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8.1   The Short Run and the Long Run in Macroeconomics 1) Keynesian economics refers to the perspective that the business cycle represents A) equilibrium. B) disequilibrium. C) long-run macroeconomic fluctuations. D) short-run macroeconomic stability. 2) Classical economics refers to the perspective that the business cycle can be explained A) using equilibrium analysis. B) using disequilibrium analysis. C) by long-run.
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8.4   Appendix: The Formula for the Expenditure Multiplier 1) If households spend $0.95 of each additional dollar of increased income, the expenditure multiplier will be A) 1.05. B) 5. C) 20. D) 9.5. 2) If households spend $0.75 of each additional dollar of increased income, the expenditure multiplier will be A) 1.33. B) 4. C) 5. D) 7.5. 3) If households.
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11) Balanced growth paths can differ across countries due to differences in savings, human capital, and social institutions. These differences are likely to result in differences in ________, a common measure of the standard of living. A) happiness B) life expectancy C) income distribution D) real GDP per capita 12) How might a natural disaster.
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7.3   The Natural Rate of Unemployment 1) The results of the Bureau of Labor Statistics' establishment survey measure A) only the number of nonfarm payroll workers who have found employment B) only the number of nonfarm payroll workers who have lost jobs. C) the net change in nonfarm payroll worker employment. D) the number of.
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8.3   How Economists Think About Business Cycles 1) Multiplier effects occur when there is a change in spending which does not depend on income. Spending which does not depend on income is referred to as A) coincident spending. B) nominal spending. C) autonomous expenditures. D) induced expenditures. 2) Suppose consumer confidence declines and as a.
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Table 4.1   Country Capital per worker Total factor productivity Terra Firma $70,000 7.4 Aquaria 115,000 12.2 11) Refer to Table 4.1. Assume the production function for real GDP per worker is y = Ak0.5 for both countries. The rate of return for capital in Terra Firma is A) 0.001. B) 0.014. C) 0.021. D) 0.032. 12) Refer to Table 4.1. Assume the production function for.
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5) By the time the German hyperinflation following World War I ended in November 1923, the price level in Germany was ________ times higher than at the beginning of the hyperinflation. A) 1,000 B) 1 million C) 250 million D) 50 billion 6) In countries that have experienced hyperinflation, what role have large government budget.
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11) Real interest rates have, at times, been negative. Why would anyone lending money agree to a negative real interest rate? 12) During the 1990s, Japan experienced periods of deflation and nominal interest rates that approached zero percent. Why would anyone lending money agree to a nominal interest rate of almost.
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11) Recent research on the relationship between the level of income and happiness indicates that higher levels of income that result from economic growth A) have no measurable effect on levels of happiness. B) do make people happier. C) do not increase happiness at low levels of real GDP per capita. D) only increase.
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Article Summary   Inflation in Brazil continued to rise in 2011, with its headline inflation index up 5.99% annually in January, well above the target rate of 4.5%. Increases in wages, government spending, and food prices, coupled with growing consumer demand, are being credited with the rise in the price level. Surveys.
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5.4   Balanced Growth Path, Convergence, and Long-Run Equilibrium 1) Balanced growth occurs when A) the economy is in steady state. B) the growth rates for the capital-labor ratio and real GDP per hour worked are the same. C) total factor productivity and capital accumulation each account for the same amount of growth in labor.
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11) How  does an increase in technology affect total factor productivity? Use a graph to show this effect on the production function, investment, and break-even investment. 12) What is human capital? How do workers acquire human capital, and how does the acquisition of human capital influence total factor productivity and labor.
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31) Inflation tends to ________ during a business cycle expansion and ________ during a business cycle recession. A) increase; decrease B) decrease; increase C) increase; increase further D) decrease; decrease further 32) All of the following are typically considered procyclical variables except A) the inflation rate. B) investment expenditures. C) the unemployment rate. D) expenditures on durable goods. 33) If.
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29) Describe the steady state in the Solow growth model. 30) Suppose the nation of Atlantica is experiencing a decline in population growth, while the nation of Pacifica is experiencing an increase in population growth. These changes in population growth rates are having a direct impact on changes in the growth.
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5.3   Total Factor Productivity and Labor Productivity 1) Assume the capital-labor ratio remains constant. If investment increases at a constant rate, output per hour worked will increase ________,  and if total factor productivity increases at a constant rate, output per hour worked will increase ________. A) at an increasing rate; at an.
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5.5   Appendix A: Capital Accumulation and Endogenous Growth 1) Endogenous growth theory tries to explain A) why the growth rate of total factor productivity varies across countries. B) why capital is not subject to diminishing marginal returns. C) total factor productivity is the only determinant of labor productivity. D) balanced growth occurs in all.
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6.5   The Costs of Inflation 1) All of the following are costs of expected inflation except A) seigniorage. B) menu costs. C) velocity costs. D) tax distortions. 2) The government's profit from issuing fiat money is known as A) seigniorage. B) menu costs. C) commodity profit. D) tax distortions. 3) The costs of inflation to firms due to reprinting price lists.
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7.2   Categories of Unemployment 1) Jonathan quit his job as a shoe salesman and is actively searching for employment in the field in which he has a bachelor's degree, accounting. Jonathan would best be categorized as A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed. 2) Reducing ________ unemployment may be beneficial for.
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11) As the average annual inflation rate ________, the volatility of inflation tends to ________. A) decreases; increase B) increases; increase C) increases; remain stable D) decreases; remain stable 12) If the real wage needs to decrease to restore equilibrium in a labor market, this can happen by A) keeping the nominal wage constant and allowing.
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11) The supply curves for labor and capital are ________ and the demand curves for labor and capital are ________. A) upward sloping; downward sloping B) vertical; horizontal C) vertical; downward sloping D) upward sloping; vertical 12) All else equal, if the demand for labor increases and the supply of labor does not change, the.
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11) Holding other factors constant, building an on-line job database to help workers find jobs would likely A) reduce cyclical unemployment and the natural rate of unemployment. B) reduce structural unemployment and the natural rate of unemployment. C) reduce frictional unemployment and the natural rate of unemployment. D) increase the natural rate of.
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11) If Jennifer withdraws $750 from her savings account and deposits it in her checking account, then M1 will ________ and M2 will ________. A) increase; increase B) increase; decrease C) increase; not change D) not change; decrease 12) If Jennifer withdraws $750 from her checking account and holds it as currency, then M1 will.
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6.2   The Federal Reserve and the Money Supply 1) Reserves are a bank ________ consisting of ________. A) asset; vault cash plus bank deposits with the Federal Reserve B) asset; checking account deposits and savings account balances C) liability; vault cash plus bank deposits with the Federal Reserve D) liability; checking account deposits and savings.
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8.2   What Happens During a Business Cycle? 1) Since the 1950s, A) U.S. business cycle fluctuations have not changed. B) U.S. business cycle fluctuations have become milder. C) U.S. business cycle fluctuations have become more severe. D) the Unites States has experienced more economic recessions than expansions. 2) Since 1950, the average length of recessions in.
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4.4   GDP per Hour Worked Among Countries 1) Suppose Canada and Thailand have the same level of total factor productivity and capital's share of income. If capital per worker is greater in Canada than in Thailand, the slope of the production function is steeper for ________, and capital will flow to.
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9.1   The IS Curve: The Relationship Between Real Interest Rates and Aggregate Expenditure 1) Equilibrium in the goods market occurs where A) real GDP equals nominal GDP. B) aggregate expenditure equals autonomous consumption. C) autonomous consumption equals induced consumption. D) aggregate expenditure equals real GDP. 2) Other things equal, if planned investment spending is greater than.
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5.2   The Solow Growth Model 1) Keeping total factor productivity constant, as the capital-labor ratio increases, labor productivity A) increases at a constant rate. B) increases at an increasing rate. C) increases at a decreasing rate. D) does not change. 2) An economy accumulates capital when A) its capital-labor ratio increases. B) it increases the number of hours.
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4) If firms pay efficiency wages, they pay wages that A) are mandated by the government. B) will eventually lower the unemployment rate. C) motivate workers to increase their productivity. D) are lower than average to ensure maximum profit. 5) An efficiency wage is ________ and results in ________. A) equal to the equilibrium wage; full.
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5.1   Labor Productivity and the Standard of Living 1) The most widely available measure of the standard of living is A) labor productivity. B) real GDP per capita. C) total factor productivity. D) the labor force growth rate. 2) Real GDP per capita is  measured as A) labor productivity x hours worked per person. B) real GDP.
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7.5   Comparisons of Unemployment Rates in Western Europe and the United States 1) The compensation from unemployment insurance has generally been greater in Western Europe than in the United States. Higher compensation in Western Europe should A) increase the duration of unemployment in Western Europe compared to the United States. B) decrease the.
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11) If the capital-labor ratio equals 1.5 in the steady state, depreciation equals 20, and dilution equals 10, break-even investment equals A) 15. B) 20. C) 30. D) 45. 12) If the capital-labor ratio equals 1.5 in the steady state, depreciation equals 20, and dilution equals 10, investment per hour worked equals A) 15. B) 20. C) 30. D).
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