30 MCQ If total output grows at 4 percent per year while labor and capital grow at

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Question 1 of 30 3.3334 Points
If total output grows at 4 percent per year while labor and capital grow at 1.5 percent and 2.1 percent pre year, respectively, then:

A. technology grew by 0.4 percent per year.
B. technology declined by 0.4 percent per year.
C. there was no technological progress.
D. technology grew by 3.6 percent per year.
Question 2 of 30 3.3334 Points
In a graph with output on the x-axis and expenditures on the y-axis, a 45-degree line starting from the origin represents the locus of:

A. equilibrium output levels.
B. negative inventory changes.
C. positive inventory changes.
D. autonomous consumption levels.
Question 3 of 30 3.3334 Points
In a closed economy without a government, planned expenditures equal:

A. I+G.
B. NX + I.
C. C + I + G.
D. C + I.
Question 4 of 30 3.3334 Points
The government spending multiplier is positive because ________ in government spending cause ________ in GDP.

A. decreases; decreases
B. decreases; increases
C. increases; decreases
D. increases; no change
Question 5 of 30 3.3334 Points
Assuming a constant level of capital in the economy, a rapid increase in population is likely to:

A. raise both real GDP and real GDP per capita.
B. lower both real GDP and real GDP per capita.
C. raise real GDP, but lower real GDP per capita.
D. lower real GDP, but increase real GDP per capita.
Question 6 of 30 3.3334 Points
In a graph with output on the x-axis and expenditures on the y-axis, a 45-degree line starting from the origin represents the locus of points where:

A. output is less than expenditures.
B. output = expenditures.
C. output is greater than expenditures.
D. output + expenditures = zero.
Question 7 of 30 3.3334 Points
The level of consumption that does not depend on income is called:

A. independent income.
B. autonomous consumption.
C. the consumption function.
D. the marginal propensity to consume.
Question 8 of 30 3.3334 Points
If the economy experiences an increase in the amount of capital stock per worker, then we say that the economy is experiencing:

A. capital deepening.
B. technological progress.
C. capital depreciation.
D. capital widening.
Question 9 of 30 3.3334 Points
If the marginal propensity to consume is 0.75 and marginal propensity to import is 0.15, then the multiplier in an open economy is:

A. 10.
B. 8.3.
C. 2.5.
D. 4.
Question 10 of 30 3.3334 Points
In the Solow Model, an increase in the depreciation rate will result in:

A. a lower output and a higher level of capital.
B. a lower capital and a higher level of output.
C. a higher level of capital and output.
D. a lower level of capital and output.
Question 11 of 30 3.3334 Points
If the marginal propensity to save is 0.15, the marginal propensity to consume:

A. is 0.85.
B. is 1.15.
C. is 0.15.
D. cannot be determined by the given information
Question 12 of 30 3.3334 Points
If the MPC is 0.75, then the spending multiplier is:

A. -3.
B. 4.
C. 3.
D. 0.75.
Question 13 of 30 3.3334 Points
A tax ________ income.

A. increase decreases planned
B. cut increases disposable
C. increase raises national
D. cut decreases disposable
Question 14 of 30 3.3334 Points
When we graph the 45 degree line, what are the labels on the x-axis and the y-axis?

A. output on the x-axis and income on the y-axis
B. output on the x-axis and expenditures on the y-axis
C. expenditures on the x-axis and output on the y-axis
D. income on the x-axis and interest rates on the y-axis
Question 15 of 30 3.3334 Points
If the capital stock remains ________ while labor ________, the new labor will likely be ________ productive than the old labor because of diminishing returns.

A. variable; decreases; less
B. fixed; decreases; less
C. fixed; decreases; more
D. fixed; increases; more
Question 16 of 30 3.3334 Points
Which of the following would cause an increase in GDP?

A. a higher discount rate
B. an open market sale
C. an open market purchase
D. a higher required reserve ratio
Question 17 of 30 3.3334 Points
Which of the following was the Fed’s primary function when it first was created in 1913?

A. provide a system of check collection and clearing
B. conduct monetary policy
C. to act as a lender of last resort
D. regulate banks
Question 18 of 30 3.3334 Points
An open-market purchase of government bonds by the Fed results in ________ in bank reserves and ________ in the supply of money.

A. a decrease; an increase
B. an increase; a decrease
C. a decrease; a decrease
D. an increase; an increase
Question 19 of 30 3.3334 Points
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Which of the following sequence of events follows an expansionary monetary policy?

A. ? interest rate ? ? investment ? ? total demand ? ? real GDP
B. ? interest rate ? ? investment ? ? total demand ? ? real GDP
C. ? interest rate ? ? investment ? ? total demand ? ? real GDP
D. ? interest rate ? ? investment ? ? total demand ? ? real GDP
Question 20 of 30 3.3334 Points
The Fed indirectly controls long-term interest rates by:

A. influencing market expectations about future short-term interest rates.
B. determining the interest rate offered by Treasury Bills.
C. setting the Federal Funds rate in advance.
D. reducing outside lags and increasing inside lags.
Question 21 of 30 3.3334 Points
Mary wants to trade piano lessons for ice-skating lessons. Sarah wants to trade ice-skating lessons for piano lessons. Mary and Sarah have:

A. a double coincidence of wants.
B. the basis for a liquidity exchange.
C. a double incidence of demand.
D. the basis for a double fiat exchange.
Question 22 of 30 3.3334 Points
If the quantity of money demanded is greater than the quantity of money supplied, then the interest rate will:

A. remain constant.
B. equal zero.
C. fall.
D. rise.
Question 23 of 30 3.3334 Points
The central bank of the United States is known as the:

A. Federal Reserve System.
B. Department of the Treasury.
C. Federal Savings and Loan Insurance Corporation.
D. Federal Deposit Insurance Corporation.
Question 24 of 30 3.3334 Points
The amount of time it takes a given policy action to bring about a change in the state of the economy is called the:

A. external lag.
B. stabilization lag.
C. outside lag.
D. inside lag.
Question 25 of 30 3.3334 Points
Which of the following represents an action by the Federal Reserve that is designed to increase the money supply?

A. a decrease in federal spending
B. an increase in the required reserve ratio
C. an increase in the discount rate
D. buying government bonds in the open market
Question 26 of 30 3.3334 Points
Though a powerful tool, the reserve requirement is seldomly used by the Fed to control the money supply because:

A. it causes significant disruptions in the banking system.
B. it takes a long time for the policy to be implemented.
C. using the reserve requirement can be inflationary.
D. it is very difficult for the Fed to monitor the reserve requirement.
Question 27 of 30 3.3334 Points
In terms of the demand for money, the interest rate is:

A. the rate at which current consumption can be exchanged for future consumption.
B. the opportunity cost of holding money.
C. the return on money that is saved for the future.
D. the price of borrowing money.
Question 28 of 30 3.3334 Points
In the money market, the demand and supply of money determine the equilibrium:

A. nominal interest rate.
B. mortgage interest rate.
C. real interest rate.
D. inflation rate.
Question 29 of 30 3.3334 Points
The outside lag associated with economic policy represents:

A. the time that is necessary to recognize and implement policy.
B. the time needed for the Federal Reserve Board to meet.
C. the time it takes for the policy makers to admit that a policy is not working.
D. the time that it takes for a newly implemented policy to take effect.
Question 30 of 30 3.3334 Points
Why would an individual choose to hold money for speculative purposes when the nominal return to holding money is zero?

A. because in the short run, stocks and bonds can have a negative rate of return
B. because in the long run, stocks and bonds get negative rates of return
C. because zero is the best any asset can get
D. because all economies experience deflation regularly, so the real return is still positive

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