If GDP increases in the model of public goods
A) people are richer, so they need less public goods.
B) there is substitution from private goods to public goods.
C) if the government provides public goods optimally, public and private goods production both increase.
D) all of the increase in GDP goes into public goods.
Question 2What does the Cobb-Douglas production function assume about the input shares in the economy?
A) the capital share is larger than the labor share of income
B) both the capital and labor shares of income grow over time
C) both the capital and labor shares of income remain relatively constant over time
D) the capital share of income is equal to the labor share of income
E) none of the above
Question 3Alternating periods of economic expansion and recession are known as the:
A) Fisher effect
B) business cycle
C) market risk
D) systematics
Question 4When the nominal interest rate increases, the quantity of credit card services
A) increases.
B) decreases.
C) stays constant.
D) moves in unpredictable ways.
Question 5Since 1990, the growth rate of real gross private investment in the United States has been relatively ________ and the growth rate of real personal consumption has been relatively ________.
A) stable; stable
B) stable; volatile
C) volatile; stable
D) volatile; volatile
Question 6Suppose for every dollar change in household wealth, consumption expenditures change by 0.05.
If real household wealth declines by 45 billion, potential GDP is 120 billion, and the multiplier effect for the second year after an expenditure shock is 1.1, what is the total change in output relative to potential for the second year? A) -1.28
B) -1.73
C) -2.06
D) -5.78
Question 7In the 2008-09 recession, the government deficit
A) stayed roughly constant.
B) decreased.
C) increased.
D) would have increased if the government had intervened.
Question 8Total aggregate demand includes ________.
A) planned investment spending
B) consumption expenditures
C) net exports
D) all of the above
E) none of the above
Question 9If higher inflation ensues from a temporary negative supply shock, and in response, the central bank raises interest rates, then the resulting decrease in AD will return inflation back to its original level ________.
A) and no further action will be required by the central bank
B) but the ensuing positive output gap will lead to higher inflation once again so further interest rate increases will be required by the central bank to return inflation back to its long run level
C) but the ensuing negative output gap will lead to short-run increases in AS and the central bank will have to undo its original interest rate hike in order to return inflation back to its target rate
D) all of the above
E) none of the above
Question 10A 10 million open market sale will decrease the monetary base by
A) 10 million.
B) 10 million times the money multiplier.
C) 10 million divided by the money multiplier.
D) an amount between 0 and 10 million, depending on the fraction of the purchase the public wishes to hold as currency.
Question 11The equilibrium price of credit card services is
A) the real quantity of money.
B) determined only by the demand for credit card services.
C) the nominal interest rate.
D) equal to the average cost of credit card services.
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