Macroeconomics Quiz for Week 1

Question 1

A competitive, profit-maximizing firm hires labor until the..

Answer 1

…price of output multiplied by the marginal product of labor equals the wage

Question 2

An increase in the supply of capital will … the rental price of capital and … the marginal product of labour

Answer 2

Decrease; increase

Question 3

An increase in the supply of capital will decrease what and increase what?

Answer 3

Decrease the rental price of capital and increase the marginal product of labour

Question 4

If output is described by the production function Y = AK^0.2L^0.8, then the production function has what returns to scale?

Answer 4

Constant

Question 5

Can government transfer payments be viewed as negative tax payments?

Answer 5

Yes

Question 6

Are government transfer payments included as part of government purchases, G?

Answer 6

No

Question 7

Are government transfer payments received as payment for inputs in the factor market?

Answer 7

No

Question 8

Do government transfer payments affect the level of public and private saving?

Answer 8

Yes

Question 9

National saving refers to…

Answer 9

income minus consumption minus government purchases

Question 10

If increased immigration raises the labour force, the long-run model predicts that the real wage will… and the reak rental price of capital will…

Answer 10

…the real wage will fall, and the real rental price of capital will rise

Question 11

If a technological advancement increases productivity, the long-run model predicts that the real wage will… and the reak rental price of capital will…

Answer 11

…both the real wage and the real rental price of capital will rise

Question 12

The government raises lump-sum taxes on income by £100 billion. If the marginal propensity to consume is 0.6, investment in long-run equilibrium…

Answer 12

…rises by £60 billion

Question 13

When exports exceed imports, all of the following are true except:
A. net exports are positive
B. domestic output exceeds domestic spending
C. net capital outflows are positive
D. domestic investment exceeds domestic saving.

Answer 13

D

Question 14

Based on a Cobb–Douglas production function and perfect capital mobility, capital should flow to economies in which…

Answer 14

…capital is relatively scarce

Question 15

The real exchange rate is determined by the equality of…

Answer 15

…net capital outflow and the demand for net exports

Question 16

In a Cobb–Douglas production function, the marginal product of capital will increase if:

A. the quantity of labor increases.

B. labor’s share of output increases.

C. average capital productivity decreases.

D. the quantity of capital increases.

Answer 16

A. because ∂Y/∂N = v/N 𝑌
if quantity of labour increases this means an increase in N. To keep the above equation constant, v must decrease. ∂Y/∂K = (1−v)/K Y. So, decrease in v would mean an increase in numerator which means larger ∂Y/∂K = larger MPC

Question 17

According to loanable funds market equilibrium for a closed market, when government spending increases and taxes increase by an equal amount, what happens to consumption and investment?

Answer 17

Consumption and investment decreases

Question 18

When exports exceed imports, all of the following are true except:
Group of answer choices

A. net exports are positive

B. domestic output exceeds domestic spending

C. net capital outflows are positive

D. domestic investment exceeds domestic saving.

Answer 18

D