income, the slope of the Cd(r) +Id(r) +G curve is equal to the C d ( r ) + I d ( r ) + G \text { curve is equal to the }Cd(r) +Id(r) +G curve is equal to the marginal

Correct AnswerverifiedShow Answer

A rational bubble is

Correct AnswerverifiedShow Answer

The partial expenditure multiplier

Correct AnswerverifiedShow Answer

When drawn against the current real wage, the labour demand curve is

Correct AnswerverifiedShow Answer

An increase in the real interest rate

Correct AnswerverifiedShow Answer

Investment will be more variable if the real interest rate is

Correct AnswerverifiedShow Answer

For the economy as a whole, investment represents a tradeoff between

Correct AnswerverifiedShow Answer

When drawn against the real interest rate, the optimal investment schedule shifts to the right if

Correct AnswerverifiedShow Answer

A firm that is a lender finances its lending

Correct AnswerverifiedShow Answer

Investment will be more variable if

Correct AnswerverifiedShow Answer

When drawn against the real interest rate, the output supply curve unambiguously shifts to the right if either or both of the following occur.

Correct AnswerverifiedShow Answer

The slope of the demand for consumption goods is

Correct AnswerverifiedShow Answer

The total government expenditure multiplier

Correct AnswerverifiedShow Answer

A temporary increase in government spending that leads to only a small decline in lifetime wealth likely shifts the output demand curve to the

Correct AnswerverifiedShow Answer

The intertemporal substitution of leisure effect is used to justify the assumption that current labour supply increases when the

Correct AnswerverifiedShow Answer

Correct Answer
verified
Labour supply is the amount of labour th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When drawn against current income, the slope of the $C d ( r ) + I d ( r ) + G \text { curve is equal to the }$ marginal

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified