1. Technological progress occurs when the economy gets more output A without any

Question

1. Technological progress occurs when the economy gets more output

A without any more capital or labor

B by using more capital per worker

C by using more capital but not more workers

D by using more labor but not more capital

2. An increase in the capital stock will

A shift the production function downward

B shift the production function upward

C flatten the production function

D steepen the production function

3. Increases in net investment generally result in

A lower levels of capital stock and lower levels of depreciation

B lower levels of capital stock and higher levels of depreciation

C higher levels of capital stock and higher levels of depreciation

D higher levels of capital stock and lower levels of depreciation

4. Nations that borrow from abroad to support current consumption

A will always be better off in the future

B will always sacrifice future consumption

C sacrifice future consumption only if the investments are not profitable

D will always sacrifice current consumption

5. Trade deficits always lead to future decreases in consumption if the trade deficits

A support current investment

B support current consumption

C support either current investment or current consumption

D require borrowing from abroad

6. To determine the change in the capital stock, the level of new investment must be adjusted for depreciation because some new investment

A is not used immediately

B merely replaces existing, but worn out, capital

C replaces existing workers

D is more efficient than existing capital

7. According to classical economists

A demand creates its own supply

B wages and prices are inflexible downward

C the market system ensures full employment.

D Say's law is invalid

8. Other things being equal, a decrease in an economy's exports will

A increase domestic aggregate expenditures and the equilibrium level of output

B decrease domestic aggregate expenditures and the equilibrium level of output

C have no impact on domestic aggregate expenditures or output

D change autonomous consumption

9. Potential output will decrease if

A there is an increase in the price level

B there is a decrease in the price level

C there is technological change that increases labor productivity

D workers choose shorter work schedules in order to enjoy more leisure time

10. A wage rate above what is necessary to attract a sufficient number of workers is known as a(n)

A inefficient wage

B market-clearing wage

C efficiency wage

D minimum wage

Explanation / Answer

Solution:

1) Technological progress occurs when the economy gets more output - a) without any more capital or labor

2) An increase in the capital stock will - b) shift the production function upward

3) Increases in net investment generally result in - d) higher levels of capital stock and lower levels of depreciation

4) Nations that borrow from abroad to support current consumption - c) sacrifice future consumption only if the investments are not profitable

5) Trade deficits always lead to future decreases in consumption if the trade deficits - d) require borrowing from abroad

6) To determine the change in the capital stock, the level of new investment must be adjusted for depreciation because some new investment - b) merely replaces existing, but worn out, capital

7) According to classical economists - c) the market system ensures full employment

8) Other things being equal, a decrease in an economy's exports will - a) increase domestic aggregate expenditures and the equilibrium level of output

9) Potential output will decrease if - d) workers choose shorter work schedules in order to enjoy more leisure time

10) A wage rate above what is necessary to attract a sufficient number of workers is known as a - c) efficiency wage

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