Econ 321 Exam 5 2022/23- 84 questions
and answers- all correct.
A competitive, profit-maximizing firm hires labor until the: - -price of output
multiplied by the marginal product of labor equals the wage.
-Consumption depends ______ on disposable income, and investment depends
______ on the real interest rate. - -positively; negatively
-If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then
C increases by: - -0.85 units.
-Other things equal, an increase in the interest rate leads to: - -a decrease in the
quantity of investment goods demanded.
-National saving refers to: - -income minus consumption minus government
purchases.
-If saving exceeds investment demand and consumption is not a function of the interest
rate: - -the interest rate will fall.
-According to the model developed in Chapter 3, when government spending increases
without a change in taxes: - -investment decreases.
-In the neoclassical model with fixed income, if there is a decrease in government
spending with no change in taxes, then public saving ______ and private saving
______. - -increases; does not change
-The economy begins in equilibrium at point E, representing the real interest rate r1 at
which saving S1 equals desired investment I1. What will be the new equilibrium
combination of real interest rate, saving, and investment if the government cuts
spending, holding other factors constant? - -The graphs will go down and have a
rightward shift for its new equilibrium
-GDP= - -SUM (PixQi)
-Y=C+I+G+NX - -GDP equation
GDP=consumption+Investment+Government purchases+Net Exports
-Inflation equation - -pi=(Pt-Pt-1)/(Pt-1)
-GDP deflator equation - -Nominal GDP/Real GDP x 100
-What are the three functions of money? - -
1. medium of exchange
, 2. unit of account
3. store of value
-Monetary Base - -the sum of coins, Federal Reserve notes, and banks' reserves at the
Fed
-money multiplier - -the amount of money the banking system generates with each
dollar of reserves
-money supply - -the quantity of money available in the economy
-currency-deposit ratio - -The ratio of the amount of currency that people choose to
hold to the amount of demand deposits they hold at banks.
-reserve-deposit ratio - -The ratio of the amount of reserves banks choose to hold to the
amount of demand deposits they have.
-labor force - -employed + unemployed
-employed - -paid employees, self-employed, and unpaid workers in a family business
-unemployed - -people not working who have looked for work during previous 4 weeks
-Cobb-Douglas production function - -A production function that assumes some degree
of substitutability among inputs.
Y=(AK^alpha)(L^1-alpha)
-marginal product of labor - -the change in output from hiring one additional unit of
labor (1-alpha)Y/L
-The larger is the MPC (the closer it is to 1), the _____ will be the decline in
investment, and the ____ will be the increase in the interest rate. - -smaller, smaller
-classical model - -a model of decision making that seeks to maximize economic or
other outcomes using a rational choice process
-K - -capital
-Pi - -Inflation
-L - -labor
-exogenous - -produced from without; due to external causes
-price of L - -wage
-price of k - -rental rate
and answers- all correct.
A competitive, profit-maximizing firm hires labor until the: - -price of output
multiplied by the marginal product of labor equals the wage.
-Consumption depends ______ on disposable income, and investment depends
______ on the real interest rate. - -positively; negatively
-If the consumption function is given by C = 150 + 0.85Y and Y increases by 1 unit, then
C increases by: - -0.85 units.
-Other things equal, an increase in the interest rate leads to: - -a decrease in the
quantity of investment goods demanded.
-National saving refers to: - -income minus consumption minus government
purchases.
-If saving exceeds investment demand and consumption is not a function of the interest
rate: - -the interest rate will fall.
-According to the model developed in Chapter 3, when government spending increases
without a change in taxes: - -investment decreases.
-In the neoclassical model with fixed income, if there is a decrease in government
spending with no change in taxes, then public saving ______ and private saving
______. - -increases; does not change
-The economy begins in equilibrium at point E, representing the real interest rate r1 at
which saving S1 equals desired investment I1. What will be the new equilibrium
combination of real interest rate, saving, and investment if the government cuts
spending, holding other factors constant? - -The graphs will go down and have a
rightward shift for its new equilibrium
-GDP= - -SUM (PixQi)
-Y=C+I+G+NX - -GDP equation
GDP=consumption+Investment+Government purchases+Net Exports
-Inflation equation - -pi=(Pt-Pt-1)/(Pt-1)
-GDP deflator equation - -Nominal GDP/Real GDP x 100
-What are the three functions of money? - -
1. medium of exchange
, 2. unit of account
3. store of value
-Monetary Base - -the sum of coins, Federal Reserve notes, and banks' reserves at the
Fed
-money multiplier - -the amount of money the banking system generates with each
dollar of reserves
-money supply - -the quantity of money available in the economy
-currency-deposit ratio - -The ratio of the amount of currency that people choose to
hold to the amount of demand deposits they hold at banks.
-reserve-deposit ratio - -The ratio of the amount of reserves banks choose to hold to the
amount of demand deposits they have.
-labor force - -employed + unemployed
-employed - -paid employees, self-employed, and unpaid workers in a family business
-unemployed - -people not working who have looked for work during previous 4 weeks
-Cobb-Douglas production function - -A production function that assumes some degree
of substitutability among inputs.
Y=(AK^alpha)(L^1-alpha)
-marginal product of labor - -the change in output from hiring one additional unit of
labor (1-alpha)Y/L
-The larger is the MPC (the closer it is to 1), the _____ will be the decline in
investment, and the ____ will be the increase in the interest rate. - -smaller, smaller
-classical model - -a model of decision making that seeks to maximize economic or
other outcomes using a rational choice process
-K - -capital
-Pi - -Inflation
-L - -labor
-exogenous - -produced from without; due to external causes
-price of L - -wage
-price of k - -rental rate
