Sample Multiple Choice Questions
(Randomly Chosen)
1.
Examination of recent data for many countries shows that countries with high saving rates generally have high levels of output per person because:
A)high saving rates mean permanently higher growth rates of output.
B)high saving rates lead to high levels of capital per worker.
C)countries with high levels of output per worker can afford to save a lot.
D)countries with large amounts of natural resources have both high output levels and high saving rates.
B✓
2.
In the Solow growth model, the assumption of constant returns to scale means that:
A)all economies have the same amount of capital per worker.
B)the steady-state level of output is constant regardless of the number of workers.
C)the saving rate equals the constant rate of depreciation.
D)the number of workers in an economy does not affect the relationship between output per worker and capital per worker.
D✓
3.
In the Solow growth model , the demand for goods equals investment:
A)minus depreciation.
B)plus saving.
C)plus consumption.
D)plus depreciation.
3.
In the Solow growth model , the demand for goods equals investment:
A)minus depreciation.
B)plus saving.
C)plus consumption.
D)plus depreciation.
C✓
4.
The Solow growth model describes:
A)how output is determined at a point in time.
B)how output is determined with fixed amounts of capital and labor.
C)how saving, population growth, and technological change affect output over time.
D)the static allocation, production, and distribution of the economy's output.
4.
The Solow growth model describes:
A)how output is determined at a point in time.
B)how output is determined with fixed amounts of capital and labor.
C)how saving, population growth, and technological change affect output over time.
D)the static allocation, production, and distribution of the economy's output.
C✓
5.
In an economy with no population growth and no technological change, steady-state consumption is at its greatest possible level when the marginal product of:
A)labor equals the marginal product of capital.
B)labor equals the depreciation rate.
C)capital equals the depreciation rate.
D)capital equals zero.
5.
In an economy with no population growth and no technological change, steady-state consumption is at its greatest possible level when the marginal product of:
A)labor equals the marginal product of capital.
B)labor equals the depreciation rate.
C)capital equals the depreciation rate.
D)capital equals zero.
C✓
6.
When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the line denotes:
A)output per worker.
B)output per unit of capital.
C)the marginal product of labor.
D)the marginal product of capital.
6.
When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the line denotes:
A)output per worker.
B)output per unit of capital.
C)the marginal product of labor.
D)the marginal product of capital.
D✓
7.
If the production function exhibits decreasing returns to scale in the steady state, an increase in the rate of population would lead to:
A)growth in total output and growth in output per worker.
B)growth in total output but no growth in output per worker.
C)growth in total output but a decrease in output per worker.
D)no growth in total output or in output per worker.
7.
If the production function exhibits decreasing returns to scale in the steady state, an increase in the rate of population would lead to:
A)growth in total output and growth in output per worker.
B)growth in total output but no growth in output per worker.
C)growth in total output but a decrease in output per worker.
D)no growth in total output or in output per worker.
C✓
8.
When capital increases by DK units, output increases by:
A)DL units.
B)MPL x DL units.
C)DK units.
D)MPK x DK units.
8.
When capital increases by DK units, output increases by:
A)DL units.
B)MPL x DL units.
C)DK units.
D)MPK x DK units.
D✓
9.
In the Solow growth model, capital exhibits ______ returns. In a basic endogenous growth model, capital exhibits ______ returns.
A)constant; diminishing
B)constant; constant
C)diminishing; constant
D)diminishing; diminishing
9.
In the Solow growth model, capital exhibits ______ returns. In a basic endogenous growth model, capital exhibits ______ returns.
A)constant; diminishing
B)constant; constant
C)diminishing; constant
D)diminishing; diminishing
C✓
10.
In a steady state with population growth and technological progress:
A)the capital share of income increases.
B)the labor share of income increases.
C)in some cases the capital share of income increases and sometimes the labor share increases.
D)the capital and labor shares of income are constant.
10.
In a steady state with population growth and technological progress:
A)the capital share of income increases.
B)the labor share of income increases.
C)in some cases the capital share of income increases and sometimes the labor share increases.
D)the capital and labor shares of income are constant.
D✓
11.
In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state:
A)level of income.
B)growth rate of income.
C)level of income and growth rate of income.
D)level of income, growth rate of income, and growth rate of the stock of knowledge.
11.
In the two-sector endogenous growth model, the fraction of labor in universities (u) affects the steady-state:
A)level of income.
B)growth rate of income.
C)level of income and growth rate of income.
D)level of income, growth rate of income, and growth rate of the stock of knowledge.
D✓
12.
In the United States' recent economic history:
A)increasing capital formation has been a high priority of economic policy.
B)economic policy has not been concerned with increasing capital formation.
C)economic policy has been more concerned with increasing labor skills than with increasing capital formation.
D)economic policymakers have felt that too much attention has been paid to increasing capital formation.
12.
In the United States' recent economic history:
A)increasing capital formation has been a high priority of economic policy.
B)economic policy has not been concerned with increasing capital formation.
C)economic policy has been more concerned with increasing labor skills than with increasing capital formation.
D)economic policymakers have felt that too much attention has been paid to increasing capital formation.
A✓
13.
According to the Solow model, persistently rising living standards can only be explained by:
A)population growth.
B)capital accumulation.
C)saving rates.
D)technological progress.
13.
According to the Solow model, persistently rising living standards can only be explained by:
A)population growth.
B)capital accumulation.
C)saving rates.
D)technological progress.
D✓
14.
14.
A 5% reduction in the money supply will, according to most economists, reduce prices 5%:
A)in both the short and long runs.
B)in neither the short nor long run.
C)in the short run but lead to unemployment in the long run.
D)in the long run but lead to unemployment in the short run.
A)in both the short and long runs.
B)in neither the short nor long run.
C)in the short run but lead to unemployment in the long run.
D)in the long run but lead to unemployment in the short run.
D✓
15.
15.
In the long run, the level of output is determined by the:
A)interaction of supply and demand.
B)money supply and the levels of government spending and taxation.
C)amounts of capital and labor and the available technology.
D)preferences of the public.
A)interaction of supply and demand.
B)money supply and the levels of government spending and taxation.
C)amounts of capital and labor and the available technology.
D)preferences of the public.
C✓
16.
The relationship between the quantity of goods and services supplied and the price level is called:
A)aggregate demand.
B)aggregate supply.
C)aggregate investment.
D)aggregate production.
16.
The relationship between the quantity of goods and services supplied and the price level is called:
A)aggregate demand.
B)aggregate supply.
C)aggregate investment.
D)aggregate production.
B✓
17.
Possible explanations for sticky magazine prices include the hypotheses that the costs of charging the wrong price may ______, and perhaps customers ______ frequent price changes inconvenient.
A)be great; do not find
B)be great; find
C)not be great; find
D)not be great; do not find
17.
Possible explanations for sticky magazine prices include the hypotheses that the costs of charging the wrong price may ______, and perhaps customers ______ frequent price changes inconvenient.
A)be great; do not find
B)be great; find
C)not be great; find
D)not be great; do not find
C✓
18.
The long-run aggregate supply curve is vertical at the level of output:
A)determined by aggregate demand.
B)at which unemployment is at its natural rate.
C)at which the inflation rate is zero.
D)at a predetermined price level.
18.
The long-run aggregate supply curve is vertical at the level of output:
A)determined by aggregate demand.
B)at which unemployment is at its natural rate.
C)at which the inflation rate is zero.
D)at a predetermined price level.
B✓
19.
A short-run aggregate supply curve shows fixed ______, and a long-run aggregate supply curve shows fixed ______.
A)output; output
B)prices; prices
C)prices; output
D)output; prices
19.
A short-run aggregate supply curve shows fixed ______, and a long-run aggregate supply curve shows fixed ______.
A)output; output
B)prices; prices
C)prices; output
D)output; prices
C✓
20.
Starting from long-run equilibrium, if a drought pushes up food prices throughout the economy, the Fed could move the economy more rapidly back to full employment output by:
A)increasing the money supply, but at the cost of permanently higher prices.
B)decreasing the money supply, but at the cost of permanently lower prices.
C)increasing the money supply, which would restore the original price level.
D)decreasing the money supply, which would restore the original price level.
20.
Starting from long-run equilibrium, if a drought pushes up food prices throughout the economy, the Fed could move the economy more rapidly back to full employment output by:
A)increasing the money supply, but at the cost of permanently higher prices.
B)decreasing the money supply, but at the cost of permanently lower prices.
C)increasing the money supply, which would restore the original price level.
D)decreasing the money supply, which would restore the original price level.
A✓
21.
The theory of liquidity preference implies that, other things being equal, an increase in the real money supply will:
A)lower the interest rate.
B)raise the interest rate.
C)have no effect on the interest rate.
D)first lower and then raise the interest rate.
21.
The theory of liquidity preference implies that, other things being equal, an increase in the real money supply will:
A)lower the interest rate.
B)raise the interest rate.
C)have no effect on the interest rate.
D)first lower and then raise the interest rate.
A✓
22.
A decrease in the price level, holding nominal money supply constant, will shift the LM curve:
A)upward and to the right.
B)downward and to the right.
C)downward and to the left.
D)upward and to the left.
22.
A decrease in the price level, holding nominal money supply constant, will shift the LM curve:
A)upward and to the right.
B)downward and to the right.
C)downward and to the left.
D)upward and to the left.
B✓
23.
The assumption of constant velocity is equivalent to assuming that the demand for real money balances depends on:
A)income alone.
B)the interest rate alone.
C)income and interest rates.
D)people economizing on real balances as the interest rate rises.
23.
The assumption of constant velocity is equivalent to assuming that the demand for real money balances depends on:
A)income alone.
B)the interest rate alone.
C)income and interest rates.
D)people economizing on real balances as the interest rate rises.
A✓
24.
When drawn on a graph with income along the horizontal axis and the interest rate along the vertical axis, the IS curve generally:
A)is vertical.
B)is horizontal.
C)slopes upward and to the right.
D)slopes downward and to the right.
24.
When drawn on a graph with income along the horizontal axis and the interest rate along the vertical axis, the IS curve generally:
A)is vertical.
B)is horizontal.
C)slopes upward and to the right.
D)slopes downward and to the right.
D✓
25.
25.
After the Kennedy tax cut in 1964, real GDP:
A)fell and unemployment rose.
B)rose and unemployment fell.
C)and unemployment both rose.
D)and unemployment both fell.
A)fell and unemployment rose.
B)rose and unemployment fell.
C)and unemployment both rose.
D)and unemployment both fell.
B✓
26.
An IS curve shows combinations of:
A)taxes and government spending.
B)nominal money balances and price levels.
C)interest rates and income that bring equilibrium in the market for real balances.
D)interest rates and income that bring equilibrium in the market for goods and services.
26.
An IS curve shows combinations of:
A)taxes and government spending.
B)nominal money balances and price levels.
C)interest rates and income that bring equilibrium in the market for real balances.
D)interest rates and income that bring equilibrium in the market for goods and services.
D✓
27.
The Keynesian-cross analysis assumes planned investment:
A)is fixed and so does the IS analysis.
B)depends on the interest rate and so does the IS analysis.
C)is fixed, whereas the IS analysis assumes it depends on the interest rate.
27.
The Keynesian-cross analysis assumes planned investment:
A)is fixed and so does the IS analysis.
B)depends on the interest rate and so does the IS analysis.
C)is fixed, whereas the IS analysis assumes it depends on the interest rate.
D)depends on the interest rate and so does the IS analysis.
C✓
28.
The variable that links the market for goods and services and the market for real money balances in the IS-LM model is the:
A)consumption function.
B)interest rate.
C)price level.
D)nominal money supply.
28.
The variable that links the market for goods and services and the market for real money balances in the IS-LM model is the:
A)consumption function.
B)interest rate.
C)price level.
D)nominal money supply.
B✓
29.
When firms experience unplanned inventory accumulation, they typically:
A)build new plants.
B)lay off workers and reduce production.
C)hire more workers and increase production.
D)call for more government spending.
29.
When firms experience unplanned inventory accumulation, they typically:
A)build new plants.
B)lay off workers and reduce production.
C)hire more workers and increase production.
D)call for more government spending.
B✓
30.
The government-purchases multiplier indicates how much ______ change(s) in response to a $1 change in government purchases.
A)the budget deficit
B)consumption
C)income
D)real balance
30.
The government-purchases multiplier indicates how much ______ change(s) in response to a $1 change in government purchases.
A)the budget deficit
B)consumption
C)income
D)real balance
C✓
Thankyou...
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