In the endogenous growth model presented in the text, suppose that u represents the fraction of time spent working (as opposed to accumulating human capital), b represents the efficiency of human capital accumulation, H represents the amount of human capital, and z represents the marginal product of efficiency units of labor. Consumption equals A) buH. […]
In a two-period model with production, an increase in current domestic total factor productivity A) increases domestic output and increases the current account surplus. B) increases domestic output and decreases the current account surplus. C) decreases domestic output and increases the current account surplus. D) decreases domestic output and decreases the current account surplus. […]
In an open economy, Y = C + I + G + NX. From this we may infer that ________. A) output is greater in an open economy than in a closed economy B) the condition for goods market equilibrium is that S = I + G + NX C) net exports can be zero […]
A car dealer that maintains a large number of automobiles on their lot so that they avoid losing a sale to another dealer who has the make and model a given customer wants is engaged in ________. A) production smoothing B) work in process C) stock-out avoidance D) first degree price discrimination ANSWER C
In the new Keynesian model, the effects on output of an anticipated aggregate demand shock are ________. A) less than if that event was unanticipated B) greater than if that event was unanticipated C) the same as would develop if that event was unanticipated D) independent of whether or not that event is anticipated or […]
A business cycle trough is a A) small positive deviation from trend in real GDP. B) relatively large positive deviation from trend in real GDP. C) small negative deviation from trend in real GDP. D) relatively large negative deviation from trend in real GDP. ANSWER D
In economies with effective accounting standards and low-cost, reliable information, ________. A) banks become less dominant among intermediaries B) the tyranny of collateral is particularly intense C) funds are available only for activities involving little or no risk D) restrictive covenants are difficult to enforce ANSWER A
How do commercial banks solve asymmetric information problems? What will be an ideal response? ANSWER By collecting information to reduce the information asymmetry: screening loan applicants and monitoring borrowers once the loan is approved. Loan assets are retained, rather than sold to third parties, so information accumulates over time and, possibly, over several loans […]
Retail stores that dedicate one or more aisles to “seasonal” items are engaging in ________. A) just-in-time production B) production smoothing C) work in process D) first degree price discrimination ANSWER A
In a two-period model with production, an anticipated future increase in domestic total factor productivity A) increases domestic output and increases the current account surplus. B) increases domestic output and decreases the current account surplus. C) has no effect on domestic output and increases the current account surplus. D) has no effect on domestic output […]
