According to Thomas Sargent and other new classical economists, a. a credible policy to provide low stable money growth can exist with a fiscal policy that generates large deficits. b. a credible policy to provide low stable money growth cannot coexist with a fiscal policy that generates large deficits. c. there is no need for […]
Which of the following is consistent with diminishing marginal returns? a. increasing labor by 10% and output increasing 10%. b. increasing labor by 10% and output prices increase by less than 10%. c. increasing labor by 10% and the marginal product of labor increasing 10%. d. increasing labor by 10% and output increasing by less […]
In the bathtub analogy, which of the following is a stock variable? A) the amount of investment B) the rate of depreciation C) the amount of capital-per worker D) the Cobb-Douglass value ANSWER C
An increase in the interest rate leads to: a. an increase in planned inventories. b. an increase in GDP. c. an increase in unplanned inventories. d. an increase in consumption. e. none of the above. ANSWER C
The response of output following a natural disaster includes A) an increase in output demand and an increase in output supply. B) an increase in output demand and a decrease in output supply. C) a decrease in output demand and an increase in output supply. D) a decrease in output demand and a decrease in […]
The term “sovereign debt crisis” applies when ________. A) private businesses cannot borrow money because the government is borrowing so much B) nations compete fiercely with each other to increase their borrowing C) a government finds that the cost of borrowing is higher than it had anticipated D) the debt of a particular government quickly […]
Which of the following would be included in GDP? a. Production of computers by IBM in Japan b. The value of a car. c. The commission on the sale of your house. d. The value of childcare provided at home by the child’s mother. ANSWER C
If money demand does not depend upon income, then a. monetary policy cannot have any effect upon the economy. b. monetary policy will only affect the level of the price level. c. monetary policy will only affect interest rates. d. monetary policy will have a larger impact on income. ANSWER A
“All available information” in the definition of rational expectations means that a. agents use all possible information that could be out there. b. agents use all possible public information that could be out there. c. agents use all information that is relevant. d. agents use all information that is available in which the marginal benefits […]
The natural rate of unemployment a. is 6 percent. b. is the long-run average rate of unemployment. c. is 4 percent. d. varies between 4 and 6 percent. ANSWER B
