Macroeconomics Question Paper

Question 1 . Using a market-clearing model to analyze the demand for haircuts is ______ because the price of a haircut usually changes ______. Answer Selected Answer: unrealistic; infrequently Correct Answer: unrealistic; infrequently . Question 2 . Which of the following is not the correct combination for a U. S. president and an important economic issue of his administration? Answer Selected Answer: President Clinton, inflation Correct Answer: President Clinton, inflation . Question 3 . Macroeconomic models are used to explain how ______ variables influence ______ variables.Answer Selected Answer: exogenous; endogenous Correct Answer: exogenous; endogenous . Question 4 . The total income of everyone in the economy adjusted for the level of prices is called: Answer Selected Answer: real GDP. Correct Answer: real GDP. . Question 5 . A period of falling prices is called: Answer Selected Answer: a recession. Correct Answer: deflation. . Question 6 . The inflation rate is a measure of h ow fast: Answer Selected Answer: prices in the economy are rising. Correct Answer: prices in the economy are rising. . Question 7 . Exogenous variables are:Answer Selected Answer: fixed at the moment they enter the model. Correct Answer: fixed at the moment they enter the model. . Question 8 . In the relationship expressed in functional form, Y = G(K, L), Y stands for real GDP, K stands for the amount of capital in the economy, and L stands for the amount of labor in the economy. In this case G( ): Answer Selected Answer: is the function telling how the variables in the parenthesis determine real GDP. Correct Answer: is the function telling how the variables in the parenthesis determine real GDP. . Question 9 .The inflation rate in the United States averaged about: Answer Selected Answer: zero between 1900 and 1950. Correct Answer: zero between 1900 and 1950. . Question 10 . Endogenous variables are: Answer Selected Answer: determined within the model. Correct Answer: determined wit hin the model. . Question 11 . The best measure of the economic satisfaction of the members of a society is: Answer Selected Answer: real GDP. Correct Answer: real GDP. . Question 12 . In 2010 in the United States, the approximate percentage of GDP that was spent on consumption was: Answer Selected Answer: 7 percent. Correct Answer: 67 percent. . Question 13 . The national income accounts identity, for an open economy, is: Answer Selected Answer: Y = C + I + G + NX. Correct Answer: Y = C + I + G + NX. . Question 14 . If nominal GDP grew by 5 percent and real GDP grew by 3 percent, then the GDP deflator grew by approximately ______ percent. Answer Selected Answer: 2 Correct Answer: 2 . Question 15 . If the number employed increases while the number unemployed does not change, the unemployment rate: Answer Selected Answer: will not change. Correct Answer: will decrease. . Question 16 .As a percentage of GNP, depreciation (also called the consumption of fixed capital) amounts to approx imately: Answer Selected Answer: 10 percent. Correct Answer: 10 percent. . Question 17 . Prices of items included in the CPI are: Answer Selected Answer: weighted according to quantity of the item purchased by the typical household. Correct Answer: weighted according to quantity of the item purchased by the typical household. . Question 18 . Real GDP means the value of goods and services is measured in ______ prices. Answer Selected Answer: constant Correct Answer: constant . Question 19 .If nominal GDP increased by 5 percent and the GDP deflator increased by 3 percent, then real GDP ______ by ______ percent. Answer Selected Answer: increased; 2 Correct Answer: increased; 2 . Question 20 . Nominal GDP is measured in _____ dollars _____ time. Answer Selected Answer: current; per unit of Correct Answer: current; per unit of . Question 21 . Exhibit: Saving, Investment, and the Interest Rate 2 Reference: Ref 3-2 (Exhibit: Saving, Investment, and the Interest Rate 2) The economy begins i n equilibrium at Point E, representing the real interest rate, r1, at which saving, S1, equals desired investment, I1.What will be the new equilibrium combination of real interest rate, saving, and investment if there is a tax law change that makes investment projects less profitable and decreases the demand for investment goods (but does not change the amount of taxes collected in the economy)? Answer Selected Answer: Point C Correct Answer: Point A . Question 22 . National saving refers to: Answer Selected Answer: income minus consumption minus government spending. Correct Answer: income minus consumption minus government spending. . Question 23 .According to the neoclassical theory of distribution, if firms are competitive and subject to constant returns to scale, total income in the economy is distributed: Answer Selected Answer: between the labor and capital used in production, according to their marginal productivities. Correct Answer: between the labor and capital used in pro duction, according to their marginal productivities. . Question 24 . According to the model developed in Chapter 3, when government spending increases but taxes are not raised, interest rates: Answer Selected Answer: increase. Correct Answer: increase. . Question 25 .When there is a fixed supply of loanable funds, an increase in investment demand results in a(n): Answer Selected Answer: higher interest rate. Correct Answer: higher interest rate. . Question 26 . Assume that the production function is Cobb–Douglas with parameter ? = 0. 3. In the neoclassical model, if the labor force increases by 10 percent, then output: Answer Selected Answer: increases by about 7 percent. Correct Answer: increases by about 7 percent. . Question 27 . In the classical model with fixed income, if households want to save more than firms want to invest, then: Answer Selected Answer: he interest rate falls. Correct Answer: the interest rate falls. . Question 28 . Assume that equilibrium GDP (Y) is 5,000. Consumption is given by the equation C = 500 + 0. 6Y. Investment (I) is given by the equation I = 2,000 – 100r, where r is the real interest rate in percent. No government exists. In this case, the equilibrium real interest rate is: Answer Selected Answer: 5 percent. Correct Answer: 5 percent. . Question 29 . In the classical model with fixed income, if the demand for goods and services is greater than the supply, the interest rate will: Answer Selected Answer: increase.Correct Answer: increase. . Question 30 . Exhibit: Saving, Investment, and the Interest Rate 1 Reference: Ref 3-1 (Exhibit: Saving, Investment, and the Interest Rate 1) The economy begins in equilibrium at Point E, representing the real interest rate, r1, at which saving, S1, equals desired investment, I1. What will be the new equilibrium combination of real interest rate, saving, and investment if the government raises taxes, holding other factors constant? Answer Selected Answer: Point B Correct Answe r: Point B . Question 31 . Assume that the consumption function is given by C = 200 + 0. (Y – T), the tax function is given by T = 100 + t1Y, and Y = 50K0. 5L0. 5, where K = 100 and L = 100. If t1 increases from 0. 2 to 0. 25, then consumption decreases by: Answer Selected Answer: 175. Correct Answer: 175. . Question 32 . Assume that the investment function is given by I = 1,000 – 30r, where r is the real rate of interest (in percent). Assume further that the nominal rate of interest is 10 percent and the inflation rate is 2 percent. According to the investment function, investment will be: Answer Selected Answer: 760. Correct Answer: 760. .Saturday, November 10, 2012 12:07:36 PM EST .