Assume that an economy experiences both positive population growth and
technological progress. Once the economy has achieved balanced growth, we know that
the capital per worker ratio (K/N) is
A) constant.
B) growing at a rate of gA – gN.
C) growing at a rate of gN.
D) growing at a rate of gA.
E) growing at the same rate as Y/N.
Suppose there are two countries that are identical with the following exception. The
saving rate in country A is greater than the saving rate in country B. Given this
information, we know that in the long run
A) output per capita will be greater in B than in A.
B) output per capita will be greater in A than in B.
C) economic growth will be higher in A than in B.
D) more information is needed to answer this question.
The quantity of imports will increase when there is
A) a reduction in the real exchange rate.
B) an increase in domestic output.
C) an increase in foreign output.
D) all of the above
E) none of the above
At the current interest rate, suppose the supply of money is less than the demand for
money. Given this information, we know that
A) the price of bonds will tend increase.
B) the price of bonds will tend to fall.
C) production equals demand.
D) the goods market is also in equilibrium.
E) the supply of bonds also equals the demand for bonds.
The natural level of output is the level of output that occurs when
A) the goods market and financial markets are in equilibrium.
B) the economy is operating at the unemployment rate consistent with both the
wage-setting and price-setting equations.
C) the markup (m) is zero.
D) the unemployment rate is zero.
E) there are no discouraged workers in the economy.
The steeper is the IS curve,
A) the more effective is monetary policy.
B) the less effective is monetary policy.
C) the effectiveness of monetary policy does not change.
D) a given change in the money supply will have a greater effect on output.
Which of the following was not part of the neoclassical synthesis?
A) the IS curve
B) the LM curve
C) the Phillips curve
D) aggregate demand
E) rational expectations
The change in the unemployment rate is approximately equal to
A) the negative of the growth rate of output.
B) the negative policy rate.
C) the negative inflation rate.
D) the negative of the growth rate of money supply.
The neoclassical synthesis had emerged by what decade?
A) 1930s
B) 1940s
C) 1950s
D) 1960s
E) 1990s
Based on the information above, the unemployment rate is
A) 4%.
B) 6.6%.
C) 9.1%.
D) 10%.
E) 11.1%.
For this question, assume that the domestic interest rate is 8% and that the foreign
interest rate is 6%. And finally, assume that the domestic currency is expected to
depreciate by 3% during the coming year. Given this information, we know that
A) individuals will only hold domestic bonds.
B) individuals will only hold foreign bonds.
C) individuals will be indifferent about holding domestic or foreign bonds.
D) the interest parity condition holds.
Assume that the current one-year rate is 3% and the two-year rate is 5%. Given this
information, the one-year rate expected one year from now is
A) 5%.
B) 6%.
C) 7%.
D) 9%.
E) 12%.
An increase in the real exchange rate will cause
A) an increase in net exports.
B) an increase in the quantity of imports.
C) an increase in output.
D) a decrease in government spending.
E) all of the above
Which of the following represents the wage setting relation when changes in labor
productivity are allowed to occur?
A) W = PeF(u,z)
B) W = P(1 + m)
C) W = PeF(u,z)/A
D) W = AP/(1 + m)
E) none of the above
Suppose a firm has 100 machines and 100 shares outstanding. The price per share is $2,
and the purchase price of a machine is $1. So Tobin’s q is equal to
A) 2.
B) 1.
C) 0.5.
D) 1.5.
Assume individuals consider only the medium run effects of changes in future macro
variables when forming expectations of future output and future interest rates. Suppose
individuals expect the central bank to pursue a monetary expansion in the future. Given
this information, we know with certainty that
A) current output and the current interest rate will both increase.
B) current output will decrease.
C) the current interest rate will decrease.
D) the current output effects are ambiguous.
E) current output will not change.
Suppose bank A has assets of 100, liabilities of 60, and capital of 40. Its capital ratio is
A) 40%.
B) 66%.
C) 25%.
D) 60%.
An increase in the marginal propensity to import will cause
A) the ZZ line to become flatter and a given change in government spending (G) to
have a larger effect on domestic output.
B) the ZZ line to become flatter and a given change in government spending (G) to
have a smaller effect on domestic output.
C) the ZZ line to become steeper and a given change in government spending (G) to
have a larger effect on domestic output.
D) the ZZ line to become steeper and a given change in government spending (G) to
have a smaller effect on domestic output.
An upward-sloping yield curve suggests that financial market participants expect
short-term interest rates will
A) rise in the future.
B) fall in the future.
C) be unstable in the future.
D) not change in the future.
E) be equal to zero in the future.
Monetary policy has medium-run effects on which of the following?
A) the level of output but not its composition
B) both the level and composition of output
C) only the price level
D) the level of output AND the price level
E) none of the above
For this question, assume that the Marshall-Lerner condition does not hold. An increase
in the real exchange rate will tend to cause which of the following to occur?
A) a reduction in NX and a reduction in Y
B) a reduction in NX and an increase in Y
C) an increase in NX and a reduction in Y
D) an increase in NX and an increase in Y
Which of the following triggered the U.S. recession of 2001?
A) decline in investment demand
B) decline in consumption demand
C) increase in budget deficit
D) increase in trade deficit
Analysis of U.S. growth rates shows that growth rate of output tends to be highest in
which year of a presidential administration?
A) the first
B) the second
C) the third
D) the fourth
Which of the following is corrrect?
A) Governments can not achieve the level of output they want.
B) Changing government spending or taxes is easy.
C) Investment will remain constant.
D) Expectations do not matter for government to change spending or taxes.
Assume individuals consider only the short-run effects of changes in future macro
variables when forming expectations of future output and future interest rates. A
permanent increase in the money supply, with no other policy change implemented or
anticipated, will most likely cause
A) an increase in the current interest rate.
B) an increase in future output and an increase in the future interest rate.
C) an unknown effect on the current interest rate.
D) all of the above
E) none of the above
The present discounted value of a future payment becomes smaller when
A) the nominal interest rate decreases.
B) the payment is made sooner rather than later.
C) the payment itself decreases.
D) all of the above
E) none of the above
A nominal appreciation of the Japanese yen (against all currencies) indicates that
A) the yen price of the U.S. dollar has increased.
B) the yen price of the U.K. pound has increased.
C) the number of units of foreign currency that one can obtain with one yen has
increased.
D) all of the above
Suppose fiscal policy makers implement a policy to reduce the size of a budget deficit.
Based on the IS-LM model, we know with certainty that the following will occur as a
result of this fiscal policy action.
A) Investment spending will decrease.
B) Investment spending will increase.
C) There will be no change in investment spending.
D) Investment spending may increase, decrease, or not change.
E) none of the above
Which of the following are reported as liabilities on a bank’s balance sheet?
A) reserves
B) checkable deposits
C) consumer loans
D) deposits with other banks
The hostage taking example was developed by
A) John Nash.
B) Kydland and Prescott.
C) John Harsanyi.
D) Reinhard Selten.
Which of the following has occurred for the United States since 1960?
A) The ratio of exports to GDP (X/Y) and the ratio of imports to GDP (IM/Y) have both
decreased.
B) X/Y has increased while IM/Y has decreased.
C) X/Y has decreased and IM/Y has increased.
D) X/Y and IM/Y have stayed relatively constant.
E) none of the above
Assume an economy experiences an increase in productivity that occurs as a result of a
more widespread implementation of a major technological breakthrough. Given this
information, we would expect which of the following to occur?
A) aggregate demand would not change
B) aggregate demand would shift to the right
C) aggregate demand would shift to the left
D) both the aggregate demand and aggregate supply curves would shift to the left
Suppose investment spending is not very sensitive to the interest rate. Given this
information, we know that
A) the IS curve should be relatively flat.
B) the IS curve should be relatively steep.
C) the LM curve should be relatively flat.
D) the LM curve should be relatively steep.
E) neither the IS nor the LM curve will be affected.