Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster) Chapter 16
1 Household L and Firm o Behavior in o the k Macroecon omy: A Further
16.1
2 Hou sehol ds: Cons ump tion and Labo r Supp ly Deci sions
3 1
4 M h ul o ti i pl c e e C
1)
5 Househo lds are said to have positive wealth when A)
6 the market value of their assets is zero. B)
7 the value of their assets is greater than the debts they owe. C)
8 the value of their assets is equal to the debts they owe. D)
9 the value of their assets is less than the debts they owe. Answer:
10 B Diff: 1 Topic:
11 Households: Consumption and Labor Supply Decisions Skill:
12 Conceptual AACSB:
13 Reflective Thinking
2)
14 Generall y speaking, wealth A)
15 starts out negative, turns positive, then approaches zero near the end of life. B)
16 starts out positive, turns negative, then turns positive again near the end of life. C)
17 starts out zero, turns positive, then turns negative near the end of life. D)
18 starts out negative, approaches zero, then turns negative again near the end of life. Answer:
19 A Diff: 1 Topic:
20 Households: Consumption and Labor Supply Decisions Skill:
21 Conceptual AACSB:
22 Reflective Thinking
3)
23 The idea of the ______is that people make lifetime consumption plans. A)
24 life-cycle theory of consumption B)
25 invisible hand C)
26 law of demand D)
27 classical theory of investment Answer:
28 A Diff: 1 Topic:
29 Households: Consumption and Labor Supply Decisions Skill:
30 Conceptual AACSB:
31 Reflective Thinking
4)
32 Accordin life-cycle theory of consumption, people tend to consume ______they earn during their main g to the working years. A)
33 more than B)
34 less than C)
35 the same as D)
36 an amount unrelated to what Answer:
37 B Diff: 1 Topic:
38 Households: Consumption and Labor Supply Decisions Skill:
39 Conceptual AACSB:
40 Reflective Thinking
41 5)
42 Accordin life-cycle theory of consumption, people tend to consume ______they earn during their early g to the and later years. A)
43 more than B)
44 less than C)
45 the same as D)
46 an amount unrelated to what Answer:
47 A Diff: 1 Topic:
48 Households: Consumption and Labor Supply Decisions Skill:
49 Conceptual AACSB:
50 Reflective Thinking
6)
51 Accordin life-cycle theory of consumption, people tend to ______during their main working years. g to the A)
52 save B)
53 dissave C)
54 consume more than they earn D)
55 accumulate negative wealth Answer:
56 A Diff: 1 Topic:
57 Households: Consumption and Labor Supply Decisions Skill:
58 Conceptual AACSB:
59 Reflective Thinking
7)
60 Accordin g to the life-cycle theory of consumption, people tend to dissave during their ______years. A)
61 main working B)
62 early C)
63 later D)
64 both B and C Answer:
65 D Diff: 1 Topic:
66 Households: Consumption and Labor Supply Decisions Skill:
67 Conceptual AACSB:
68 Reflective Thinking
8)
69 The path of consumption over a lifetime is likely to be ______the path of income. A)
70 much more stable than B)
71 much less stable than C)
72 about the same as D)
73 completely unrelated to Answer:
74 A Diff: 1 Topic:
75 Households: Consumption and Labor Supply Decisions Skill:
76 Conceptual AACSB:
77 Reflective Thinking
78 9)
79 The larger the percentage of people who work, the ______output per capita. A)
80 higher the potential B)
81 lower the potential C)
82 higher the actual D)
83 lower the actual Answer:
84 A Diff: 1 Topic:
85 Households: Consumption and Labor Supply Decisions Skill:
86 Conceptual AACSB:
87 Reflective Thinking
10)
88 The average level of one's expected future income stream is A)
89 disposable income. B)
90 permanent income. C)
91 gross income. D)
92 taxable income. Answer:
93 B Diff: 1 Topic:
94 Households: Consumption and Labor Supply Decisions Skill:
95 Definition
11)
96 A medical student is likely to consume more than a high school student because the A)
97 medical student bases consumption on current income while the high school student does not. B)
98 high school student bases consumption on permanent income while the medical student does not. C)
99 medical permanent income is likely higher than the high school student's permanent income. student's D)
100 medical student and the high school student both base consumption on current income. Answer:
101 C Diff: 2 Topic:
102 Households: Consumption and Labor Supply Decisions Skill:
103 Conceptual AACSB:
104 Reflective Thinking
12)
105 Permane nt income is A)
106 current income. B)
107 expected future income. C)
108 the average level of expected future income. D)
109 accumulated wealth. Answer:
110 C Diff: 1 Topic:
111 Households: Consumption and Labor Supply Decisions Skill:
112 Definition
113 13)
114 A change in tax rates is likely to affect individuals' behavior regarding consumption and saving if A)
115 the change is for one year only. B)
116 the change is not too big. C)
117 the change will not increase the budget deficit. D)
118 the change is permanent. Answer:
119 D Diff: 2 Topic:
120 Households: Consumption and Labor Supply Decisions Skill:
121 Conceptual AACSB:
122 Reflective Thinking
14)
123 The opportunity cost of leisure will rise if A)
124 the wage rate increases. B)
125 the wage rate decreases. C)
126 nonlabor income increases. D)
127 nonlabor income decreases. Answer:
128 A Diff: 1 Topic:
129 Households: Consumption and Labor Supply Decisions Skill:
130 Conceptual AACSB:
131 Reflective Thinking
15)
132 The substitution effect of a wage rate increase suggests that A)
133 individuals will supply more work. B)
134 individuals will supply less work. C)
135 individuals will consume more leisure. D)
136 individuals will supply more work and consume more leisure. Answer:
137 A Diff: 2 Topic:
138 Households: Consumption and Labor Supply Decisions Skill:
139 Conceptual AACSB:
140 Reflective Thinking
16)
141 The income effect of a wage rate increase should lead to A)
142 an increase in the quantity of labor supplied and a decrease in leisure. B)
143 an increase in the quantity of labor supplied and an increase in leisure. C)
144 a decrease in quantity of labor supplied and an increase in leisure. D)
145 a decrease in the quantity of labor supplied and a decrease in leisure. Answer:
146 C Diff: 2 Topic:
147 Households: Consumption and Labor Supply Decisions Skill:
148 Conceptual AACSB:
149 Reflective Thinking
150 17)
151 If the income effect is less than the substitution effect and the wage rate increases, individuals A)
152 will supply more work. B)
153 will supply less work. C)
154 will consume more leisure. D)
155 cannot be determined from the given information Answer:
156 A Diff: 2 Topic:
157 Households: Consumption and Labor Supply Decisions Skill:
158 Conceptual AACSB:
159 Reflective Thinking
18)
160 If the income effect is greater than the substitution effect, the labor supply curve A)
161 is horizontal. B)
162 is vertical. C)
163 has a negative slope. D)
164 has a positive slope. Answer:
165 C Diff: 2 Topic:
166 Households: Consumption and Labor Supply Decisions Skill:
167 Conceptual AACSB:
168 Reflective Thinking
19)
169 If the income effect is equal to the substitution effect, the labor supply curve A)
170 is horizontal. B)
171 is vertical. C)
172 has a negative slope. D)
173 has a positive slope. Answer:
174 B Diff: 2 Topic:
175 Households: Consumption and Labor Supply Decisions Skill:
176 Conceptual AACSB:
177 Reflective Thinking
20)
178 Mickey raise from $14 an hour to $20 an hour. As a result of the wage increase, Mickey desires to work got a more hours and take less hours of leisure. For Mickey A)
179 the substitution effect dominates the income effect. B)
180 the income effect dominates the substitution effect. C)
181 the substitution effect must equal the income effect. D)
182 the substitution effect must be zero. Answer:
183 A Diff: 2 Topic:
184 Households: Consumption and Labor Supply Decisions Skill:
185 Analytic AACSB:
186 Analytic Skills
187 21)
188 Caroline' wage rate was reduced from $22 to $16. As a result of the wage decrease, Caroline desires to s hourly work more hours and take fewer hours of leisure. For Caroline A)
189 the income effect must be zero. B)
190 the substitution effect dominates the income effect. C)
191 the income effect dominates the substitution effect. D)
192 the substitution effect must equal the income effect. Answer:
193 C Diff: 2 Topic:
194 Households: Consumption and Labor Supply Decisions Skill:
195 Analytic AACSB:
196 Analytic Skills
22)
197 Empirica l evidence with respect to the labor supply decision suggests that A)
198 the income dominate for most people, which means that the aggregate labor supply responds effect seems to negatively to an increase in the wage rate. B)
199 the effect seems to dominate for most people, which means that the aggregate labor supply substitution responds positively to an increase in the wage rate. C)
200 the effect seems to dominate for most people, which means that the aggregate labor supply substitution responds negatively to an increase in the wage rate. D)
201 the income dominate for most people, which means that the aggregate labor supply responds effect seems to positively to an increase in the wage rate. Answer:
202 B Diff: 2 Topic:
203 Households: Consumption and Labor Supply Decisions Skill:
204 Fact
23)
205 If the wage rate falls, consumption A)
206 rises because and substitution effects are working in opposite directions to change consumption. the income B)
207 falls because and substitution effects are both working in the same direction to decrease consumption. the income C)
208 rises because and substitution effects are both working in the same direction to increase consumption. the income D)
209 falls because and substitution effects are working in opposite directions to change consumption. the income Answer:
210 B Diff: 2 Topic:
211 Households: Consumption and Labor Supply Decisions Skill:
212 Conceptual AACSB:
213 Reflective Thinking
24)
214 The wage rate that is adjusted for changes in the price level over time is the A)
215 expected future wage rate. B)
216 nominal wage rate. C)
217 real wage rate. D)
218 money wage rate. Answer:
219 C Diff: 1 Topic:
220 Households: Consumption and Labor Supply Decisions Skill:
221 Definition
222 25)
223 Arnold's wage increased by 3%, and the prices of goods that Arnold buys increased by 5%. Arnold's real nominal wage has A)
224 increased. B)
225 remained constant. C)
226 decreased. D)
227 changed by 8%, but the direction of the change is ambiguous. Answer:
228 C Diff: 1 Topic:
229 Households: Consumption and Labor Supply Decisions Skill:
230 Conceptual AACSB:
231 Reflective Thinking
26)
232 When the substitution effect is greater than the income effect, Juanita will not supply more work if A)
233 the wage rate and the price level increase proportionately. B)
234 the percentage increase in the price level is greater than the percentage change in wages. C)
235 wages are falling faster than prices. D)
236 all of the above Answer:
237 D Diff: 1 Topic:
238 Households: Consumption and Labor Supply Decisions Skill:
239 Conceptual AACSB:
240 Reflective Thinking
Refer to the information provided in Table 16.1 below to answer the questions that follow.
Table 16.1
27)
241 Refer to Table 16.1. What is the real wage rate in 2007 using 2006 as the base year? A)
242 $9.80 B)
243 $7.14 C)
244 $10.00 D)
245 $14.00 Answer:
246 B Diff: 2 Topic:
247 Households: Consumption and Labor Supply Decisions Skill:
248 Analytic AACSB:
249 Analytic Skills
28)
250 Refer to Table 16.1. What is the real wage rate in 2008 using 2006 as the base year? A)
251 $8.86 B)
252 $13.30 C)
253 $6.84 D)
254 $9.29 Answer:
255 C Diff: 2 Topic:
256 Households: Consumption and Labor Supply Decisions Skill:
257 Analytic AACSB:
258 Analytic Skills
29)
259 Refer to Table 16.1. What is the real wage rate in 2008 using 2007 as the base year? A)
260 $9.28 B)
261 $17.64 C)
262 $19.00 D)
263 $9.58 Answer:
264 D Diff: 3 Topic:
265 Households: Consumption and Labor Supply Decisions Skill:
266 Analytic AACSB:
267 Analytic Skills
30)
268 Refer to Table 16.1. What is the real wage rate in 2006 using 2008 as the base year? A)
269 $6.84 B)
270 $13.30 C)
271 $6.00 D)
272 $11.40 Answer:
273 B Diff: 3 Topic:
274 Households: Consumption and Labor Supply Decisions Skill:
275 Analytic AACSB:
276 Analytic Skills
31)
277 Refer to Table 16.1. From 2006 to 2008 nominal wages A)
278 rise. B)
279 fall. C)
280 stay the same. D)
281 rise then fall. Answer:
282 A Diff: 1 Topic:
283 Households: Consumption and Labor Supply Decisions Skill:
284 Analytic AACSB:
285 Analytic Skills
32)
286 Refer to Table 16.1. From 2006 to 2008 the real wage A)
287 rises. B)
288 falls. C)
289 stays the same. D)
290 rises then falls. Answer:
291 D Diff: 1 Topic:
292 Households: Consumption and Labor Supply Decisions Skill:
293 Analytic AACSB:
294 Analytic Skills
33)
295 Refer to Table 16.1. From 2007 to 2008 the real wage A)
296 rises. B)
297 falls. C)
298 stays the same. D)
299 rises then falls. Answer:
300 B Diff: 2 Topic:
301 Households: Consumption and Labor Supply Decisions Skill:
302 Analytic AACSB:
303 Analytic Skills
34)
304 Holding everything else constant, the more wealth a household has, A)
305 the less it will consume, both now and in the future. B)
306 the more it will consume now, but the less it will consume in the future. C)
307 the less it will consume now, but the more it will consume in the future. D)
308 the more it will consume, both now and in the future. Answer:
309 D Diff: 2 Topic:
310 Households: Consumption and Labor Supply Decisions Skill:
311 Conceptual AACSB:
312 Reflective Thinking
35)
313 Which of the following is an example of nonlabor income? A)
314 proprietors' income B)
315 wages C)
316 inheritance D)
317 a month-pay bonus Answer:
318 C Diff: 1 Topic:
319 Households: Consumption and Labor Supply Decisions Skill:
320 Conceptual AACSB:
321 Reflective Thinking
36)
322 An ed decrease in nonlabor income will have ______effect on a household's consumption. unexpect A)
323 an uncertain B)
324 a negative C)
325 a positive D)
326 no Answer:
327 B Diff: 1 Topic:
328 Households: Consumption and Labor Supply Decisions Skill:
329 Conceptual AACSB:
330 Reflective Thinking
37)
331 An unexpected decrease in wealth or nonlabor income leads to A)
332 an uncertain effect on labor supply. B)
333 an increase in labor supply. C)
334 a decrease in labor supply. D)
335 a zero effect on labor supply. Answer:
336 B Diff: 1 Topic:
337 Households: Consumption and Labor Supply Decisions Skill:
338 Conceptual AACSB:
339 Reflective Thinking
340 38)
341 Which of the following causes an individual to increase his/her supply of labor? A)
342 a decrease in the real wage B)
343 an increase in his/her wealth C)
344 a decrease in nonlabor income D)
345 Both A and C are correct. Answer:
346 C Diff: 1 Topic:
347 Households: Consumption and Labor Supply Decisions Skill:
348 Conceptual AACSB:
349 Reflective Thinking
39)
350 A rise in the interest rate A)
351 decreases the opportunity cost of consuming today. B)
352 increases the opportunity cost of consuming in the future. C)
353 increases the opportunity cost of consuming today. D)
354 decreases the opportunity cost of consuming in the future. Answer:
355 C Diff: 1 Topic:
356 Households: Consumption and Labor Supply Decisions Skill:
357 Fact
40)
358 When interest rates increase, the substitution effect suggests that individuals will A)
359 consume less today. B)
360 save less today. C)
361 consume less in the future. D)
362 save more and consume more today. Answer:
363 A Diff: 2 Topic:
364 Households: Consumption and Labor Supply Decisions Skill:
365 Conceptual AACSB:
366 Reflective Thinking
41)
367 Assume households have positive wealth. Which of the following explains how the income effect of an that interest rate increase affects consumption? A)
368 As the interest the opportunity cost of current consumption falls, and therefore current consumption rate increases, increases. B)
369 As the interest rate increases, permanent income increases and future consumption increases. C)
370 As the interest rate increases, expected future income increases and future consumption increases. D)
371 As the interest rate increases, nonlabor income increases and current consumption increases. Answer:
372 D Diff: 2 Topic:
373 Households: Consumption and Labor Supply Decisions Skill:
374 Analytic AACSB:
375 Analytic Skills
376 42)
377 At the Joey planned to buy a new iPhone, LCD TV, and motorcycle by borrowing money. Joey already beginnin owes $25,000 on other loans. He also planned to buy new clothing and DVDs out of current g of 2008, income. An increase in interest rates, during 2008, will most likely A)
378 cause Joey to borrow less money, but not change what he planned to spend on goods purchased with decide to current income. B)
379 cause Joey to borrow more money and to spend more on goods purchased with current income. decide to C)
380 cause Joey to borrow more money, but not change what he planned to spend on goods purchased with decide to current income. D)
381 cause Joey to decide to borrow less money and to spend less on goods purchased with current income. Answer:
382 D Diff: 3 Topic:
383 Households: Consumption and Labor Supply Decisions Skill:
384 Analytic AACSB:
385 Analytic Skills
43)
386 Assume Brenda has positive wealth. As the interest rate decreased, Brenda reduced her current that consumption. For Brenda, A)
387 the substitution effect of an interest rate decrease outweighs the income effect B)
388 the income effect of an interest rate decrease outweighs the substitution effect. C)
389 the substitution effect of an interest rate increase must be zero. D)
390 the income effect of an interest rate decrease must equal the substitution effect. Answer:
391 B Diff: 2 Topic:
392 Households: Consumption and Labor Supply Decisions Skill:
393 Conceptual AACSB:
394 Reflective Thinking
44)
395 If an individual is a debtor, A)
396 the substitution effect of an interest rate increase is zero. B)
397 the income effect of an interest rate increase is zero. C)
398 the income and substitution effects of an increase in the interest rate work in the same direction. D)
399 the income and substitution effects of an increase in the interest rate work in opposite directions. Answer:
400 C Diff: 2 Topic:
401 Households: Consumption and Labor Supply Decisions Skill:
402 Fact
45)
403 Assume substitution effect dominates the income effect. When the government raises tax rates, after-tax that the real wage rates A)
404 fall, consumption decreases, and labor supply increases. B)
405 fall, consumption decreases, and labor supply decreases. C)
406 rise, consumption increases, and labor supply increases. D)
407 fall, consumption increases, and labor supply decreases. Answer:
408 B Diff: 2 Topic:
409 Households: Consumption and Labor Supply Decisions Skill:
410 Conceptual AACSB:
411 Reflective Thinking
46)
412 Assume substitution effect dominates the income effect. An increase in both consumption and labor that the supply would result from A)
413 a decrease in tax rates. B)
414 a decrease in transfer payments. C)
415 an increase in tax rates. D)
416 an increase in transfer payments. Answer:
417 A Diff: 3 Topic:
418 Households: Consumption and Labor Supply Decisions Skill:
419 Analytic AACSB:
420 Analytic Skills
47)
421 A decrease in transfer payments will result in A)
422 a decrease in both consumption and labor supply. B)
423 a decrease in consumption and an increase in labor supply. C)
424 an increase in consumption and a decrease in labor supply. D)
425 an increase in both consumption and labor supply. Answer:
426 B Diff: 2 Topic:
427 Households: Consumption and Labor Supply Decisions Skill:
428 Conceptual AACSB:
429 Reflective Thinking
48)
430 An increase in consumption and a decrease in labor supply would result from A)
431 an increase in tax rates. B)
432 a decrease in transfer payments. C)
433 an increase in transfer payments. D)
434 a decrease in government spending. Answer:
435 C Diff: 2 Topic:
436 Households: Consumption and Labor Supply Decisions Skill:
437 Analytic AACSB:
438 Analytic Skills
49)
439 Which of the following causes an increase in labor supply? A)
440 when wages and the price level increase proportionately B)
441 a decrease in income tax rates C)
442 a decrease in the general price level D)
443 a decrease in transfer payments Answer:
444 D Diff: 2 Topic:
445 Households: Consumption and Labor Supply Decisions Skill:
446 Conceptual AACSB:
447 Reflective Thinking
448 50)
449 Which of the following factors is NOT one of the determinants of a household's budget constraint? A)
450 consumer's preferences B)
451 income C)
452 wealth D)
453 prices Answer:
454 A Diff: 1 Topic:
455 Households: Consumption and Labor Supply Decisions Skill:
456 Conceptual AACSB:
457 Reflective Thinking
51)
458 Empirica l data suggest that during recessions, individuals reduce more of their consumption of A)
459 nondurable goods. B)
460 durable goods. C)
461 services. D)
462 necessities. Answer:
463 B Diff: 1 Topic:
464 Households: Consumption and Labor Supply Decisions Skill:
465 Fact
52)
466 Over time, spending on ______is "smoother" than spending on ______. A)
467 durable goods; services B)
468 nondurable goods; durable goods C)
469 services; nondurable goods D)
470 durable goods; service Answer:
471 B Diff: 1 Topic:
472 Households: Consumption and Labor Supply Decisions Skill:
473 Fact
53)
474 When your income decreases, which of the following items are you likely to postpone buying first? A)
475 health insurance B)
476 food C)
477 new CD player D)
478 gas Answer:
479 C Diff: 1 Topic:
480 Households: Consumption and Labor Supply Decisions Skill:
481 Conceptual AACSB:
482 Reflective Thinking
483 54)
484 Purchase houses are the most volatile type of expenditures because they are very sensitive to ______, s of new which is highly volatile. A)
485 the interest rate B)
486 disposable income C)
487 the inflation rate D)
488 GDP Answer:
489 A Diff: 1 Topic:
490 Households: Consumption and Labor Supply Decisions Skill:
491 Fact
55)
492 The highest labor-force participation rate is among A)
493 prime-age women. B)
494 prime-age men C)
495 prime-age men and women. D)
496 non-prime- age men. Answer:
497 B Diff: 1 Topic:
498 Households: Consumption and Labor Supply Decisions Skill:
499 Fact
56)
500 The ained supply of labor refers to the amount a household ______within a given period at the unconstr current wage rate if it could find the work. A)
501 would like to work B)
502 chooses not to work C)
503 is forced to work D)
504 actually works Answer:
505 A Diff: 2 Topic:
506 Households: Consumption and Labor Supply Decisions Skill:
507 Definition
57)
508 The refers to the amount a household actually works within a given period at the current wage rate. ______A)
509 constrained supply of labor B)
510 labor-force participation rate C)
511 natural rate of unemployment D)
512 unconstrained supply of labor Answer:
513 A Diff: 2 Topic:
514 Households: Consumption and Labor Supply Decisions Skill:
515 Definition
58)
516 The largest increase in the labor-force participation rate since 1970 is among A)
517 prime-age men. B)
518 teenagers over the age of 16. C)
519 prime-age women. D)
520 males in their 20s. Answer:
521 C Diff: 1 Topic:
522 Households: Consumption and Labor Supply Decisions Skill:
523 Fact
524 59)
525 Assume ds have positive wealth. If the income effect is greater than the substitution effect, a decrease in househol interest rates will A)
526 increase saving and decrease consumption spending by households. B)
527 decrease saving and increase consumption spending by households. C)
528 decrease both saving and consumption spending by households. D)
529 increase both saving and consumption spending by households. Answer:
530 A Diff: 2 Topic:
531 Households: Consumption and Labor Supply Decisions Skill:
532 Analytic AACSB:
533 Analytic Skills
60)
534 If the substitution effect is greater than the income effect, a decrease in interest rates will A)
535 increase saving and decrease consumption spending by households. B)
536 decrease saving and increase consumption spending by households. C)
537 decrease both saving and consumption spending by households. D)
538 increase both saving and consumption spending by households. Answer:
539 B Diff: 2 Topic:
540 Households: Consumption and Labor Supply Decisions Skill:
541 Analytic AACSB:
542 Analytic Skills
61)
543 Monetar y policy is less effective than it was in the past because A)
544 investment has become less sensitive to interest rate changes. B)
545 the substitution effect of an interest rate change on consumption has increased. C)
546 the income effect of an interest rate change on consumption has increased. D)
547 the government deficit has decreased. Answer:
548 C Diff: 2 Topic:
549 Households: Consumption and Labor Supply Decisions Skill:
550 Fact
62)
551 Which of the following is TRUE of a change in nonlabor income? A)
552 There is no effect because a change in nonlabor income does not change the trade-off between work substitution and leisure. B)
553 There is no because a change in nonlabor income does not change the trade-off between work and income effect leisure. C)
554 There is no effect because a change in nonlabor income does not change a household's permanent substitution income. D)
555 There is no because a change in nonlabor income does not change a household's permanent income. income effect Answer:
556 A Diff: 3 Topic:
557 Households: Consumption and Labor Supply Decisions Skill:
558 Conceptual AACSB:
559 Reflective Thinking
560 63)
561 The portion of a corporation's profits that the firm pays out each period to shareholders is known as A)
562 capital gains. B)
563 dividends. C)
564 interest. D)
565 retained earnings. Answer:
566 B Diff: 1 Topic:
567 Households: Consumption and Labor Supply Decisions Skill:
568 Definition
64)
569 An increase in dividend payments will A)
570 have no effect on labor supply. B)
571 lead to an increase in labor supply. C)
572 lead to a decrease in labor supply. D)
573 either lead to decrease in labor supply depending on the relative magnitude of the income and an increase or substitution effects. Answer:
574 C Diff: 1 Topic:
575 Households: Consumption and Labor Supply Decisions Skill:
576 Conceptual AACSB:
577 Reflective Thinking
65)
578 If a ker wants to change taxes to encourage individuals to increase their labor supply, the policyma policymaker should A)
579 reduce taxes by a lump-sum amount. B)
580 increase taxes by a lump sum. C)
581 reduce the income tax rates that individuals pay. D)
582 increase the income tax rates that individuals pay. Answer:
583 C Diff: 3 Topic:
584 Households: Consumption and Labor Supply Decisions Skill:
585 Analytic AACSB:
586 Analytic Skills
66)
587 Which of the following is NOT a transfer payment? A)
588 social Security payments B)
589 welfare benefits C)
590 unemploymen t compensation D)
591 dividends Answer:
592 D Diff: 1 Topic:
593 Households: Consumption and Labor Supply Decisions Skill:
594 Conceptual AACSB:
595 Reflective Thinking
596 67)
597 Cash payments made by the government directly to households are A)
598 dividends. B)
599 transfer payments. C)
600 compensating differential payments. D)
601 national income payments. Answer:
602 B Diff: 1 Topic:
603 Households: Consumption and Labor Supply Decisions Skill:
604 Definition
68)
605 A decrease in nonlabor income leads to ______in consumption and ______in labor supply. A)
606 a decrease; a decrease B)
607 a decrease; an increase C)
608 an increase; a decrease D)
609 an increase; an increase Answer:
610 B Diff: 1 Topic:
611 Households: Consumption and Labor Supply Decisions Skill:
612 Conceptual AACSB:
613 Reflective Thinking
2
614 Tr s ue e /F al
1)
615 An ed decrease in nonlabor income will have a negative effect on a household's consumption. unexpect Answer:
616 TRUE Diff: 2 Topic:
617 Households: Consumption and Labor Supply Decisions Skill:
618 Conceptual AACSB:
619 Reflective Thinking
2)
620 The idea of the life-cycle theory of consumption is that people make lifetime consumption plans. Answer:
621 TRUE Diff: 1 Topic:
622 Households: Consumption and Labor Supply Decisions Skill:
623 Conceptual AACSB:
624 Reflective Thinking
3)
625 If the on effect dominates the income effect, an increase in transfer payments will have a positive substituti effect on both consumption and labor supply. Answer:
626 FALSE Diff: 2 Topic:
627 Households: Consumption and Labor Supply Decisions Skill:
628 Conceptual AACSB:
629 Reflective Thinking
4)
630 Accordin life-cycle theory of consumption, people tend to consume less than they earn during their main g to the working years. Answer:
631 TRUE Diff: 1 Topic:
632 Households: Consumption and Labor Supply Decisions Skill:
633 Conceptual AACSB:
634 Reflective Thinking
5)
635 The path of consumption over a lifetime is likely to be much more stable than the path of income. Answer:
636 TRUE Diff: 1 Topic:
637 Households: Consumption and Labor Supply Decisions Skill:
638 Conceptual AACSB:
639 Reflective Thinking
6)
640 Accordin g to the life-cycle theory of consumption, people tend to save during their main working years. Answer:
641 TRUE Diff: 1 Topic:
642 Households: Consumption and Labor Supply Decisions Skill:
643 Conceptual AACSB:
644 Reflective Thinking
7)
645 The real wage rate is the nominal wage rate adjusted for inflation since some base year. Answer:
646 TRUE Diff: 1 Topic:
647 Households: Consumption and Labor Supply Decisions Skill:
648 Definition
8)
649 If the rate increases, the substitution effect is for a person to work less and the income effect is for a wage person to take less leisure. Answer:
650 FALSE Diff: 1 Topic:
651 Households: Consumption and Labor Supply Decisions Skill:
652 Conceptual AACSB:
653 Reflective Thinking
9)
654 Generall y speaking, wealth starts out negative, turns positive, then approaches zero near the end of life. Answer:
655 TRUE Diff: 1 Topic:
656 Households: Consumption and Labor Supply Decisions Skill:
657 Conceptual AACSB:
658 Reflective Thinking
10)
659 The smaller the percentage of people who work, the higher the potential output per capita. Answer:
660 FALSE Diff: 1 Topic:
661 Households: Consumption and Labor Supply Decisions Skill:
662 Conceptual AACSB:
663 Reflective Thinking
11)
664 Any in nonlabor income unambiguously leads to a decrease in consumption and a decrease in labor increase supply. Answer:
665 FALSE Diff: 2 Topic:
666 Households: Consumption and Labor Supply Decisions Skill:
667 Conceptual AACSB:
668 Reflective Thinking
669 12)
670 A in corporate profits, resulting in a decline in dividend payments, will decrease consumption decrease and decrease labor supply. Answer:
671 FALSE Diff: 2 Topic:
672 Households: Consumption and Labor Supply Decisions Skill:
673 Conceptual AACSB:
674 Reflective Thinking
13)
675 Output to respond more to sales increases in high-output periods than in low-output periods, provided is likely that firms have enough capital and labor to support the output increase. Answer:
676 TRUE Diff: 2 Topic:
677 Households: Consumption and Labor Supply Decisions Skill:
678 Analytic AACSB:
679 Analytic Skills
16.2
680 Firm s: Inve stme nt and Emp loym ent Deci sions
681 1
682 M h ul o ti i pl c e e C
1)
683 Change in inventories equals the difference between A)
684 production and investment. B)
685 sales and investment. C)
686 production and sales. D)
687 investment and depreciation. Answer:
688 C Diff: 1 Topic:
689 Firms: Investment and Employment Decisions Skill:
690 Definition
2)
691 A capital-intensive technology is a technique of production that A)
692 uses a large amount of capital relative to labor. B)
693 uses a large amount of labor relative to capital. C)
694 relies entirely on physical inputs; no human labor is required. D)
695 is used only in cases where few skilled workers are available. Answer:
696 A Diff: 1 Topic:
697 Firms: Investment and Employment Decisions Skill:
698 Definition
3)
699 A firm that chooses to use a labor-intensive technology does so because A)
700 labor is cheaper than capital. B)
701 capital is cheaper than labor. C)
702 labor is relatively cheaper than capital. D)
703 capital is more productive than labor. Answer:
704 C Diff: 1 Topic:
705 Firms: Investment and Employment Decisions Skill:
706 Conceptual AACSB:
707 Reflective Thinking
708 4)
709 When a labor-intensive technology is used, an expansion is likely to A)
710 increase the demand for labor while increasing the demand for capital only modestly. B)
711 increase the demand for labor and decrease the demand for capital. C)
712 substantially increase the demand for both labor and capital. D)
713 substantially increase the demand for capital while increasing the demand for labor only modestly. Answer:
714 A Diff: 2 Topic:
715 Firms: Investment and Employment Decisions Skill:
716 Analytic AACSB:
717 Analytic Skills
5)
718 When forming their expectations, firms gather information about all the following factors EXCEPT A)
719 the projected demand for their specific line of products. B)
720 the overall health of the macroeconomy. C)
721 the future plans of their competitors. D)
722 the historical supply of their competitors' line of products. Answer:
723 D Diff: 2 Topic:
724 Firms: Investment and Employment Decisions Skill:
725 Conceptual AACSB:
726 Reflective Thinking
6)
727 The that was coined by John Maynard Keynes to describe the feelings of investors was the ______phrase of entrepreneurs. A)
728 optimism B)
729 animal spirits C)
730 pessimism D)
731 karma Answer:
732 B Diff: 1 Topic:
733 Firms: Investment and Employment Decisions Skill:
734 Fact
7)
735 The for investment to increase when aggregate output increases is the result of the ______effect. tendency A)
736 accelerator B)
737 multiplier C)
738 substitution D)
739 income Answer:
740 A Diff: 2 Topic:
741 Firms: Investment and Employment Decisions Skill:
742 Definition
743 8)
744 The for ______to decrease when ______decreases is the result of the accelerator effect. tendency A)
745 investment; aggregate output B)
746 consumption; investment C)
747 saving; consumption D)
748 aggregate output; saving Answer:
749 A Diff: 2 Topic:
750 Firms: Investment and Employment Decisions Skill:
751 Definition
9)
752 The costs that a firm incurs when it changes its production level are ______costs. A)
753 adjustment B)
754 accelerated C)
755 sunk D)
756 depreciation Answer:
757 A Diff: 1 Topic:
758 Firms: Investment and Employment Decisions Skill:
759 Definition
Refer to the information provided in Figure 16.1 below to answer the questions that follow.
Figure 16.1
10)
760 Refer to Figure 16.1. Which of the following could cause a movement from Point B to Point C? A)
761 an increase in the interest rate B)
762 positive growth in the GDP C)
763 negative growth in the GDP D)
764 a decrease in the interest rate Answer:
765 D Diff: 1 Topic:
766 Firms: Investment and Employment Decisions Skill:
767 Analytic AACSB:
768 Analytic Skills
769 11)
770 Refer to Figure 16.1. Which of the following could cause a movement from Point C to Point B? A)
771 an increase in the interest rate B)
772 positive growth in the GDP C)
773 negative growth in the GDP D)
774 a decrease in the interest rate Answer:
775 A Diff: 1 Topic:
776 Firms: Investment and Employment Decisions Skill:
777 Analytic AACSB:
778 Analytic Skills
12)
779 Refer to Figure 16.1. Growth in GDP causes a ______through the accelerator effect. A)
780 shift from I2 to I3 B)
781 shift from I3 to I2 C)
782 shift from Point C to Point B D)
783 shift from Point B to Point C Answer:
784 B Diff: 2 Topic:
785 Firms: Investment and Employment Decisions Skill:
786 Conceptual AACSB:
787 Reflective Thinking
13)
788 Refer to 16.1. If the economy is currently at Point C, pessimism about future growth in GDP moves the Figure economy to Point A)
789 B. B)
790 C. C)
791 D. D)
792 E. Answer:
793 D Diff: 2 Topic:
794 Firms: Investment and Employment Decisions Skill:
795 Analytic AACSB:
796 Analytic Skills
14)
797 Refer to 16.1. Suppose the economy is currently at Point B. If investors are optimistic about future Figure growth in GDP, investment A)
798 moves to Point C. B)
799 moves to Point A. C)
800 moves to Point D. D)
801 stays at Point B. Answer:
802 C Diff: 2 Topic:
803 Firms: Investment and Employment Decisions Skill:
804 Analytic AACSB:
805 Analytic Skills
806 15)
807 If a firm produce the same amount of output even after reducing its labor workforce, this implies that is able to the firm has A)
808 unplanned inventories. B)
809 excess capital. C)
810 excess labor. D)
811 planned inventories. Answer:
812 C Diff: 2 Topic:
813 Firms: Investment and Employment Decisions Skill:
814 Conceptual AACSB:
815 Reflective Thinking
16)
816 A firm is less likely to invest in new capital if A)
817 the productivity of capital is high. B)
818 it has no excess capital. C)
819 it does not expect future sales to grow. D)
820 it is expanding into new markets. Answer:
821 C Diff: 2 Topic:
822 Firms: Investment and Employment Decisions Skill:
823 Conceptual AACSB:
824 Reflective Thinking
17)
825 The yment rate does not tend to fall as soon as the economy pulls out of a recession. Which of the unemplo following best explains this? A)
826 Firms are labor, so as the economy pulls out of the recession, firms do not need to hire new workers holding excess immediately. B)
827 Firms' about the state of the economy increased prior to the economy pulling out of the optimism recession, so firms increased their employment earlier. C)
828 Firms are not able to find qualified workers to fill the job vacancies. D)
829 During periods, firms switch to more capital-intensive production techniques, so they do not recessionary need to increase employment as the economy pulls out of the recession. Answer:
830 A Diff: 3 Topic:
831 Firms: Investment and Employment Decisions Skill:
832 Analytic AACSB:
833 Analytic Skills
18)
834 Which of the following relationships is correct? A)
835 Stock of (End of Period) = Stock of Inventories (Beginning of Period) - Production + Sales Inventories B)
836 Stock of (End of Period) = Stock of Inventories (Beginning of Period) - Production - Sales Inventories C)
837 Stock of (End of Period) = Stock of Inventories (Beginning of Period) + Production - Sales Inventories D)
838 Stock of (End of Period) = Stock of Inventories (Beginning of Period) + Production + Sales Inventories Answer:
839 C Diff: 1 Topic:
840 Firms: Investment and Employment Decisions Skill:
841 Definition
842 19)
843 At the the Shades of Gray Company has 8,000 pairs of sunglasses in stock. During 2008, the company beginnin produces 120,000 pairs of sunglasses and sells 112,000 pairs of sunglasses. The Shades of Gray g of 2008, Company's stock of inventory at the end of 2008 is ______pairs of sunglasses. A)
844 0 B)
845 4,000 C)
846 8,000 D)
847 16,000 Answer:
848 D Diff: 2 Topic:
849 Firms: Investment and Employment Decisions Skill:
850 Analytic AACSB:
851 Analytic Skills
20)
852 The level of inventories is the level at which the extra cost (in lost sales) from lowering inventories desired by a small amount is A)
853 greater than the extra gain (in interest revenue and decreased storage costs). B)
854 zero. C)
855 less than the extra gain in (in interest revenue and decreased storage costs). D)
856 just equal to the extra gain (in interest revenue and decreased storage costs). Answer:
857 D Diff: 2 Topic:
858 Firms: Investment and Employment Decisions Skill:
859 Conceptual AACSB:
860 Reflective Thinking
21)
861 The Company rents space by the square foot in a warehouse to store its inventory. The owner of the Unique warehouse just doubled the rent he charges the Unique Toy Company. Everything else equal, Toy the rent increase is likely to ______Unique's optimal level of inventory. A)
862 not change B)
863 increase C)
864 decrease D)
865 reduce to zero Answer:
866 C Diff: 2 Topic:
867 Firms: Investment and Employment Decisions Skill:
868 Analytic AACSB:
869 Analytic Skills
22)
870 An unexpected increase in inventories has A)
871 no effect on future production. B)
872 a positive effect on future production. C)
873 a negative effect on current production. D)
874 a negative effect on future production. Answer:
875 D Diff: 2 Topic:
876 Firms: Investment and Employment Decisions Skill:
877 Conceptual AACSB:
878 Reflective Thinking
879 23)
880 If a firm's sales turn out to be more than expected, inventories will be A)
881 lower than expected, and there will be more production in the future. B)
882 lower than expected, and there will be less production in the future. C)
883 higher than expected, and there will be more production in the future. D)
884 higher than expected, and there will be less production in the future. Answer:
885 A Diff: 2 Topic:
886 Firms: Investment and Employment Decisions Skill:
887 Analytic AACSB:
888 Analytic Skills
24)
889 Which of the following statements is true? A)
890 Production and sales will fluctuate by the same amount and in the same direction over time. B)
891 Production will not fluctuate over time, but a firm's sales will fluctuate over time. C)
892 Production will fluctuate somewhat over time, but not as much as sales fluctuates over time. D)
893 Production and sales will both fluctuate by the same amount over time, but in different directions. Answer:
894 C Diff: 2 Topic:
895 Firms: Investment and Employment Decisions Skill:
896 Conceptual AACSB:
897 Reflective Thinking
25)
898 Due to increase in the birthrate, the Solid Wood Furniture Company expects an increase in the sale of an its cribs over the next few years. The Solid Wood Furniture Company will most likely A)
899 keep current production constant, but plan to increase production in the future. B)
900 increase current production. C)
901 decrease current production so that it can increase production in the future. D)
902 not change its current investment plans, but plan to increase investment in the future. Answer:
903 B Diff: 2 Topic:
904 Firms: Investment and Employment Decisions Skill:
905 Analytic AACSB:
906 Analytic Skills
26)
907 Generall y speaking, investment does ______when GDP does ______. A)
908 well; poorly B)
909 poorly; well C)
910 well; well D)
911 not change; well Answer:
912 C Diff: 1 Topic:
913 Firms: Investment and Employment Decisions Skill:
914 Conceptual AACSB:
915 Reflective Thinking
916 27)
917 Which of the following types of expenditures is more volatile than plant and equipment investment? A)
918 consumption of durable goods B)
919 consumption of services C)
920 housing investment D)
921 consumption of nondurable goods Answer:
922 C Diff: 1 Topic:
923 Firms: Investment and Employment Decisions Skill:
924 Fact
28)
925 Which of the following types of investments is the most volatile? A)
926 inventory investment B)
927 plant investment C)
928 housing investment D)
929 equipment investment Answer:
930 A Diff: 1 Topic:
931 Firms: Investment and Employment Decisions Skill:
932 Fact
29)
933 Producti vity fluctuates along a business cycle because A)
934 firms usually keep excess labor. B)
935 workers tend to become more productive during expansions. C)
936 workers tend to become less productive during expansions. D)
937 Both B and C are correct. Answer:
938 A Diff: 1 Topic:
939 Firms: Investment and Employment Decisions Skill:
940 Conceptual AACSB:
941 Reflective Thinking
30)
942 Provided firms have sufficient capital and labor to support an output increase, monetary and fiscal policy that are likely to be the most effective when A)
943 prices and inventory stocks are both high. B)
944 output and inventory stocks are both high. C)
945 output is low and inventory stocks are low. D)
946 output is low and inventory stocks are high. Answer:
947 C Diff: 2 Topic:
948 Firms: Investment and Employment Decisions Skill:
949 Conceptual AACSB:
950 Reflective Thinking
951 31)
952 If y stocks are low and firms have enough capital and labor to support an output increase, inventor A)
953 monetary and fiscal policy will be very effective. B)
954 fiscal policy will be effective, but monetary policy will be ineffective. C)
955 monetary policy will be effective, but fiscal policy will be ineffective. D)
956 neither monetary nor fiscal policy will be effective. Answer:
957 A Diff: 2 Topic:
958 Firms: Investment and Employment Decisions Skill:
959 Conceptual AACSB:
960 Reflective Thinking
32)
961 There is increase in aggregate demand, and firms do not have sufficient capital and labor to support an an output increase. In this case, inventory stocks will A)
962 continue to fall, and there will be a large increase in the price level. B)
963 continue to increase, and there will be a large increase in the price level. C)
964 continue to fall, and the price level will fall. D)
965 remain unchanged, and the price level will remain unchanged. Answer:
966 A Diff: 2 Topic:
967 Firms: Investment and Employment Decisions Skill:
968 Analytic AACSB:
969 Analytic Skills
33)
970 The two channels through which monetary policy can influence behavior in the goods market are A)
971 investment and government spending. B)
972 investment and consumption. C)
973 government spending and consumption. D)
974 taxation and investment. Answer:
975 B Diff: 2 Topic:
976 Firms: Investment and Employment Decisions Skill:
977 Conceptual AACSB:
978 Reflective Thinking
34)
979 If firms that a downturn in sales and output is temporary and that increased output will be needed in believe the future, they may choose to A)
980 fire all their workers. B)
981 sell off the plant. C)
982 close a plant permanently. D)
983 reassign their workers to different jobs. Answer:
984 D Diff: 2 Topic:
985 Firms: Investment and Employment Decisions Skill:
986 Conceptual AACSB:
987 Reflective Thinking
988 35)
989 At low output, the economy can expand with little or no increase in the overall price level because levels of A)
990 at low levels of output the aggregate supply curve is negatively sloped. B)
991 people will be expecting the price level to fall. C)
992 there is excess supply so prices are kept low. D)
993 firms likely labor and capital, and production can be increased without causing input prices to hold excess increase. Answer:
994 D Diff: 2 Topic:
995 Firms: Investment and Employment Decisions Skill:
996 Conceptual AACSB:
997 Reflective Thinking
36)
998 Which of the following is a way in which a firm can add to its capital stock? A)
999 expanding its labor force B)
1000 plant and equipment investment C)
1001 purchasing raw materials D)
1002 unplanned inventory disinvestment Answer:
1003 B Diff: 1 Topic:
1004 Firms: Investment and Employment Decisions Skill:
1005 Conceptual AACSB:
1006 Reflective Thinking
37)
1007 Purchase s by firms of additional machines, factories, or buildings within a given period is A)
1008 planned inventory investment. B)
1009 unplanned inventory investment. C)
1010 plant and equipment investment. D)
1011 investment in human capital. Answer:
1012 C Diff: 1 Topic:
1013 Firms: Investment and Employment Decisions Skill:
1014 Definition
38)
1015 Related to the Economics in Practice on p. 305 [617]: Lower home prices A)
1016 threaten the economy's growth by making consumers feel less wealthy. B)
1017 accelerate the economy's growth by making consumers feel more wealthy. C)
1018 threaten the economy's growth despite making consumers feel more wealthy. D)
1019 accelerate the economy's growth despite making consumers feel less wealthy. Answer:
1020 A Diff: 2 Topic:
1021 Firms: Investment and Employment Decisions: Economics in Practice Skill:
1022 Conceptual AACSB:
1023 Reflective Thinking
1024 39)
1025 Related to the Economics in Practice on p. 305 [617]: Lower home prices A)
1026 make it more difficult for home owners to borrow against the value of their homes. B)
1027 erode the value of banks' collateral. C)
1028 prompt banks to tighten lending standards. D)
1029 all of the above Answer:
1030 D Diff: 2 Topic:
1031 Firms: Investment and Employment Decisions: Economics in Practice Skill:
1032 Conceptual AACSB:
1033 Reflective Thinking
2
1034 Tr s ue e /F al
1)
1035 Accordin accelerator effect, there is a tendency for investment to decrease when aggregate output g to the decreases, thus accelerating the decline of output. Answer:
1036 TRUE Diff: 1 Topic:
1037 Firms: Investment and Employment Decisions Skill:
1038 Conceptual AACSB:
1039 Reflective Thinking
2)
1040 The most volatile type of investment is inventory investment. Answer:
1041 TRUE Diff: 1 Topic:
1042 Firms: Investment and Employment Decisions Skill:
1043 Fact
3)
1044 The level of inventories is the level at which the extra cost (in lost sales) from lowering inventories optimal by a small amount is greater than the gain (in interest revenue and decreased storage costs). Answer:
1045 FALSE Diff: 2 Topic:
1046 Firms: Investment and Employment Decisions Skill:
1047 Conceptual AACSB:
1048 Reflective Thinking
4)
1049 An unexpected increase in inventories has a negative effect on future production. Answer:
1050 TRUE Diff: 1 Topic:
1051 Firms: Investment and Employment Decisions Skill:
1052 Conceptual AACSB:
1053 Reflective Thinking
5)
1054 If the on effect is larger than the income effect, a decrease in tax rates will lead to an increase in the substituti labor supply. Answer:
1055 TRUE Diff: 2 Topic:
1056 Firms: Investment and Employment Decisions Skill:
1057 Analytic AACSB:
1058 Analytic Skills
1059 6)
1060 A nt tax cut of 10% would cause an increase in consumption, output, and the price level and a permane decrease in unemployment equal to that caused by a temporary tax cut of 10%. Answer:
1061 FALSE Diff: 2 Topic:
1062 Firms: Investment and Employment Decisions Skill:
1063 Analytic AACSB:
1064 Analytic Skills
7)
1065 Investme nt affects output, but output does not affect investment. Answer:
1066 FALSE Diff: 2 Topic:
1067 Firms: Investment and Employment Decisions Skill:
1068 Conceptual AACSB:
1069 Reflective Thinking
8)
1070 Labor technology is a production technique that uses a large amount of labor relative to capital. intensive Answer:
1071 TRUE Diff: 2 Topic:
1072 Firms: Investment and Employment Decisions Skill:
1073 Definition
9)
1074 Capital technology is a production technique that uses a small amount of capital relative to labor. intensive Answer:
1075 FALSE Diff: 2 Topic:
1076 Firms: Investment and Employment Decisions Skill:
1077 Definition
10)
1078 A phrase coined by John Maynard Keynes to describe investors' feelings is "Animal Spirits." Answer:
1079 TRUE Diff: 2 Topic:
1080 Firms: Investment and Employment Decisions Skill:
1081 Fact
11)
1082 The costs that a firm incurs when it changes its production level are adjustment costs. Answer:
1083 TRUE Diff: 1 Topic:
1084 Firms: Investment and Employment Decisions Skill:
1085 Definition
1086 16.3
1087 Prod 1
1088 M h ul o ti i pl c e e C
1)
1089 The amount of output produced by an average worker in one hour is A)
1090 a production quota. B)
1091 the marginal revenue product of labor. C)
1092 the marginal product of labor. D)
1093 labor productivity. Answer:
1094 D Diff: 1 Topic:
1095 Productivity and the Business Cycle Skill:
1096 Definition
2)
1097 Producti vity tends to A)
1098 rise during contractions. B)
1099 rise during expansions. C)
1100 fall during expansions. D)
1101 rise throughout the business cycle. Answer:
1102 B Diff: 1 Topic:
1103 Productivity and the Business Cycle Skill:
1104 Conceptual AACSB:
1105 Reflective Thinking
3)
1106 Producti vity tends to A)
1107 rise during contractions. B)
1108 fall during expansions. C)
1109 fall during contractions. D)
1110 rise throughout the business cycle. Answer:
1111 C Diff: 1 Topic:
1112 Productivity and the Business Cycle Skill:
1113 Conceptual AACSB:
1114 Reflective Thinking
4)
1115 Nancy's employs five workers. Each worker works eight hours per day. The five workers are able to Nail serve 20 customers per day. The labor productivity is therefore ______customer(s) per Salon person/hour. A)
1116 0.5 B)
1117 1 C)
1118 2 D)
1119 4 Answer:
1120 A Diff: 2 Topic:
1121 Productivity and the Business Cycle Skill:
1122 Analytic AACSB:
1123 Analytic Skills
1124 5)
1125 A firm is holding excess labor. This will A)
1126 increase the amount of capital employed. B)
1127 decrease the productivity of capital. C)
1128 increase labor productivity. D)
1129 reduce labor productivity. Answer:
1130 D Diff: 1 Topic:
1131 Productivity and the Business Cycle Skill:
1132 Conceptual AACSB:
1133 Reflective Thinking
6)
1134 During economic expansions, A)
1135 employment rises by a higher percentage than output, and the ratio of output to workers falls. B)
1136 output rises by a larger percentage than employment, and the ratio of output to workers rises. C)
1137 employment rises by a larger percentage than output, and the ratio of output to workers rises. D)
1138 output rises by a larger percentage than employment, and the ratio of output to workers falls. Answer:
1139 B Diff: 1 Topic:
1140 Productivity and the Business Cycle Skill:
1141 Conceptual AACSB:
1142 Reflective Thinking
7)
1143 During economic downswings, A)
1144 output falls faster than employment, and the ratio of output to workers falls. B)
1145 employment falls faster than output, and the ratio of output to workers falls. C)
1146 employment falls faster than output, and the ratio of output to workers rises. D)
1147 output falls faster than employment, and the ratio of output to workers rises. Answer:
1148 A Diff: 1 Topic:
1149 Productivity and the Business Cycle Skill:
1150 Conceptual AACSB:
1151 Reflective Thinking
8)
1152 When the economy is in a slump, labor productivity tends to fall because firms have A)
1153 excess capital. B)
1154 excess labor. C)
1155 too little capital. D)
1156 too little labor. Answer:
1157 B Diff: 1 Topic:
1158 Productivity and the Business Cycle Skill:
1159 Conceptual AACSB:
1160 Reflective Thinking
1161 9)
1162 Which of the following statements is TRUE? A)
1163 The long-run potential of the economy declines as output per worker falls during a recession. B)
1164 The long-run potential of the economy increases as output per worker rises during an expansion. C)
1165 The long-run the economy increases as output per worker rises during an expansion, but the long-run potential of potential of the economy doesn't change as output per worker falls during a recession. D)
1166 Changes in worker over the business cycle have nothing to do with the long-run potential of the output per economy. Answer:
1167 D Diff: 2 Topic:
1168 Productivity and the Business Cycle Skill:
1169 Conceptual AACSB:
1170 Reflective Thinking
10)
1171 When increases by 1%, the number of jobs does not tend to rise by 1% in the short run. Which of the output following statements represents one of the reasons why this is true? A)
1172 A firm is some of the increase in output by increasing the number of hours worked per job. likely to meet B)
1173 A firm is some of the increase in output by decreasing the number of hours worked per job. likely to meet C)
1174 Firms are likely to meet some of the increase in output by reducing labor productivity. D)
1175 Firms are part of the increase in output by eliminating any excess capital they may have. likely to meet Answer:
1176 A Diff: 2 Topic:
1177 Productivity and the Business Cycle Skill:
1178 Analytic AACSB:
1179 Analytic Skills
11)
1180 When increases by 1%, the unemployment rate does not tend to fall by 1% in the short run because output A)
1181 a firm is likely to meet some of the increase in output by increasing the number of hours worked per job. B)
1182 the number of people who become employed is less than the number of new jobs created. C)
1183 as output increases, the size of the labor force increases. D)
1184 all of the above Answer:
1185 D Diff: 2 Topic:
1186 Productivity and the Business Cycle Skill:
1187 Analytic AACSB:
1188 Analytic Skills
1189 Refer to the information provided in Figure 16.2 below to answer the questions that follow.
Figure 16.2
12)
1190 Refer to Figure 16.2. Between times t3 and t4, labor is A)
1191 more productive because growth in employment exceeds growth in output. B)
1192 more productive because growth in employment is less than growth in output. C)
1193 less productive because growth in employment exceeds growth in output. D)
1194 less productive because growth in employment is less than growth in output. Answer:
1195 B Diff: 3 Topic:
1196 Productivity and the Business Cycle Skill:
1197 Analytic AACSB:
1198 Analytic Skills
13)
1199 Refer to Figure 16.2. Labor productivity at time t3 is A)
1200 larger than labor productivity at time t1. B)
1201 less than labor productivity at time t4. C)
1202 larger than labor productivity at time t2. D)
1203 larger than labor productivity at time t2, but less than labor productivity at time t4. Answer:
1204 B Diff: 3 Topic:
1205 Productivity and the Business Cycle Skill:
1206 Analytic AACSB:
1207 Analytic Skills
14)
1208 Refer to Figure 16.2. Labor productivity at time t2 is A)
1209 larger than labor productivity at time t1. B)
1210 less than labor productivity at time t4. C)
1211 less than labor productivity at time t3. D)
1212 larger than labor productivity at time t1, but less than labor productivity at time t3. Answer:
1213 A Diff: 3 Topic:
1214 Productivity and the Business Cycle Skill:
1215 Analytic AACSB:
1216 Analytic Skills
1217 2
1218 Tr s ue e /F al
1)
1219 Producti fluctuates over the business cycle, tending to fall during expansions and rise during vity contractions. Answer:
1220 FALSE Diff: 1 Topic:
1221 Productivity and the Business Cycle Skill:
1222 Conceptual AACSB:
1223 Reflective Thinking
2)
1224 Labor productivity rises during a recession as firms retain their more experienced workers. Answer:
1225 FALSE Diff: 1 Topic:
1226 Productivity and the Business Cycle Skill:
1227 Conceptual AACSB:
1228 Reflective Thinking
3)
1229 As the starts to expand, labor productivity rises as firm start using any excess labor they kept during economy the recession. Answer:
1230 TRUE Diff: 1 Topic:
1231 Productivity and the Business Cycle Skill:
1232 Conceptual AACSB:
1233 Reflective Thinking
16.4
1234 The Short -Run Relat ions hip Betw een Outp ut and Une mplo yme nt
1235 1
1236 M h ul o ti i pl c e e C
1)
1237 Which of the following is TRUE of a change in dividend payments? A)
1238 There is no effect because a change in dividend payments does not change the trade-off between substitution work and leisure. B)
1239 There is no because a change in dividend payments does not change the trade-off between work and income effect leisure. C)
1240 There is no effect because a change in dividend payments does not change a household's permanent substitution income. D)
1241 There is no because a change in dividend payments does not change a household's permanent income effect income. Answer:
1242 A Diff: 3 Topic:
1243 The Relationship Between Output and Unemployment Skill:
1244 Analytic AACSB:
1245 Analytic Skills
1246 2)
1247 The government reduces the corporate profits tax. As a result, corporate profits increase. This will A)
1248 have no effect on households. B)
1249 increase the income of households, causing consumption to increase and labor supply to increase. nonlabor C)
1250 increase the income of households, causing consumption to increase and labor supply to decrease. nonlabor D)
1251 increase the income of households, causing consumption to increase and labor supply to increase or nonlabor decrease depending on the relative magnitude of the income and substitution effects. Answer:
1252 C Diff: 3 Topic:
1253 The Relationship Between Output and Unemployment Skill:
1254 Analytic AACSB:
1255 Analytic Skills
3)
1256 The government increases the corporate profits tax. As a result, corporate profits decrease. This will A)
1257 have no effect on households. B)
1258 decrease the income of households, causing consumption to decrease and labor supply to decrease. nonlabor C)
1259 decrease the income of households, causing consumption to decrease and labor supply to increase. nonlabor D)
1260 decrease the income of households, causing consumption to decrease and labor supply to decrease or nonlabor increase depending on the relative magnitude of the income and substitution effects. Answer:
1261 C Diff: 3 Topic:
1262 The Relationship Between Output and Unemployment Skill:
1263 Analytic AACSB:
1264 Analytic Skills
4)
1265 Okun's Law states that the unemployment rate decreases about A)
1266 1 percentage point for every 1% increase in GDP. B)
1267 3 percentage points for every 1% increase in GDP. C)
1268 1 percentage point for every 3% increase in GDP. D)
1269 1 percentage point for every 2% increase in GDP. Answer:
1270 C Diff: 1 Topic:
1271 The Relationship Between Output and Unemployment Skill:
1272 Fact
5)
1273 Accordin g to Okun's Law, if GDP increased by 6%, the unemployment rate would decrease by A)
1274 1 percentage point. B)
1275 2 percentage points. C)
1276 3 percentage points. D)
1277 6 percentage points. Answer:
1278 B Diff: 1 Topic:
1279 The Relationship Between Output and Unemployment Skill:
1280 Analytic AACSB:
1281 Analytic Skills
6)
1282 If Okun's holds true, then a 9% increase in GDP would lead to a ______percentage point decrease in Law the unemployment rate. A)
1283 3 B)
1284 2 C)
1285 1 D)
1286 6 Answer:
1287 A Diff: 1 Topic:
1288 The Relationship Between Output and Unemployment Skill:
1289 Analytic AACSB:
1290 Analytic Skills
7)
1291 Althoug relationship between output and the unemployment rate is not as simple as Okun's Law h the represents it to be, it is true that A)
1292 a 1% increase in output tends to correspond to a greater than 1% decrease in the unemployment rate. B)
1293 a 1% increase in output tends to correspond to a less than 1% decrease in the unemployment rate. C)
1294 a 1% increase in output tends to correspond to a 1% decrease in the unemployment rate. D)
1295 a 1% increase in output will have no effect on the unemployment rate. Answer:
1296 B Diff: 1 Topic:
1297 The Relationship Between Output and Unemployment Skill:
1298 Fact
8)
1299 Okun's Law has A)
1300 been proven completely incorrectthere isn't a negative relationship between GDP and the to be unemployment rate. B)
1301 proven to be time in that as GDP increases by 3%, there has been a 1 percentage point decline in correct over unemployment. C)
1302 not turned out lawthe relationship between changes in GDP and the unemployment rate is more to be a complex than Okun's Law indicates. D)
1303 been proven there is a positive relationship between changes in GDP and the unemployment rate. false, because Answer:
1304 C Diff: 1 Topic:
1305 The Relationship Between Output and Unemployment Skill:
1306 Fact
9)
1307 Which of following is NOT one of the "slippages" between changes in output and changes in the the unemployment rate? A)
1308 As the size of the labor force increases, the interest rate increases, and therefore output falls. B)
1309 The percentage increase in the number of jobs is less than the percentage increase in output. C)
1310 The labor force increases when output increases. D)
1311 The change in the number of jobs and the change in the number of people employed are not equal. Answer:
1312 A Diff: 2 Topic:
1313 The Relationship Between Output and Unemployment Skill:
1314 Conceptual AACSB:
1315 Reflective Thinking
10)
1316 An increase in output will cause the unemployment rate to fall by a larger percentage if A)
1317 firms are holding excess labor. B)
1318 firms aren't holding excess labor. C)
1319 firms have their workers work more overtime. D)
1320 firms hire workers who were already employed by other firms to work for them part-time. Answer:
1321 B Diff: 2 Topic:
1322 The Relationship Between Output and Unemployment Skill:
1323 Analytic AACSB:
1324 Analytic Skills
11)
1325 In general, the relationship between output and unemployment A)
1326 has been quite stable over the long run. B)
1327 depends on the state of the economy at the time of the output change. C)
1328 has been completely unpredictable over time. D)
1329 is a simple one, as represented by Okun's Law. Answer:
1330 B Diff: 1 Topic:
1331 The Relationship Between Output and Unemployment Skill:
1332 Conceptual AACSB:
1333 Reflective Thinking
12)
1334 People who have two jobs, A)
1335 are counted twice in the job data, but only once in the persons-employed data. B)
1336 are counted twice in both the job data and the persons-employed data. C)
1337 are counted once in the job data, but twice in the persons-employed data. D)
1338 are counted once in both the job data and the persons-employed data. Answer:
1339 A Diff: 1 Topic:
1340 The Relationship Between Output and Unemployment Skill:
1341 Fact
13)
1342 The between output and the unemployment rate occurs because the unemployment rate is slippage calculated from data on A)
1343 the number of jobs. B)
1344 the number of people who do not want to work. C)
1345 the number of people employed. D)
1346 the civilian adult population. Answer:
1347 C Diff: 1 Topic:
1348 The Relationship Between Output and Unemployment Skill:
1349 Fact
14)
1350 The unemployment rate is A)
1351 the difference between the number of people in the labor force and the number of people employed. B)
1352 one plus the employment rate. C)
1353 one minus the employment rate. D)
1354 the ratio of the labor force to the number of people unemployed. Answer:
1355 C Diff: 1 Topic:
1356 The Relationship Between Output and Unemployment Skill:
1357 Definition
15)
1358 The employment rate is the ratio of the number of people A)
1359 unemployed to the number of people employed. B)
1360 unemployed to the number of people in the labor force. C)
1361 in the labor force to the number of people employed. D)
1362 employed to the number of people in the labor force. Answer:
1363 D Diff: 1 Topic:
1364 The Relationship Between Output and Unemployment Skill:
1365 Definition
16)
1366 If the of people employed is 190 million and the number of people in the labor force is 200 million, number then the employment rate is A)
1367 5%. B)
1368 10%. C)
1369 90%. D)
1370 95%. Answer:
1371 D Diff: 1 Topic:
1372 The Relationship Between Output and Unemployment Skill:
1373 Analytic AACSB:
1374 Analytic Skills
17)
1375 If the employment rate is 93%, then the unemployment rate is A)
1376 7%. B)
1377 13%. C)
1378 97%. D)
1379 unknown based on the information given. Answer:
1380 A Diff: 1 Topic:
1381 The Relationship Between Output and Unemployment Skill:
1382 Analytic AACSB:
1383 Analytic Skills
18)
1384 The in the measured unemployment rate that results when people who want to work, but who decline cannot find work, drop out of the ranks of the unemployed and the labor force is the A)
1385 leisure- preference effect. B)
1386 discouraged- worker effect. C)
1387 surplus labor effect. D)
1388 disguised unemployment effect. Answer:
1389 B Diff: 2 Topic:
1390 The Relationship Between Output and Unemployment Skill:
1391 Conceptual AACSB:
1392 Reflective Thinking
1393 19)
1394 If ged workers were counted as unemployed, then as output increased the unemployment rate discoura would A)
1395 not change at all. B)
1396 fall by more than if discouraged workers are not counted as unemployed. C)
1397 fall by less than if discouraged workers are not counted as unemployed. D)
1398 increase by less than if discouraged workers are not counted as unemployed. Answer:
1399 B Diff: 1 Topic:
1400 The Relationship Between Output and Unemployment Skill:
1401 Conceptual AACSB:
1402 Reflective Thinking
20)
1403 The d unemployment rate does not fall as much as one might expect when output increases measure because, as the economy expands, A)
1404 more people enter the labor force. B)
1405 firms want to hire additional workers. C)
1406 more people find jobs. D)
1407 more people leave the labor force. Answer:
1408 A Diff: 1 Topic:
1409 The Relationship Between Output and Unemployment Skill:
1410 Conceptual AACSB:
1411 Reflective Thinking
21)
1412 As the expands, the labor force ______, and as the economy contracts, the labor force ______. economy A)
1413 increases; decreases B)
1414 increases; increases C)
1415 decreases; decreases D)
1416 decreases; increases Answer:
1417 A Diff: 1 Topic:
1418 The Relationship Between Output and Unemployment Skill:
1419 Conceptual AACSB:
1420 Reflective Thinking
2
1421 Tr s ue e /F al
1)
1422 Recent and data have shown that the relationship between output and unemployment is as stable as research Okun's Law predicts. Answer:
1423 FALSE Diff: 1 Topic:
1424 The Relationship Between Output and Unemployment Skill:
1425 Fact
2)
1426 When an economy expands the unemployment rate is slow to drop because the labor force expands too. Answer:
1427 TRUE Diff: 1 Topic:
1428 The Relationship Between Output and Unemployment Skill:
1429 Conceptual AACSB:
1430 Reflective Thinking
1431 3)
1432 When firms hold excess labor, the unemployment rate drops faster during an expansion. Answer:
1433 FALSE Diff: 1 Topic:
1434 The Relationship Between Output and Unemployment Skill:
1435 Conceptual AACSB:
1436 Reflective Thinking
4)
1437 The relationship between output growth and unemployment depends on the state of the economy. Answer:
1438 TRUE Diff: 1 Topic:
1439 The Relationship Between Output and Unemployment Skill:
1440 Conceptual AACSB:
1441 Reflective Thinking
5)
1442 For every 3% growth in output, the unemployment rate always declines 1%. Answer:
1443 FALSE Diff: 1 Topic:
1444 The Relationship Between Output and Unemployment Skill:
1445 Fact
16.5
1446 The 1
1447 M h ul o ti i pl c e e C
1)
1448 Firms that their workers are working six hours of overtime per week. The government reports that report the unemployment rate is 3.5%. In this situation, the multiplier is likely to be A)
1449 negative. B)
1450 large. C)
1451 small. D)
1452 infinitely large. Answer:
1453 C Diff: 2 Topic:
1454 The Size of the Multiplier Skill:
1455 Conceptual AACSB:
1456 Reflective Thinking
2)
1457 As the economy approaches full employment, the size of the multiplier will A)
1458 remain unchanged. B)
1459 become negative. C)
1460 become larger. D)
1461 become smaller. Answer:
1462 D Diff: 1 Topic:
1463 The Size of the Multiplier Skill:
1464 Conceptual AACSB:
1465 Reflective Thinking
1466 3)
1467 The government spending multiplier is likely to be smaller during periods of A)
1468 high output and high unemployment. B)
1469 high output and low unemployment. C)
1470 low output and low unemployment. D)
1471 low output and high unemployment. Answer:
1472 B Diff: 1 Topic:
1473 The Size of the Multiplier Skill:
1474 Conceptual AACSB:
1475 Reflective Thinking
4)
1476 The government spending multiplier is likely to be larger during periods of A)
1477 high output and low unemployment. B)
1478 low output and low unemployment. C)
1479 low output and high unemployment. D)
1480 high output and high unemployment. Answer:
1481 C Diff: 1 Topic:
1482 The Size of the Multiplier Skill:
1483 Conceptual AACSB:
1484 Reflective Thinking
5)
1485 If the economy has automatic stabilizers built in, the multiplier will A)
1486 be smaller than it would have been in the absence of automatic stabilizers. B)
1487 be larger than it would have been in the absence of automatic stabilizers. C)
1488 be zero. D)
1489 be infinitely larger than it would have been in the absence of automatic stabilizers. Answer:
1490 A Diff: 2 Topic:
1491 The Size of the Multiplier Skill:
1492 Conceptual AACSB:
1493 Reflective Thinking
6)
1494 Which of the following statements is TRUE? A)
1495 Increases in rate crowd out both consumption and investment spending, and this reduces the size of the interest the multiplier. B)
1496 Increases in rate crowd out both consumption and investment spending, and this increases the size of the interest the multiplier. C)
1497 Increases in rate have no effect on the size of the multiplier because higher interest rates cause the interest consumption to increase, which offsets the crowding out of investment. D)
1498 Increases in rate cause the size of the multiplier to be smaller if the economy is on the flat portion of the interest the AS curve and to be larger if the economy is on the steep portion of the AS curve. Answer:
1499 A Diff: 2 Topic:
1500 The Size of the Multiplier Skill:
1501 Analytic AACSB:
1502 Analytic Skills
1503 7)
1504 Which of the following statements is TRUE? A)
1505 The multiplier policy changes that are perceived to be temporary are smaller than those for policy effects for changes that are perceived to be permanent. B)
1506 The multiplier policy changes that are perceived to be temporary are larger than those for policy changes effects for that are perceived to be permanent. C)
1507 The multiplier policy changes that are perceived to be temporary are the same as those for policy effects for changes that are perceived to be permanent. D)
1508 There is no between the size of the multiplier effect and whether policy changes are perceived to be relationship temporary or permanent. Answer:
1509 A Diff: 2 Topic:
1510 The Size of the Multiplier Skill:
1511 Conceptual AACSB:
1512 Reflective Thinking
8)
1513 Suppose value of the multiplier has increased in recent years. Which of the following could have caused that the this? A)
1514 Consumption has become more sensitive to changes in the interest rate. B)
1515 The costs of inventory storage have fallen. C)
1516 Changes in the unemployment compensation fund is financed have made it more expensive for firms to way the lay off workers. D)
1517 "Buy America" launched by many unions have succeeded in reducing the demand for imported goods. campaigns Answer:
1518 D Diff: 2 Topic:
1519 The Size of the Multiplier Skill:
1520 Analytic AACSB:
1521 Analytic Skills
9)
1522 If it becomes more expensive for firms to hold excess capital and labor, the multiplier will A)
1523 decrease. B)
1524 remain unchanged. C)
1525 increase. D)
1526 either increase or decrease depending on the value of the MPC. Answer:
1527 C Diff: 2 Topic:
1528 The Size of the Multiplier Skill:
1529 Conceptual AACSB:
1530 Reflective Thinking
10)
1531 Firms have inventories that they can draw down to meet an increase in demand. This will A)
1532 have no effect on the multiplier, because the MPC remains unchanged. B)
1533 increase the multiplier, because firms will be able to respond more quickly to a change in demand. size of the C)
1534 decrease the multiplier, because output will not immediately respond to changes in demand. size of the D)
1535 either increase or decrease the multiplier, depending on the size of the MPC. Answer:
1536 C Diff: 3 Topic:
1537 The Size of the Multiplier Skill:
1538 Analytic AACSB:
1539 Analytic Skills
1540 11)
1541 Suppose that input prices respond very quickly to output price. This will A)
1542 reduce the value of the multiplier. B)
1543 increase the value of the multiplier. C)
1544 have no effect on the value of the multiplier. D)
1545 either increase or decrease the value of the multiplier depending on the value of the MPC. Answer:
1546 A Diff: 3 Topic:
1547 The Size of the Multiplier Skill:
1548 Conceptual AACSB:
1549 Reflective Thinking
12)
1550 In practice, the size of the multiplier is about A)
1551 1. B)
1552 1.4. C)
1553 2.5. D)
1554 3. Answer:
1555 B Diff: 1 Topic:
1556 The Size of the Multiplier Skill:
1557 Fact
13)
1558 The multiplier reaches its peak about ______months after a spending increase began. A)
1559 3 B)
1560 6 to 9 C)
1561 9 to 12 D)
1562 12 to 15 Answer:
1563 C Diff: 1 Topic:
1564 The Size of the Multiplier Skill:
1565 Fact
14)
1566 If the economy is on the steep part of the AS curve, the multiplier will be A)
1567 larger than it would be if the economy were on the flat portion of the AS curve. B)
1568 smaller than it would be if the economy were on the flat portion of the AS curve. C)
1569 constant regardless of where the economy is on the AS curve. D)
1570 infinite, as compared to zero if the economy is on the flat portion of the AS curve. Answer:
1571 B Diff: 2 Topic:
1572 The Size of the Multiplier Skill:
1573 Conceptual AACSB:
1574 Reflective Thinking
1575 15)
1576 Firms economic downturn will be long-lasting and have decided to hold very little excess labor. The believe government reports that the unemployment rate is 12.5%. The government has decided to that the stimulate the economy by increasing government spending. In this situation the multiplier is current likely to be A)
1577 negative. B)
1578 zero. C)
1579 small. D)
1580 large. Answer:
1581 D Diff: 2 Topic:
1582 The Size of the Multiplier Skill:
1583 Conceptual AACSB:
1584 Reflective Thinking
2
1585 Tr s ue e /F al
1)
1586 The presence of automatic stabilizers increases the size of the multiplier. Answer:
1587 FALSE Diff: 1 Topic:
1588 The Size of the Multiplier Skill:
1589 Conceptual AACSB:
1590 Reflective Thinking
2)
1591 The closer the economy is to full employment, the larger the multiplier is. Answer:
1592 FALSE Diff: 1 Topic:
1593 The Size of the Multiplier Skill:
1594 Conceptual AACSB:
1595 Reflective Thinking
3)
1596 Tempora ry policy changes have more effect than permanent ones. Answer:
1597 FALSE Diff: 1 Topic:
1598 The Size of the Multiplier Skill:
1599 Conceptual AACSB:
1600 Reflective Thinking
4)
1601 The less inventories firms hold, the larger the multiplier. Answer:
1602 TRUE Diff: 2 Topic:
1603 The Size of the Multiplier Skill:
1604 Conceptual AACSB:
1605 Reflective Thinking
5)
1606 The "crowding out" effect decreases planned investment and decreases the value of the multiplier. Answer:
1607 TRUE Diff: 2 Topic:
1608 The Size of the Multiplier Skill:
1609 Conceptual AACSB:
1610 Reflective Thinking
1611