Question 1

In an economic model,an endogenous variable is

Accepted Answer

A)   a stand-in for more complicated variables.
B)   determined by the model itself.
C)   determined outside the model.
D)   a variable that has no effect on the workings of the model.
E)   closely linked to a closed economy.F) A) and E)
G) B) and D)

Question 2

In a one-period model,government is likely to run

Accepted Answer

A)   a deficit but not a surplus.
B)   a surplus but not a deficit.
C)   either a surplus or a deficit.
D)   neither a surplus nor a deficit.
E)   on a fiscal year basis.F) B) and C)
G) A) and E)

Question 3

A competitive equilibrium may fail to be Pareto optimal due to

Accepted Answer

A)   inequality.
B)   externalities.
C)   social efficiency.
D)   profit maximizing firms..
E)   government intervention.F) A) and B)
G) D) and E) B

Question 4

An example of a public good is

Accepted Answer

A)   national defence
B)   transfer payments
C)   government pension payments
D)   both 
A)   and 
C)  E) None of the above
F) A) and B)

Question 5

In the one-period competitive model we have been studying,

Accepted Answer

A)   both consumption and total factor productivity are exogenous.
B)   consumption is exogenous and total factor productivity is endogenous.
C)   consumption is endogenous and total factor productivity is exogenous.
D)   both consumption and total factor productivity are endogenous.
E)   consumption and taxes are exogenous.F) C) and D)
G) A) and B)

Question 6

In an economic model,

Accepted Answer

A)   endogenous variables determine exogenous variables.
B)   exogenous variables determine endogenous variables.
C)   the government budget constraint determines exogenous variables.
D)   fiscal policy determines endogenous variables.
E)   endogenous and exogenous variables are determined simultaneously.F) A) and B)
G) A) and E)

Question 7

A competitive equilibrium is a state of affairs in which

Accepted Answer

A)   markets clear, and output is maximized.
B)   output is maximized, and all agents are equally well-off.
C)   all agents are equally well-off and agents are price-takers.
D)   agents are price-takers, and markets clear.
E)   output and total factor productivity are maximized.F) C) and E)
G) D) and E)

Question 8

Immunization from communicable diseases generate

Accepted Answer

A)   overproduction.
B)   a Pareto optimum.
C)   the provision of public goods.
D)   negative externalities.
E)   positive externalities.F) None of the above
G) A) and B)

Question 9

The production possibilities frontier in the one-period model is a

Accepted Answer

A)   behavioural relationship between consumption and leisure.
B)   behavioural relationship between consumption and government spending.
C)   technological relationship between consumption and leisure.
D)   technological relationship between consumption and government spending.
E)   technological relationship between consumption and the capital stock.F) A) and C)
G) C) and D)

Question 10

An increase in total factor productivity

Accepted Answer

A)   increases consumption, increases output, and increases the real wage.
B)   reduces consumption, increases output, and increases the real wage.
C)   reduces consumption, increases output and reduces the real wage.
D)   reduces consumption, reduces output, and reduces the real wage.
E)   increases consumption, reduces output, and increases the real wage.F) A) and B)
G) B) and E)

Question 11

Changes in government spending are not likely causes of business cycles because government spending induced business cycles would,counterfactually predict

Accepted Answer

A)   countercyclical consumption.
B)   procyclical consumption.
C)   countercyclical employment.
D)   procyclical employment.
E)   countercyclical real wages.F) A) and E)
G) C) and D)

Question 12

In response to an increase in total factor productivity

Accepted Answer

A)   both the substitution effect and the income effect suggest that hours worked should increase.
B)   the substitution effect suggests that hours worked should increase, while the income effect suggests that hours worked should decrease.
C)   the substitution effect suggests that hours worked should decrease, while the income effect suggests that hours worked should increase.
D)   both the substitution effect and the income effect suggest that hours worked should decrease.
E)   the net effect is a reduction in the welfare of the representative consumer.F) B) and E)
G) B) and C)

Question 13

The Laffer Curve illustrates the relationship between

Accepted Answer

A)   the income effect and the substitution effect.
B)   consumption and taxes.
C)   investment and interest rates.
D)   total factor productivity and wage rates.
E)   tax revenue and income tax rates.F) None of the above
G) A) and B)

Question 14

An increase in government spending

Accepted Answer

A)   increases consumption, increases hours worked, and increases the real wage.
B)   reduces consumption, increases hours worked, and increases the real wage.
C)   reduces consumption, increases hours worked, and reduces the real wage.
D)   reduces consumption, reduces hours worked, and reduces the real wage.
E)   increases consumption, reduces hours worked, and increases the real wage.F) C) and D)
G) A) and B)

Question 15

A Pareto optimum is a point that

Accepted Answer

A)   a malevolent dictator would choose.
B)   a cooperative coalition of some altruistic consumers would choose.
C)   a cooperative coalition of some socially responsible firms would choose.
D)   a social planner would choose.
E)   is experienced at competitive equilibrium.F) A) and B)
G) B) and C)

Question 16

The marginal rate of transformation is

Accepted Answer

A)   the rate at which hours worked can be converted into an economy's capital stock.
B)   - (slope of the PPF) .
C)   equivalent to the marginal rates of substitution.
D)   is derived from the marginal product of labour.
E)   is equal to the wage rate ? TFP.F) A) and B)
G) C) and D)

Question 17

The rate at which one good can be converted technologically into another is called

Accepted Answer

A)   the marginal rate of transformation.
B)   the marginal rate of substitution.
C)   the marginal product of labour.
D)   rate of conversion.
E)   the marginal product of capital.F) C) and D)
G) B) and E)

Question 18

The second fundamental theorem of welfare economics states that

Accepted Answer

A)   under certain conditions, a competitive equilibrium is Pareto optimal.
B)   a competitive equilibrium is always Pareto optimal.
C)   under certain conditions, a Pareto optimum is a competitive equilibrium.
D)   a Pareto optimum is always a competitive equilibrium.
E)   a Pareto optimum does not have to be a competitive equilibrium.F) D) and E)
G) A) and E) C

Question 19

In the model where G = qT,when q increases,the income effect

Accepted Answer

A)   increases both C and G.
B)   decreases G and increases C.
C)   reduces C and increases G.
D)   reduces both C and G.
E)   increases C and decreases G.F) C) and D)
G) A) and E)

Question 20

Changes in government spending are not likely causes of business cycles because government spending induced business cycles would,counterfactually predict

Accepted Answer

A)   countercyclical real wages.
B)   procyclical real wages.
C)   countercyclical employment.
D)   procyclical employment.
E)   countercyclical consumption.F) A) and E)
G) C) and D) A

Exam 5: A Closed-Economy One-Period Macroeconomic Model

In an economic model,an endogenous variable is

Correct AnswerverifiedShow Answer

In a one-period model,government is likely to run

Correct AnswerverifiedShow Answer

A competitive equilibrium may fail to be Pareto optimal due to

Correct AnswerverifiedB

An example of a public good is

Correct AnswerverifiedShow Answer

In the one-period competitive model we have been studying,

Correct AnswerverifiedShow Answer

In an economic model,

Correct AnswerverifiedShow Answer

A competitive equilibrium is a state of affairs in which

Correct AnswerverifiedShow Answer

Immunization from communicable diseases generate

Correct AnswerverifiedShow Answer

The production possibilities frontier in the one-period model is a

Correct AnswerverifiedShow Answer

An increase in total factor productivity

Correct AnswerverifiedShow Answer

Changes in government spending are not likely causes of business cycles because government spending induced business cycles would,counterfactually predict

Correct AnswerverifiedShow Answer

In response to an increase in total factor productivity

Correct AnswerverifiedShow Answer

The Laffer Curve illustrates the relationship between

Correct AnswerverifiedShow Answer

An increase in government spending

Correct AnswerverifiedShow Answer

A Pareto optimum is a point that

Correct AnswerverifiedShow Answer

The marginal rate of transformation is

Correct AnswerverifiedShow Answer

The rate at which one good can be converted technologically into another is called

Correct AnswerverifiedShow Answer

The second fundamental theorem of welfare economics states that

Correct AnswerverifiedC

In the model where G = qT,when q increases,the income effect

Correct AnswerverifiedShow Answer

Changes in government spending are not likely causes of business cycles because government spending induced business cycles would,counterfactually predict

Correct AnswerverifiedA

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B

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C

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A