Suppose a country is much richer than the others in the Solow growth model. What happens in the long run? A) The other countries catch up to the rich one. B) The rich country grows the fastest. C) The rich country becomes poorer than the others. D) Nothing. ANSWER A
Date: September 10th, 2020
When we try to measure real GDP and the price level, if we underestimate the growth in real GDP, we will A) always underestimate the rate of inflation. B) sometimes underestimate the rate of inflation. C) always overestimate the rate of inflation. D) sometimes overestimate the rate of inflation. ANSWER C
Date: September 10th, 2020
The real interest rate ________. A) is the cost of borrowing adjusted for inflation B) keeps the market for saving and investment in equilibrium C) describes the real benefit of saving D) all of the above E) none of the above ANSWER D
Date: September 10th, 2020
Suppose you hear of a great deal on a used car and wonder, “Why is the price so low?” This might be an instance of ________. A) tyranny of collateral B) adverse selection C) the free rider problem D) moral hazard ANSWER B
Date: September 10th, 2020
Changes in liquidity in the banking system affect ________. A) the nominal interest rate B) the real interest rate C) the federal funds rate D) all of the above E) none of the above ANSWER D
Date: September 10th, 2020
Under a liquidity trap in the New Keynesian model, A) prices cannot be sticky. B) monetary policy is ineffective. C) the economy is always efficient. D) fiscal policy is ineffective. ANSWER B
Date: September 10th, 2020
In the model for desired saving, autonomous is roughly synonymous with ________. A) policy-determined B) endogenous C) intended D) inflation-adjusted E) exogenous ANSWER E
Date: September 10th, 2020
Gross investment is equal to ________. A) net investment plus depreciation B) net investment divided by depreciation C) net investment minus depreciation D) net investment times depreciation ANSWER A
Date: September 10th, 2020
According to real business cycle theory, a likely cause of an increase in employment is ________. A) an increase in the real wage B) an increase in aggregate demand C) a decrease in the real wage D) a decrease in the real interest rate ANSWER A
Date: September 10th, 2020
Consumption expenditures are a function of ________. A) the real interest rate B) disposable income C) autonomous consumption D) all of the above E) none of the above ANSWER D
Date: September 10th, 2020
