2. If workers become more productive, which of the following would happen in the

Question

2. If workers become more productive, which of the following would happen in the labor market? a. Labor supply would increase. b.Labor supply would decrease. c.Labor demand would increase and labor supply would decrease. d.Labor demand would decrease and so would labor supply. 3.Which of the following could lead to an increase in worker productivity? a. a decrease in the physical capital stock b.an increase in the number of workers c. a war that destroys an enormous amount of plant and equipment d. an increase in the physical capital stock e. a decrease in the human capital stock 5.Since a long run consists of many short runs, the classical model is a. incorrect every time we look at output data b.accurate during the short run c. paradoxically quite accurate in the long run; however, it is not very accurate in the short run d. our best guide to fluctuations in the economy e. paradoxically quite accurate in the short run; however, it is not very accurate in the long run 10.Everything else equal, a higher interest rate a. increases consumption spending as people face increasing debt b.reduces consumption spending as people have a greater incentive to save c. does not change consumption spending because consumption is only affected by income d. does not change total consumption spending, but to change who does the spending e. reduces both consumption spending and saving as people face increased debt 14.In the short-run macro model, the change in inventories will a. equal output minus aggregate expenditures b. trigger a price change c. equal investment minus depreciation d. equal sales minus investment e. be matched by an equal and opposite change in the subsequent period 17. From the perspective of the classical model, many economists would say that the most important automatic stabilizer is a. Taxes b. Imports c. interest rates d. transfer payments e. passage of time 18.The difference between the number of workers employed if the economy was operating at full employment and the number of workers currently employed given aggregate expenditures is known as a. cyclical unemployment b. frictional unemployment c. structural unemployment d. unemployment is not possible in the short run macro model 22. From the perspective of the classical model, many economists would NOT consider one of these to be an automatic de-stabilizer a. Stock prices b. Wealth c. Housing prices d. Investment spending e. None of the above 25. We expect a rise in transfer payments when a. the needs of the poor receive more publicity b. taxes rise c. GDP rises and inflation soars d. the retirement age remains unchanged over time e. recessions occur 27.Individuals with low incomes probably a. pay no Social Security tax b. pay more Social Security tax than income tax c. pay less Social Security tax than personal income tax d. pay no taxes at all e. are avoiding most of their tax payments 28. Which of the following is true? a. The federal budget deficit is a flow and so is the national debt. b. The national debt is both a stock and a flow. c. The federal budget deficit is a stock and the national debt is a flow. d. The federal budget deficit is a flow and the national debt is a stock. e. The federal budget deficit is a stock and so is the national debt. 30. When the U.S. government runs a deficit, it usually does the following: a. it buys government bonds from the public b. it asks the Treasury Department to print money to pay for the deficit c. it sells new government bonds to the public d. it borrows money directly from the Federal Reserve e. it asks the Federal Reserve to print money to pay for the deficit 32. Under what condition can the U.S. government continue to pay interest on a rising debt without eventually needing to increase the average tax rate? a. if the national debt grows at the same rate as nominal GDP b. if the nominal interest on the national debt grows faster than nominal GDP c. if the total interest payments on the national debt grow faster than nominal GDP d. if the national debt grows faster than nominal GDP e. if the real interest on the national debt grows faster than real GDP 34.The national debt a. will be zero when the federal budget is balanced. b. has been shrinking in the last 30 years. c. is equal to the government’s budget deficit. d. can grow without negative economic effects. 36.In the long run, a. an increase in the federal budget deficit can lower the interest rate and investment spending. b. an increase in the federal budget deficit can raise the interest rate and investment spending. c. a decrease in the federal budget deficit can lower the interest rate and raise investment spending. d. a decrease in the federal budget deficit can raise the interest rate and lower investment spending. 44. If the Fed conducts open market purchases (of bonds), we should expect to see the money supply a. decrease, the interest rate increase, autonomous consumption decrease, business investment decrease, and real GDP decrease b. increase, the interest rate decrease, autonomous consumption decrease, business investment decrease, and real GDP decrease c. increase, the interest rate decrease, autonomous consumption increase, business investment increase, and real GDP increase d. decrease, the interest rate decrease, autonomous consumption increase, business investment increase, and real GDP decrease e. decrease, the interest rate increase, autonomous consumption increase, business investment increase, and real GDP increase 48. In the classical model the interest rate is determined in the money market; in the short-run macro model the interest rate is determined in the market for loanable funds. a. true b. false 50.If the price of a bond increases, the interest rate (or rate of return on the bond) decreases. a. True b. False

Explanation / Answer

2. c.Labor demand would increase and labor supply would decrease.

3. d. an increase in the physical capital stock

5. e. paradoxically quite accurate in the short run; however, it is not very accurate in the long run

10. b. reduces consumption spending as people have a greater incentive to save

14. d. equal sales minus investment

17. a. Taxes

44. c. increase, the interest rate decrease, autonomous consumption increase, business investment increase, and real GDP increase

50. a. True

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