How might a real business cycle theorist explain the Volcker recession of the early 1980s?
What will be an ideal response?
Question 2In the endogenous growth model, an increase in a worker's level of human capital
A) increases the amount of additional human capital she can produce, but does not increase the amount of output she can produce.
B) increases the amount of additional output she can produce, but does not increase the amount of human capital she can produce.
C) increases both the amount of additional human capital she can produce and the amount of output she can produce.
D) increases neither the amount of additional human capital she can produce nor the amount of output she can produce.
Question 3Ceteris paribus, in a closed economy, if consumers become more optimistic ________.
A) autonomous consumption would decrease
B) the equilibrium interest rate should increase
C) saving should increase
D) all of the above
E) none of the above
Question 4Additions to the nation's capital stock are brought about through
A) the current account surplus.
B) investment.
C) investment and the current account surplus.
D) investment and the government budget surplus.
Question 5Based on the neoclassical theory of investment, which aspect of a booming economy helps to explain the procyclicality of investment?
A) Tax revenues are likely to be rising.
B) The real interest rate is likely to be rising.
C) Capital goods are becoming more expensive.
D) Financing constraints are likely to be relaxed for many businesses.
Question 6A current account deficit is
A) good because a country wants to own the others.
B) bad because every country should have a surplus.
C) good because it allows to smooth consumption.
D) it does not matter.
Question 7If exchange rates are floating, the Fed increasing its target inflation rate will cause the dollar to ________ relative to other currencies and cause net capital outflows to ________.
A) appreciate; increase
B) appreciate; decrease
C) depreciate; increase
D) depreciate; decrease
Question 8Private disposable income is equal to
A) Y + TR + INT - T.
B) Y + NFP + TR + INT - T.
C) Y - TR - INT + T.
D) Y + CA - G.
Question 9Suppose that a provider of health insurance is concerned that a policy holder will eat unhealthy foods during the lifetime of their insurance contract. The insurer faces the problem of ________.
A) Antediluvian intransigence
B) opportunity costs
C) moral hazard
D) adverse selection
Question 10Use the concept of intertemporal substitution to explain how, in real business cycle models, a change in potential output causes an immediate change in actual output.
What will be an ideal response?
Question 11A rise in the tax rate on businesses leads to ________.
A) a decline the desired level of capital and an increase in investment
B) a decline in the desired level of capital and a decrease in investment
C) an increase in the desired level of capital and a decrease in investment
D) an increase in the desired level of capital and an increase in investment
Question 12Ceteris paribus, in a closed economy, if consumers become more pessimistic ________.
A) autonomous consumption will fall
B) investment will fall
C) saving will increase
D) all of the above
E) none of the above
Question 13The importance of barriers to the adoption of technologies is supported by research by
A) P. Romer.
B) R. Lucas.
C) S. Parente and E. Prescott.
D) G. Glomm and B. Ravikumar.
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