Which of the following would be evidence against rational expectations? a. unpredictable changes in policy have real effects. b. new information leads to changes in output. c. the public never make mistakes with respect to price level predictions. d. changes in stock prices change much more often than new information becomes available. ANSWER D
The classical model is a model in which a. governmental policies are needed to ensure full employment. b. wages and prices are perfectly flexible. c. the public has perfect information. d. None of the above e. b and c ANSWER E
Which of the following statements is (are) incorrect? a. Consumption plays a central role in the Keynesian theory of income determination b. Consumer expenditure is the largest component of aggregate demand c. In recent years, consumption has totaled between 60 and 70 percent of GDP d. Keynes believed that investment was largely determined by expectations […]
Income taxes were made constitutional in the United States by the ________. A) Recovery Act of 2009 B) 16th Amendment to the U.S. Constitution C) Sherman Anti-Trust Act of 1890 D) Gramm-Leach-Bliley Act of 1999 ANSWER B
According to the Taylor rule, if actual output is greater than the natural rate of output, then the Fed should a. decrease inflation. b. increase interest rates. c. conduct open market sales. d. decrease interest rates. e. Both a and b ANSWER D
If the great majority of shocks to our system arise from unpredictable shocks to money demand, the preferred tactic of monetary policy is targeting a. reserves. b. interest rates. c. M2. d. reserves plus currency. ANSWER B
In the Solow model, which of the following is an exogenous variable? A) productivity B) the capital-labor ratio C) consumption per worker D) investment per worker ANSWER A
Look at the production schedule of the Widget Company below: Number of workers 0 1 2 3 4 5 Number of widgets 0 12 22 30 36 40 What is the marginal product of the second worker? A) 8 B) 10 C) 12 D) 22 ANSWER B
A federal government deficit is said to exist in the event that ________. A) federal outlays are less than federal revenues B) federal outlays are equal to federal revenues C) federal outlays are greater than federal revenues D) any of the above conditions exists ANSWER C
Diminishing marginal returns refers to the fact that a. holding other inputs constant, additional increases in labor lead to smaller changes in output. b. holding other inputs constant, additional increases in labor lead to lower output. c. additional increases in labor always lead to smaller changes in output d. the returns to labor fall as […]
