In neoclassical growth theory __ real GDP

Question # 00549027 Posted By: dr.tony Updated on: 06/19/2017 08:21 AM Due on: 06/19/2017
Subject Economics Topic Microeconomics Tutorials:
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) In neoclassical growth theory, ___________.

A. real GDP per person grows because of the choices people make in the pursuit of profit B. technological advances depend on how many people are looking for a new technology C. a population explosion bring diminishing returns to labor

D. growth will stop if technology stops advancing

2) The Classical macroeconomic model proposes that

A. government intervention is required to help the economy reach its potential. B. real GDP equals potential GDP as long as inflation equals zero.

C. changes in the quantity of money are critical in driving economic growth. D. markets work efficiently to produce the best macroeconomic outcomes.

3) The Keynesian macroeconomic model states that

A. the economy is inherently unstable and government intervention is required to maintain continued economic growth.

B. markets work efficiently to produce the best macroeconomic outcomes.

C. fluctuations in the quantity of money are responsible for most economic recessions. D. changes in technology generate business cycles.

4) Potential GDP(YP) is

A. equal to the maximum amount of goods and services that can be produced B. another name for real GDP.

C. the level of output produced when the economy is fully employed.

D. a measure of the short term fluctuations in real GDP.

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5) The production function describes the relationship between A. the real wage and the quantity of labor supplied.

B. real GDP and the quantity of labor employed.

C. real and potential GDP.

D. potential GDP and the real wage rate.

6) An increase in the real wage rate ________ the quantity of labor demanded (LD) and ________ the quantity of labor supplied (LS).

A. increases; increases B. increases; decreases

C. decreases; increases D. decreases; decreases

7) The Rule of 70, as applied to real GDP growth, can be used to find the A. real GDP growth rate necessary to double growth.

B. number of years it takes for the level of real GDP to double.

C. population growth rate necessary to double the GDP growth rate.

D. number of years it takes for the growth rate of real GDP to double.

8) Suppose that an Intel worker rearranges existing machines and labor and increases the quantity of chips Intel can produce. Using the productivity curve graphed, this innovation would be described as

A. a movement upward along the curve. B. a movement downward along the curve. C. a shift of the curve upward. D. a shift of the curve downward.

9) A technological change ________ and a change in the population ________.

A. shifts the production function; shifts the production function

B. shifts the production function; creates a movement along the production function C. creates a movement along the production function; shifts the production function D. does not change the production function; creates a movement along the production function

10) Suppose the economy was initially in a long-run equilibrium. Then the world economy expands so that foreign incomes rise. U.S. aggregate demand ________ in the short run. In the long run, the money wage rate ________.

A. increases; rises B. decreases; falls C. decreases; rises D. increases; falls

11) An increase in the opportunity cost of holding money (increase in the interest rate) creates a ________ the money demand curve and an increase in real GDP creates a ________ the money demand curve.

A. leftward shift of; movement down along B. movement up along; leftward shift of C. rightward shift of; movement down along D. movement up along; rightward shift of

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12) When the dollar appreciates, U.S. (hints: the dollar is more expensive in terms of other currency)

A. exports and imports increase B. exports increase, while imports decrease C. exports decrease, while imports increase D. exports and imports decrease

13) When the Fed buys securities from the public, banks' reserves ________ and the quantity of money ________.

A. increase; increases B. increase; decreases C. decrease; increases D. decrease; decreases

14) In response to an inflationary gap, the Fed

A. increases the quantity of money supply buying U.S. government securities B. decreases the quantity of money by selling U.S. government securities

C. waits until the price level falls before acting

D. decreases the quantity of money by selling U.S. government securities

15)

In the above figure the economy is initially at point A on aggregate expenditure curve AE0. Suppose firms expect profits to decrease and decide to decrease investment. As a

result

A. the AE curve shifts upward to a curve such as AE2.

B. the AE curve shifts downward to a curve such as AE1. C. there is a movement along AE1 to a point such as B. D. there is a movement along AE1 to a point such as C.

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______16) The four main policy tools the Federal Reserve System uses to influence the interest rate are setting

A. the prime rate, open market operations, extraordinary crisis management and setting the excess reserve ratio.

B. quantitative easing, market interest rate and the discount rate, as well as open market operations.

C. the discount rate, open market operations, quantitative easing and setting the required reserve ratio.

D. credit easing, the discount rate, setting tax rates, and setting the required reserve ratio.

______17) The interest rate the Federal Reserve charges a bank when it borrows reserves from the Fed is called the

A. market interest rate B. federal funds rate.

C. discount rate. D. borrowing rate.

______18) Quantitative easing by the Fed refers to

A. the creation of bank reserves by engaging in large-scale open market operation at very low interest rates.

B. selling private securities issued by the Fed.

C. decreasing the money supply during a recession to prevent inflation.

D. lowering the federal funds rate while increasing the discount rate.

______19) Which of the following statements describes a contractionary fiscal policy? A. Lower government spending and higher taxes

B. Higher government spending and lower taxes

C. Higher government spending and higher taxes

D Lower government spending and lower taxes

______20) Taking account of its supply-side effects, a cut in the tax on labor income ______ employment and _______ real wage rate received by workers.

A. increases; increases B. decreases; increases C. increases; decreases D. decreases; decreases

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_______21) The initial factors that can create a cost-push inflation spiral do not include an

  1. A) increase in money wage rate
  2. B) increase in the prices of raw materials
  3. C) increase in the open market purchases
  4. D) increase in both money wage rate and the prices of raw materials

_______22) Which of the following items is a change that would NOT start a demand pull inflation?

  1. A) an increase in government expenditure on goods and services
  2. B) an increase in exports
  3. C) an increase in population
  4. D) an increase in the quantity of money

_______23) A change in the actual inflation rate brings a movement along the ______. A change in the expected inflation rate brings ______.

A.SRPC; a shift of the SRPC B. LRPC; a shift of the LRPC C.SRPC; a shift of the LRPC D. SRPC; no change in the SRPC

_______24) The Conduct of Monetary Policy Which of the following are policy instruments available to the Fed as it tries to achieve its macroeconomic goals?

  1. government expenditures on goods and services and taxes
  2. the government budget deficit or surplus

III. changes in the federal funds rate

A. I and II B. III only C. II and III D. II only

_______25) An economy is experiencing a recessionary gap. The government should ___.

  1. raise taxes to decrease long-run aggregate supply
  2. increase expenditure or cut taxes to increase aggregate demand
  3. raise taxes or decrease the quantity of money to decrease long-run aggregate supply
  4. increase expenditure or cut taxes to increase short-run aggregate supply

_______26) The higher the federal funds rate, the ________ the opportunity cost of holding reserves, which ________ the incentive to economize on reserves.

A. higher; increases B. higher; decreases

C. lower; increases D. lower; decreases

_______27) If the Fed carries out an open market operation to buy U.S. government securities, the federal funds rate ________ and the quantity of reserves ________. A. falls; increases B. rises; increases

C. falls; decreases D. rises; decreases

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_______28) A Phillips curve shows the relationship between ________.

A. B. C. D.

the unemployment rate and the inflation rate the money wage rate and real GDP

the unemployment rate and real GDP

the inflation rate and real GDP growth rate

_______29) Taxes and needs-tested spending work as automatic fiscal policy to dampen the business cycle because taxes ______ during an expansion, and needs-tested spending

______ during a recession.

A. increase; increases B. decrease; decreases C. decrease; increases D. increase; decreases _______30) Stagflation is characterized by __________.

A. B. C. D.

an increase in both output and the price level

an increase in aggregate demand and a rise in unemployment

a rise in the money wage rate and a fall in unemployment

an increase in the price level and an increase in unemployment

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