- In the production function. assume that there are decreasing returns to capital. decreasing returns to labor, and constant returns to sale. Now suppose that both capital and labor decreased by 5%. Given this information, we know that output (Y) Will?
not change.
decrease by 5%.
decrease by more than 5%
decrease by less than 5%.
- Among emerging economies, which of the sources of economic growth is most likely to explain catch-up growth in the medium run?
high demand.
none of the other answers.
technological improvement.
the level of capital stock.
- The real GDP per capita of country Y in 2018 is $2.050. If country Y is expected to grow by 19 % between the years 2018 and 2019, What is the expected GDP per capita for the year 2019?
$2,763.90.
$1,882.
$2,439.50.
$3,015.
- Consider two countries: country A and country B. At the beginning of the year 2017. the GDP per capita in both countries is $2,400. The annual growth rate of output in country A is 3% while the annual growth rate of output in country B is 5%. Which of the following statements is true?
The gap between the GDP per capita of both countries will converge over time.
The gap between the GDP per capita of both countries will diverge over time.
The gap between the GDP per capita of both countries will remain the same over time.
In 30 years, the GDP per capita of country A is likely to be higher than that of country B
- In the IS-LM model, which of the following statements about an expansive fiscal policy is FALSE?
It increases the interest rate.
It decreases national saving (public and private saving).
It increases public deficit.
It increases private saving.
- In 1987, Professors Katz and Meyer performed an experiment to analyze the behavior of unemployed people who receibed unemployment benefits. They observed that, as the time to the end of the subsidy got closer, the probablity of unemployed people finding a job increased. This conclusion suggests that
The lack of unemployment benefits would rise the search effort of the unemployed people.
Unemployed people need a long period of time in order to find a job and, therefore, unemployment benefits are essential
The lack of unemployment benefits would reduce the search effort of the unemployed people.
Unemployed people need a short time period of time in order to find a job and, therefore, the unemployment subsidy is too costly.
- Suppose the economy is currently operating on both the LM curve and the IS curve. Which of the following is true for this economy?
The quantity supplied of bonds equals the quantity demanded of bonds.
Production equals demand.
All of them
Financial markets are in equilibrium.
The money supply equals money demand.
- Consider the AS-AD model which of the following statements is FALSE?
this model represents a preliminary approximation to the analysis of business cycles.
this model helps analyze the effect of stabilization policies on the economy
an expansionary monetary policy generates a recession in the short run. But output goes back to its full-employment level in the long run.
negative supply shocks create recessions in the short run.
- Suppose that the Federal Reserve wants to keep the level of output stable. Which of the following economic policies will it apply as a result of a positive demand shock?
a rise in money supply.
it will not intervene in the economy because it will move back on its own to the initial price level
it does not care.
a decrease in money supply.
- In comparison to the long run, the analysis of short-term economic fluctuations according to Keynesian economics is frequently done assuming that
the economic model has only exogenous variables.
prices are flexible.
prices are sticky.
the economic model has only endogenous variables.
- Which Of the following is an endogenous variable in our IS model?
All of them
government expenditure
public saving
none of them
taxes
- Suppose that a computer virus destroys all the computers from a country. As a consequence:
Aggregate Demand shifts to the left.
Aggregate Supply shifts to the right.
If Aggregate Demand remains constant, there will be stagflation in the economy.
The Central Bank should increase the money supply to avoid stagflation.
- Which of the following would NOT cause a SHIFT in AS?
The costs of the factors of production
The Structure of the Economy
The level of government spending
Incentives
- The natural level of output (potential or full-employment output) is determined when
there is also a short-run equilibrium in the economy
there is full use of the resources in the economy
there is stagflation
there is equilibrium in the economy
- In the IS-LM model which of the following shocks are consistent with an increase in the consumption level and, at the same time, a constant GDP level in equilibrium?
an increase in taxes, accompanied by the purchase of bonds in the open market by the Central Bank
an increase in taxes, accompanied by a sale of bonds in the open market by the Central Bank
a cut in taxes, accompanied by a purchase of bonds in the open market by the Central Bank
a cut in taxes, accompanied by the sale of bonds in the open market by the Central Bank
- Improvements in a country’s standard of living are brought about in the LONG RUN by
constructing more machines and buildings.
technological progress.
growth in the population.
immigration policy.
- In 1914 Henry Ford decided to pay its workers $5 per day compared to the average wage in the sector of $3/day. Ford said: “The payment to my workers of $5 per day for an 8-hour shift has been the decision we have ever made. These results seem to indicate that Ford had discovered the concept of
Reservation wage
Moral hazard
Efficiency wage
Collective bargaining
- Refer to the IS-LM model. During 2008 in the United States, consumer confidence fell significantly. Which of the following will occur as a result of this reduction in consumer confidence?
The LM curve will shift down
The IS curve will shift rightwards
The IS curve will shift leftwards
The LM curve will shift up
- Which of the following statements is CORRECT? The IS curve shifts to the right when:
At the initial interest rate, there is excess demand in the goods and services market.
The interest rate decreases.
The interest rate increases.
At the initial interest rate, there is excess supply in the goods and services market.
- Any economic measure that tries to reduce the natural rate of unemployment (long-term equilibrium) should
rise separations and hires.
reduce separations and rise hires.
rise separations and decrease hires.
reduce separations and hires.
. Suppose a country has 100 million people, of whom 50 million are working age. Of these 50 million, 20 million have jobs. Of the remainder: 10 million are actively searching for Jobs, 10 million would like jobs but are not searching, and 10 million do not want jobs at all. The official unemployment rate is
0.33
0.2
0.1
0.66
- Assume the AD-AS model. Imagine that you are at the medium/long-run equilibrium and a higher percentage of the young population decides to get educated and get college degrees. As a result of it…
Only the Aggregate demand curve will Shift to the right.
The aggregate demand curve Will shift to the left.
Only the Short run aggregate demand curve will shift to the right.
The long-run Aggregate supply curve will shift to the right.
- If the unemployment rate is above the natural rate of unemployment…
The company is in an expansion
There is frictional unemployment
The economy is in a recession
There is no unemployment whatsoever
- The most likely outcome when both aggregate supply and aggregate demand increase is:
a rise in inflation
a decrease in output
an increase in nominal GDP
higher unemployment
