2. If workers become more productive, which of the following would happen in the
ID: 1205848 • Letter: 2
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.
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
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
Explanation / Answer
2. d.Labor demand would decrease and so would labor supply.
When labor becomes productive it can do same amount of work with lesser number of workers.
5. c) paradoxically quite accurate in the long run; however, it is not very accurate in the short run
Assumptions of classical model like market correction, full employment etc, can be realized only in the long run.
18. a) cyclical unemployment. Due to market ups and downs , economy might not be on full employment level and hence cyclical unemployment arises.
22. e) None of the above. All others are de stabilizers.
b. taxes rise. This means increase in government revenue and hence one can expect an increase in government spending thereby increasing transfer payments.
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