Econ Test 2

Front 1

What does the keynsian cross show

Back 1

the equality of planned expenditure and income in the short run

Front 2

in the keynsian cross model, actual expenditures equal

Back 2

GDP

Front 3

the government purchases multiplier shows how much

Back 3

income changes in response to a $1 change in government purchases

Front 4

in the keynsian cross model if taxes are reduced by 100, then planned expenditures

Back 4

increase, but by less than 100

Front 5

assume that a war reduces a country's labor force but does not directly affect its capital stock. if the economy was in a steady state before the war and the saving rate does not change after the war, then, over time, capital will____ and output per worker will grow _____ than it did before the war

Back 5

decline, more slowly

Front 6

suppose that two countries are exactly alike in every aspect except that the citizens of country A have a higher savings rate than the citizens of country B.

Which country will have the higher level of output per in the steady state?


Which country will have the faster rate of growth of output in the steady state?

Back 6

Country A will have a higher level of output

In the steady state the growth rate of output per worker will be zero in both country A and country B

Front 7

According to the Solow model, persistently rising living standards can only be explained by...

Back 7

technological progress

Front 8

In the solow model with technological change, the Golden Rule level of capital is the steady state that maximizes

Back 8

consumption per effective worker

Front 9

in the solow model with technological progress, the steady-state growth rate of total output is

Back 9

n + g

Front 10

What change would bring the US capital stock, currently below the GOlden Rule level, closer to the steady-state, consumption maximizing level

Back 10

increasing the saving rate

Front 11

okun's law is

Back 11

the negative relationship between real GDP and the unemployment level

Front 12

Most economists believe that prices are

Back 12

flexible in the long run but many are sticky in the short run

Front 13

if the national savings rate increases...

Back 13

the economy will grow at a faster rate until a new, higher, steady state capital labor ratio is reached

Front 14

in the solow growth model, with a given production function, depreciation rate, no technological change, and no population growth, a higher savings rate produces...

Back 14

higher steady state level of output per worker

Front 15

with a perworker production function y=k ^1/2, the steady state capital stock per worker (k*) as a function of the saving rate (s) is given by

Back 15

k*=(s/d)^2

Front 16

The solow growth model describes

Back 16

how savings, population growth, and technological change affect output over time

Front 17

unlike the long run classical model in chapter 3, the solow growth model:

Back 17

describes changes in the economy over time

Front 18

if the labor force is growing at a 3 percent rate and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growing at a rate of

Back 18

five percent

Front 19

the efficiency of labor

Back 19

includes the knowlodge, health and skills of labor

Front 20

if two economies are indentical (including having the population growth rates and efficiency of labor), but one economy has a lower saving rate, then the steady state level of income per worker in the economy with the lower saving rate:

Back 20

will be at a lower level than the steady state of the high saving economy

Front 21

in the solow model with population growth and technological change, the break-even level of investment must cover:

Back 21

depreciating capital, capital for new workers, and capital for new effective workers

Front 22

in the keynsian cross model if government purchases increase by 250, then the equilibrium level of income:

Back 22

increases by more than 250

Front 23

when planned expenditure is drawn on a graph as a function of income, the slope of the line is

Back 23

between zero and one

Front 24

according to the keynsian-cross analysis, where there is a shift upward in the government purchase schedule by an amount deltaG and the planned expenditure schedule by an equal amount, then equilibrium income rises by

Back 24

delta G divided by the quantity one minus the marginal propensity to consume

Front 25

In the keynesian cross model, if the MPC equals .75, then a $1billion decrease in taxes increases plannes expenditures by____ and increases the wquilibrium level of income by_____

Back 25

.75 billion, more than .75 billion