The idea that a permanent increase in income causes a larger increase in consumption than a temporary change in income is called the A) Friedman-Lucas theory. B) permanent income hypothesis. C) Ricardian equivalence theorem. D) intertemporal substitution effect. ANSWER B
Date: September 10th, 2020
A dynamic decision is one that A) is made very quickly. B) involves only the present. C) involves only the future. D) involves planning over more than one time period. ANSWER D
Date: September 10th, 2020
The balance of payments is zero A) as an accounting identity. B) because market forces ensure that this is so. C) only if the current account balance is zero. D) only if the capital account balance is zero. ANSWER A
Date: September 10th, 2020
Assume that a firm has $100 million in real assets and $90 in real liabilities. The value of its net worth would be ________. A) a negative $10 million. B) $190 million. C) $4190 billion. D) $10 million. ANSWER D
Date: September 10th, 2020
The two primary explanations for the excess volatility of consumption are A) consumers’ limited life spans and credit market imperfections. B) credit market imperfections and changes in market prices. C) changes in market prices and distorting taxes. D) distorting taxes and consumers’ limited life spans. ANSWER B
Date: September 10th, 2020
If current income increases as much as future income decreases A) current consumption decreases. B) current consumption stays the same. C) current consumption increases. D) We do not know. ANSWER C
Date: September 10th, 2020
An asset-price bubble entails ________. A) increasing the value of one’s assets to cover liability losses B) an increase in asset prices above their fundamental economic value C) reducing the number of participants in the underlying financial derivatives market D) an economic skins game ANSWER B
Date: September 10th, 2020
A rightward shift of the money supply ________. A) may come about from an increase in the quantity of money supplied by the Federal Reserve B) may come about from a decrease in the price level C) leads to a decrease in interest rates ceteris paribus D) all of the above E) none of the […]
Date: September 10th, 2020
Which of the following is most like money? A) game arcade tokens B) board game “money” C) credit cards D) baseball trading cards E) frequent flyer miles ANSWER A
Date: September 10th, 2020
A good proxy for the flow of consumption services would be A) aggregate consumption. B) consumption of services and consumption of durables. C) consumption of durables and consumption of nondurables. D) consumption of nondurables and consumption of services. ANSWER D
Date: September 10th, 2020
