Compared to the central bank response to the financial crisis in 2007-2009, the response to the Great Depression of the 1930s may be characterized as ________, while the response of Japan’s central bank to the banking crisis in the early 1990s merits the label ________. A) hasty; sluggish B) intrusive; tenacious C) complacent; indulgent D) […]
The marginal propensity to consume is a. the change in consumption associated with a change in income. b. equal to the marginal propensity to save minus 1. c. equal to 1 minus the marginal tax rate. d. the change in consumption associated with a change in wealth. ANSWER A
According to Keynes, the level of consumer expenditures was a stable function of a. national income. b. gross income. c. disposable income. d. net income. e. None of the above ANSWER C
An increase in the real wage A) represents a pure substitution effect. B) represents a pure income effect. C) represents a combination of income and substitution effects. D) causes a parallel shift in the consumer’s budget line. ANSWER C
A Phillips curve is A) the correlation between money growth and the inflation rate. B) the negative correlation between the unemployment rate and the vacancy rate. C) the positive observed correlation between the inflation rate and the nominal interest rate. D) an observed positive correlation between the inflation rate and some measure of aggregate economic […]
If the value of a price index was 125 for 2005 and 75 for 1982, and GDP was 2500 in 2005 compared to 600 in 1982, the value of real 2005 GDP in terms of 1982 prices is a. 1500. b. 1000. c. 2500. d. 360. ANSWER A
According to Okun’s law, an increase in which of the following is associated with an increase in unemployment? A) inflation B) output C) expected inflation D) autonomous expenditure E) potential output ANSWER E
The assumption that current-period labor supply is positively related to the current-period real wage is justified as long as the A) income effect dominates the substitution effect in the short run. B) income effect dominates the substitution effect in the long run. C) substitution effect dominates the income effect in the short run. D) substitution […]
Central bank lending to bail out troubled firms is known as ________, while allowing troubled firms to conceal the true value of their assets is called ________. A) crony capitalism; larceny B) liquidity provision; regulatory forbearance C) securitization; nonconventional monetary policy D) subprime lending; regulatory arbitrage ANSWER B
In the Keynesian consumption function a. consumption is a constant fraction of income. b. the marginal propensity to consume is constant. c. disposable income determines consumption. d. All of the above e. None of the above ANSWER D
