A positive, pure income effect can be obtained by A) increasing the real wage. B) increasing the tax. C) increasing the dividend. D) decreasing leisure. ANSWER C
Date: September 10th, 2020
Distinguish between investment goods and consumption goods. If you buy a car, is it investment or consumption? What if IBM buys a car? Are inventories a consumption or investment good? What will be an ideal response? ANSWER Investment goods include the purchase of capital by firms and the purchases of homes by households. A […]
Date: September 10th, 2020
The natural rate of output is ________. A) independent of the inflation rate B) always lower than potential output C) unrelated to the natural rate of unemployment D) all of the above E) none of the above ANSWER A
Date: September 10th, 2020
What is Real Business Cycle Theory? What drives business cycles in this model? Where do these shocks come from? What will be an ideal response? ANSWER In the Real Business Cycle Theory, changes in output are driven by changes in technology, which change aggregate supply. The changes in technology can be driven by new […]
Date: September 10th, 2020
Moral hazard is a problem in providing deposit insurance because insured banks are A) more likely to make bookkeeping errors. B) overly cautious due to extra regulations adopted by the FDIC. C) more likely to provide bank managers with lavish perquisites. D) encouraged to take on more risk. ANSWER D
Date: September 10th, 2020
In an attempt to manage expectations, a central bank may prefer to announce an unconditional commitment, because an unconditional commitment ________ than a conditional commitment. A) is inherently more credible B) may have an impact on expectations that is stronger C) places fewer constraints on policy makers D) is less likely to have unintended consequences […]
Date: September 10th, 2020
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 C
Date: September 10th, 2020
A consumer may increase her saving by A) working more hours and consuming more goods in the present period. B) working more hours and consuming fewer goods in the present period. C) working fewer hours and consuming more goods in the present period. D) working fewer hours and consuming fewer goods in the present period. […]
Date: September 10th, 2020
The Troubled Asset Relief Program ________. A) led to the creation of the Federal Reserve System B) helped contribute to the stock market crash of 2006-2007 C) shifted non-performing assets off the balance sheet of the Federal Deposit Insurance Corporation onto the balance sheet of Fannie Mae and Freddie Mac D) authorized the Treasury to […]
Date: September 10th, 2020
A defense for the assumption that consumers maximize is that A) consumers never make mistakes. B) consumers do not consistently make the same mistakes. C) it allows for many possible outcomes. D) mistaken consumers may receive counseling from the government. ANSWER B
Date: September 10th, 2020
