If productivity is growing at some sustained rate g, then output and capital per worker ________.
A) are growing at the same rate g, in a stable steady state
B) are growing faster than g, because improving technology encourages a higher rate of saving and investment
C) are growing slower than g, because some of the new capital is merely replacing obsolete capital
D) are growing faster than g, because productivity does not suffer from diminishing marginal product
Question 2If government spending rises but the central bank changes the money supply to prevent income from changing, then
a. both consumption and investment will remain unchanged.
b. consumption rises and investment falls.
c. investment falls but consumption rises.
d. both consumption and investment rises.
Question 3According to the quantity theory of money, a 10-percent increase in the money stock would lead to a 10-percent rise in the
a. the money wage and the price level.
b. level of real GNP.
c. level of nominal GNP.
d. the money wage and the price level, but the price level rises by more
e. Both a and c
Question 4During World War II (194145), the market coordinated what the government commanded in terms of production.
Indicate whether the statement is true or false
Question 5A tax ________ is more likely to cause a permanent increase in investment and worker productivity in an economy with a ________.
A) increase; small government budget deficit
B) decrease; large government budget deficit
C) decrease; high inflation rate
D) increase; large government budget deficit
Question 6Suppose that the MPC out of disposable income was 0.8 and the tax function for a given economy was T = 30 + 0.25Y.
An increase in the intercept of the tax function of 10 units (from 30 to 20) would cause equilibrium income in the simple Keynesian model to fall by a. -20 units.
b. 10 units.
c. 20 units.
d. 40 units.
Question 7According to real business cycle theory, an increase in taxes
a. would significantly reduce labor supply, increase employment, and decrease output.
b. a decline in employment but not in output.
c. would significantly reduce labor supply, and decrease employment and output.
d. no change in output and employment.
Question 8Robert Higgs and Louis Stettler (1970) find evidence to suggest that colonial couples married at a younger age than those in Europe, thus explaining the relatively high birth rates in colonial America.
Indicate whether the statement is true or false
Question 9Under the Articles of Confederation, the Continental Congress permitted each state to issue paper money and borrow on their own to finance expenses related to the American Revolution.
Indicate whether the statement is true or false
Question 10On the Solow Diagram, an increase in productivity is shown by ________.
A) an upward shift of the depreciation plus capital dilution line
B) an upward shift of the investment function
C) a downward shift of the depreciation plus capital dilution line
D) a downward shift of the investment function
Question 11If the increase in government expenditures of World War II (194145) is matched against the decrease in private investment and consumption during the same period, it was the end of World War II that officially concluded the depression era, not
the start of World War II, according to Robert Higgs (2007). Indicate whether the statement is true or false
Question 12In the classical model, the level of business investment was a function of
a. only the expected profitability of investment projects.
b. only the real interest rate.
c. both the expected profitability of investment projects and the real interest rate.
d. only the nominal interest rate.
d. None of the above
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