Following the collapse of its housing and stock markets around 1990, the Japanese government ________. A) effectively managed the crisis, limiting the damage to the Japanese economy B) took only limited action in response to the crisis C) was able to rely on private initiatives in quickly reversing the course of GDP in the 1990s […]
The condition, MRS1,’C’ = w ‘, describes the representative consumer’s A) investment decision. B) consumption – savings decision. C) current period work – leisure decision. D) future period work – leisure decision. ANSWER D
When consumption and leisure are both normal goods, after an increase in real dividend income minus taxation, the rational consumer A) increases consumption and increases leisure. B) increases consumption and reduces leisure. C) reduces consumption and increases leisure. D) reduces consumption and reduces leisure. ANSWER A
Which of the following never assumes, either implicitly or explicitly, independence between nominal and real variables? A) the AS curve B) the Phillips curve C) Okun’s law D) the classical dichotomy E) none of the above ANSWER C
Discuss how economists measure the following: (i) aggregate expenditure, (ii) aggregate income, and (iii) aggregate output. What will be an ideal response? ANSWER They are all measured by GDP.
The supply-determined nature of output and employment is a crucial feature of a. the Keynesian theory. b. the classical system. c. monetarism. d. the rational expectations model. ANSWER B
At the end of the future period, in the real intertemporal model with investment A) the firm’s capital becomes useless and is thrown away. B) the firm’s capital is used to produce more capital for the distant future. C) the firm can convert capital one-for-one into consumption goods. D) the firm’s capital is converted into […]
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
Suppose Y = 100, P = 80, and V = 3.2. If Y rises to 105, and the inflation rate is 10 percent, what is the new value of M? What will be an ideal response? ANSWER 105 × 88 = 9,240 = M × 3.2. M = 2,887.5. Equivalently, 100 × 80 = […]
