Macroeconomics - Governance and Leadership

Final Test: Macroeconomics (2016)

1. One difference between exogenous growth models and endogenous growth models is

1. there is no steady state in an exogenous growth model
2. endogenous growth models have no role for total factor productivity
3. exogenous growth models seek to explain only short run business cycles
4. endogenous growth models seek to explain technological progress
5. exogenous growth models do not rely on production functions

2. If the marginal product of capital is constant,

1. output does not increase when more capital is used in production
2. technological progress cannot shift the production function
3. investment is always equal to depreciation
4. the economy does not reach a steady state
5. the stock of capital never changes

3. Endogenous growth theory explains poverty traps as the result of

1. discrimination
2. wide variations in basic human attitudes, motivation, and risk-taking
3. more rapid depreciation of human capital among some groups than others
4. interdependencies which make investments more valuable in wealthy regions
5. mismanaged government policy

4. One reason to believe that the marginal product of capital may be constant is that

1. capital and labor are substitutes in production
2. physical capital and human capital may be complementary inputs
3. firms treat unsold output as inventory investments
4. beyond the optimal level, the extra output produced by another machine is always zero
5. technology rarely changes

5. The observation that poorer nations grow more rapidly than richer ones if they share

the same steady state, and more slowly if they don’t, is known as

1. conditional convergence
2. spillover
3. learning by doing
4. the poverty trap
5. the iron law of convergence

6. The marginal product of labour is defined as

1. the amount of output produced by a given labour force
2. the minimum amount of workers required to produce a given level of output
3. the increase in productivity of the marginal worker if capital is increased
4. the amount of output one more worker could produce given other factors of production are fixed
5. the cost of employing another worker

7. If the stock of physical capital remains constant while employment rises, output

1. initially declines, then eventually rises
2. increases at an increasing rate
3. remains constant in real terms
4. increases at a decreasing rate
5. fluctuates with the price level

8. If a firm’s marginal product of labor is currently 75 units of output, the wage is $15

per unit of labor, and output sells for $0.80 per unit, the firm should

1. shut down production
2. hire fewer workers
3. maintain its current workforce, but at fewer hours per worker
4. keep the current number of employees and hours worked
5. hire more labor

9. The labor supply curve

1. slopes upward if the income and substitution effects of a wage increase exactly offset each other
2. is vertical if the income effect of a wage increase is dominant
3. is downward-sloping if the income effect of a wage increase is dominant
4. is vertical if the substitution effect of a wage increase is dominant
5. is horizontal in the long run

10. Increases in labor productivity from improved technology

1. increase the long run supply of labor
2. reduce the demand for labor
3. reduce real wages
4. induce firms to substitute capital for labor
5. have no long run effect on total hours worked

11. Which of the following is the least likely to influence the natural rate of

unemployment?

1. monopolies in the goods market
2. labor unions
3. payroll taxes
4. unemployment insurance benefits
5. monetary policy

12. The replacement ratio is defined as

1. The cost of replacing a worker
2. The cost of employing a new worker relative to the value of output they could produce
3. The cost of replacing capital relative to the book value of existing capital
4. Unemployment benefit as a share of previous earnings
5. None of the above

13. The Beveridge Curve is the relationship between