In the endogenous growth model presented in the text, :

In the endogenous growth model presented in the text,
 
  A) consumption grows faster than human capital.
  B) human capital grows faster than consumption.
  C) both consumption and human capital grow at the same rate.
  D) neither consumption nor human capital grows in the steady state.

Question 2

Deposit insurance can lead to ________.
 
  A) an increase in adverse selection
  B) a decrease in bank costs
  C) a decrease in bank lending rates
  D) an increase in risks banks take on

Question 3

The MP Curve ________.
 
  A) demonstrates how central banks respond to changes in inflation with changes in the interest rate
  B) shows how changes in interest rates affect equilibrium output
  C) explains short run fluctuations in output and inflation
  D) all of the above
  E) none of the above

Question 4

Consider the two graphs above. Suppose producers forecast a decrease in sales. This would ________ the desired level of inventories, as depicted in graph ________.
 
  A) increase; B
  B) increase; A
  C) decrease; B
  D) decrease; A

Question 5

Which of the following is NOT a feature of recent U.S. business cycles?
 
  A) The time series of deviations from trend in real GDP is quite choppy.
  B) The time series of deviations from trend in real GDP is quite smooth.
  C) There is no regularity to the amplitude of fluctuations in real GDP above trend.
  D) There is no regularity to the frequency of fluctuations in real GDP above trend.

Question 6

If there are human capital externalities, then
 
  A) human capital should be taxed.
  B) convergence in per capita incomes occurs.
  C) differences in human capital across countries can persist.
  D) pollution is a problem.

Question 7

Suppose a tax cut that had been anticipated by households and businesses doesn't happen. Describe a new Keynesian analysis of the consequences of this event.
 
  What will be an ideal response?

Question 8

Based on the Saving-Investment Diagram, if the world real interest rate is indicated by C, then ________.
 
  A) the difference between values H and D measures the net capital outflow
  B) the difference between values H and D measures the trade deficit
  C) the domestic real interest rate is indicated by B
  D) the difference between values H and F measures the trade deficit
  E) none of the above

Question 9

In the two-period model with production, an increase in anticipated future total factor productivity
 
  A) has no effect on domestic output, but reduces the current account surplus.
  B) increases domestic output and increases the current account surplus.
  C) reduces domestic output, and increases the current account surplus.
  D) has no effect on domestic output, but increases the current account surplus.

Question 10

In a two-period model with production, a decrease in the world real interest rate
 
  A) increases the current account surplus and increases real output.
  B) reduces the current account surplus and increases real output.
  C) increases the current account surplus and reduces real output.
  D) reduces the current account surplus and reduces real output.

Question 11

Consider the two graphs above. Suppose that improvements in storage technology reduce inventory losses. This would ________ the desired level of inventories, as depicted in graph ________.
 
  A) increase; B
  B) increase; A
  C) decrease; B
  D) decrease; A