1.In the goods market model with a marginal propensity to consume of .75, a decrease in taxes (T) by 100 billion causes an increase in output by:

(a)100 billion

(b)200 billion

(c)300 billion

(d)400 billion

(e)Can't say since there is not enough information

2.GDP can be defined in different ways. Which sentence is correct?

(a)GDP is the value of final and intermediate goods produced in the economy during a given period.

(b)GDP is the sum of labor income, capital income and indirect taxes during a given period.

(c)The production side definition of GDP is equivalent to the income side one if and only if we are assuming that the firms do not hold inventories.

(d)GDP is equivalent to the population wealth.

(e)Both B) and C).

3.There are about 500 people in the labor force of Women Yao Qian economy. At the beginning of every month, 5 people lose their jobs and remain unemployed for exactly one month; one month later, they find new jobs and become employed. Furthermore, on January 1 of each year, 20 people lose their jobs and remain unemployed for six months before finding new jobs. Finally, on July 1 of each year, 20 people lose their jobs and remain unemployed for six months before finding new jobs. What is the average duration of an unemployment spell?

(a)60 percent

(b)3 months

(c)40 percent

(d)3.5 months

4.Which of the following reasons contributes to the growth slowdown in capital accumulation and output per worker under the Solow growth model?

(a)Constant population growth rate

(b)Constant saving rate

(c)Diminishing marginal product of capital

(d)No technological progress

5.Which of following statements is true?

(a)In the Solow growth model with positive population growth rate n, output per worker grows forever at the rate n in the steady state.

(b)In both Solow and endogenous growth models, the higher the saving rate, the higher the growth rate of output.

(c)In the endogenous growth model, output grows forever.

(d)None of the statements a., b., and c. are true.

6.Parker's disposable income increases by $1,000, and she spends $600 of it. Parker's:

(a)MPS is 0.4 and she saves $400.

(b)MPC is 0.4 and she saves $400.

(c)MPS is 0.4 and she saves $600.

(d)MPC is 0.6 and she consumes $400.

7.Suppose the marginal propensity to consume changes from 0.75 to 0.9. How will this affect the consumption function?

(a)The slope will get steeper.

(b)Autonomous consumption will increase.

(c)The function will shift upward.

(d)The slope will get steeper and autonomous consumption will increase.

8.If entrepreneurs in Optics valley, endorse raising the quote of foreign employee visas for foreign nationals who complete degrees in China US in science, math, and engineering. We learned in lecture that this would do the following to the ratio of skilled to unskilled wages and employment.

(a)Raise the relative wage ration and leave relative employment unchanged

(b)Raise the relative wage ratio and reduce relative skilled to unskilled employment

(c)Reduce the relative wage ratio and raise relative skilled to unskilled employment

(d)Reduce the relative wage ratio and leave relative employment unchanged