Question 1

How does the nature of irreversible investments affect the impact of a negative shock on the economy?

Accepted Answer

When investments are irreversible, they ...

Question 2

"In the real business cycle model, fiscal policy can have a permanent effect on real growth because of intertemporal substitution." Explain this statement with the aid of a Solow growth curve diagram.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Suppose the government increases govern...

Question 3

In most advanced economies, economic activity is highest in the

Accepted Answer

A)   first quarter.
B)   second quarter.
C)   third quarter.
D)   fourth quarter.

Question 4

The construction of a home is an irreversible investment.

Accepted Answer

A) True 
 B)False

Question 5

Explain what a collateral shock is and provide an example of how it fills the role of a transmission mechanism.

Accepted Answer

A collateral shock occurs when for some ...

Question 6

Economic forces that can amplify shocks across time and sectors of the economy are called

Accepted Answer

A)   business cycles.
B)   cyclical recessions.
C)   shock magnifiers.
D)   transmission mechanisms.

Question 7

Suppose a restaurant moves to another city and its manager asks the restaurant's two cooks to move there as well. Cook A is single and has no children to support. Cook B has a family with five children in grades K-8. Which of the following is the most likely outcome?

Accepted Answer

A)   Cook A is more likely to move because of a lower labor adjustment cost.
B)   Cook B is more likely to move because of a lower labor adjustment cost.
C)   Cook A is more likely to move because of a higher labor adjustment cost.
D)   Cook B is more likely to move because of a higher labor adjustment cost.

Question 8

A negative shock to aggregate demand will lead to a higher unemployment rate if

Accepted Answer

A)   time bunching in economic activity is lower.
B)   intertemporal substitution in labor supply is lower.
C)   investments are more easily reversible.
D)   labor adjustment costs are higher.

Question 9

Firms are willing to supply greater numbers of goods when prices rise. This decision is very similar to the intertemporal substitution decision by a working individual.

Accepted Answer

A) True 
 B)False

Question 10

The observation of high business activity in the Christmas season and low business activity immediately after Christmas is an example of

Accepted Answer

A)   irreversible investments.
B)   high labor adjustment costs.
C)   time bunching.
D)   intertemporal substitution.

Question 11

A reason why fourth-quarter economic fluctuations occur is

Accepted Answer

A)   spending on Christmas.
B)   spending on vacations.
C)   spending on renovation projects.
D)   post-Christmas spending declines.

Question 12

Uncertainty magnifies negative shocks by

Accepted Answer

A)   keeping resources in unproductive areas.
B)   slowing the speed of transmission of the negative shocks.
C)   providing clear investment signals.
D)   increasing the number of irreversible investments.

Question 13

An economy with a 1 percent Solow growth curve experiences a positive economic shock that brings the real GDP growth rate to 2 percent. If intertemporal substitution takes place, what will the new GDP growth rate be?

Accepted Answer

A)   0 percent
B)   1 percent
C)   2 percent
D)   3 percent

Question 14

When an increase in government purchases increases aggregate demand, what happens to the Solow growth curve in the long run?

Accepted Answer

A)   It has a lower GDP growth rate than before the government purchases.
B)   It has the same GDP growth rate as before the government purchases.
C)   It has a higher GDP growth rate than it had before the government purchases.
D)   It has a GDP growth rate that continues to grow.

Question 15

Seasonally adjusted data would reduce the visibility of time bunching in economic activity.

Accepted Answer

A) True 
 B)False

Question 16

For a given increase in government spending growth, intertemporal substitution is more widespread when

Accepted Answer

A)   the impact of AD growth on both inflation and real GDP growth is stronger.
B)   the impact of AD growth on both inflation and real GDP growth is weaker.
C)   the impact of AD growth on inflation is stronger and the impact of the AD growth on real GDP growth is weaker.
D)   the impact of AD growth on inflation is weaker and the impact of AD growth on real GDP growth is stronger.

Exam 31: Unemployment and Labor Force Participation

A reason why fourth-quarter economic fluctuations occur is

Correct Answer
verified

In most advanced economies, economic activity is highest in the

Correct Answer
verified

The construction of a home is an irreversible investment.

Correct Answer
verified

Seasonally adjusted data would reduce the visibility of time bunching in economic activity.

Correct Answer
verified

When an increase in government purchases increases aggregate demand, what happens to the Solow growth curve in the long run?

Correct Answer
verified

"In the real business cycle model, fiscal policy can have a permanent effect on real growth because of intertemporal substitution." Explain this statement with the aid of a Solow growth curve diagram.

Correct Answer
verified
Suppose the government increases govern...
View Answer

Suppose a restaurant moves to another city and its manager asks the restaurant's two cooks to move there as well. Cook A is single and has no children to support. Cook B has a family with five children in grades K-8. Which of the following is the most likely outcome?

Correct Answer
verified

For a given increase in government spending growth, intertemporal substitution is more widespread when

Correct Answer
verified

The observation of high business activity in the Christmas season and low business activity immediately after Christmas is an example of

Correct Answer
verified

Explain what a collateral shock is and provide an example of how it fills the role of a transmission mechanism.

Correct Answer
verified
A collateral shock occurs when for some ...
View Answer

An economy with a 1 percent Solow growth curve experiences a positive economic shock that brings the real GDP growth rate to 2 percent. If intertemporal substitution takes place, what will the new GDP growth rate be?

Correct Answer
verified

Firms are willing to supply greater numbers of goods when prices rise. This decision is very similar to the intertemporal substitution decision by a working individual.

Correct Answer
verified

Economic forces that can amplify shocks across time and sectors of the economy are called

Correct Answer
verified

How does the nature of irreversible investments affect the impact of a negative shock on the economy?

Correct Answer
verified
When investments are irreversible, they ...
View Answer

Uncertainty magnifies negative shocks by

Correct Answer
verified

A negative shock to aggregate demand will lead to a higher unemployment rate if

Correct Answer
verified

Exam 31: Unemployment and Labor Force Participation

A reason why fourth-quarter economic fluctuations occur is

Correct AnswerverifiedShow Answer

In most advanced economies, economic activity is highest in the

Correct AnswerverifiedShow Answer

The construction of a home is an irreversible investment.

Correct AnswerverifiedShow Answer

Seasonally adjusted data would reduce the visibility of time bunching in economic activity.

Correct AnswerverifiedShow Answer

When an increase in government purchases increases aggregate demand, what happens to the Solow growth curve in the long run?

Correct AnswerverifiedShow Answer

"In the real business cycle model, fiscal policy can have a permanent effect on real growth because of intertemporal substitution." Explain this statement with the aid of a Solow growth curve diagram.

Correct Answerverified Suppose the government increases govern...View AnswerShow Answer

Suppose a restaurant moves to another city and its manager asks the restaurant's two cooks to move there as well. Cook A is single and has no children to support. Cook B has a family with five children in grades K-8. Which of the following is the most likely outcome?

Correct AnswerverifiedShow Answer

For a given increase in government spending growth, intertemporal substitution is more widespread when

Correct AnswerverifiedShow Answer

The observation of high business activity in the Christmas season and low business activity immediately after Christmas is an example of

Correct AnswerverifiedShow Answer

Explain what a collateral shock is and provide an example of how it fills the role of a transmission mechanism.

Correct AnswerverifiedA collateral shock occurs when for some ...View AnswerShow Answer

An economy with a 1 percent Solow growth curve experiences a positive economic shock that brings the real GDP growth rate to 2 percent. If intertemporal substitution takes place, what will the new GDP growth rate be?

Correct AnswerverifiedShow Answer

Firms are willing to supply greater numbers of goods when prices rise. This decision is very similar to the intertemporal substitution decision by a working individual.

Correct AnswerverifiedShow Answer

Economic forces that can amplify shocks across time and sectors of the economy are called

Correct AnswerverifiedShow Answer

How does the nature of irreversible investments affect the impact of a negative shock on the economy?

Correct AnswerverifiedWhen investments are irreversible, they ...View AnswerShow Answer

Uncertainty magnifies negative shocks by

Correct AnswerverifiedShow Answer

A negative shock to aggregate demand will lead to a higher unemployment rate if

Correct AnswerverifiedShow Answer

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verified

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Correct Answer
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Correct Answer
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Suppose the government increases govern...
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Correct Answer
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Correct Answer
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Correct Answer
verified
A collateral shock occurs when for some ...
View Answer

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verified

Correct Answer
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Correct Answer
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Correct Answer
verified
When investments are irreversible, they ...
View Answer

Correct Answer
verified

Correct Answer
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