1. Productivity growth

2. Money supply growth

3. Labour growth

4. Capital growth

5. Output growth

26. An increase in which of the following is most likely to cause an improvement in the standard of living over time?

1. Size of the population

2. Size of the labor force

3. Number of banks

4. Level of taxation

5. Productivity of labor

Macroeconomic models

27. Economic principles, theories or models

(A) Seek to explain and predict economic events in the hope of developing policies to correct eco­nomic problems.

(B) Identify all of the numerous detailed causes of an economic event.

(C) Develop rules of individual behavior in order to generalize and predict society's economic be­havior.

(D) All of the above.

28. Each of the following is a fundamental step that almost every successful construction of a macroeconomic model follows except

(A) The use of representative agents.

(B) A focus on the opportunity costs in undertaking agents' decisions.

(C) Careful attention to the effect of people's expectations on events.

(D) Careful attention to making the model as complicated as possible.

29. In an economic model:

(A) Exogenous variables and endogenous variables are both fixed when they enter the model.

(B) Endogenous variables and exogenous variables are both determined within the model.

(C) Endogenous variables affect exogenous variables.

(D) Exogenous variables affect endogenous variables.

4. Endogenous variables are given outside the model

30. The variable that is likely to be exogenous in a model that explains production in a small firm within a large industry is:

(A) The amount of output produced by the firm.

(B) The price of the firm's inputs.

(C) The number of workers hired by the firm.

(D) The amount of machinery employed by the firm.

31. In a simple model of the supply and demand for bread, the endogenous variables are:

1. The price of bread and the price of flour.

2. Aggregate income and the quantity of bread sold.

3. Aggregate income and the price of flour.

4. The price of bread and the quantity of bread sold.

5. Aggregate income and the price of bread.

32. In a simple model of the supply and demand for bread. the exogenous variables are:

(A) The price of bread and the price of flour.

(B) Aggregate income and the quantity of bread sold.

3. Aggregate income and the price of flour.

4. The price of bread and the quantity of bread sold.

5. Aggregate income and the price of bread.

33. In stating that C = f (Yd. W), where C – consumption. Yd – disposable income and W – wealth:

(A) It is hypothesized that Yd is a more important determinant of С than W.

(B) It is hypothesized that W is a more important determinant of С than Yd

(C) W and Yd are dependent variables explaining C

(D) Yd and W are independent variables explaining C

34. Which of the following statements is correct?

(A) A variable is endogenous when its value is determined by forces outside the model.

(B) A change in an exogenous variable is classified as an autonomous change.

(C) A variable is exogenous when its value is determined by forces within the model.

4. A variable is autonomous when its value is determined by forces within the model.

(E) The value of an independent variable depends upon the value of a dependent variable.

35. When the value of an independent variable increases. the value of the dependent variable

(A) Also increases when there is a positive relationship.

(B) Also increases when there is a negative relationship.

(C) Decreases when there is a positive relationship.

(D) Decreases when there is no relationship between the two variables.

36. In the statement "Quantity demanded is a function of price."

(A) Quantity demanded is the dependent variable and price is the independent variable.

(B) Price is the dependent variable and quantity is the independent variable.

(C) Quantity demanded and price have no relationship

(D) The relationship is uncertain

37. In the equation C = $10 + 0.90 Yd

(A) C (consumption) is $90 when Yd (disposable income) is $100.

(B) C (consumption) is $190 when Yd (disposable income) is $200.

(C) C (consumption) is $270 when Yd (disposable income) is $300.

(D) C (consumption) is $390 when Yd (disposable income) is $400.

38. Ceteris paribus means that

(A) Other factors are held constant.

(B) No other variable affects the dependent variable.

(C) No other model can explain the dependent variable.

(D) The model is logical.

39. Ceteris paribus is used in economics when

(A) Two variables are positively related.

(B) Two variables are negatively related.

(C) The value of an independent variable affecting the dependent variable is held constant.

(D) The value of a dependent variable affecting the independent variable is held constant.

(E) The value of a dependent variable is changing.

40. Which of the following is a flow variable?

(A) The value of the house in which you live.

(B) The balance in your savings account.

(C) Your monthly consumption of hamburgers.

(D) The number of hamburgers in your refrigerator at the beginning of the month.

41. All of the following are a flow except:

(A) Purchases of new houses.

(B) Budget deficit

3. Annual GDP

4. Business expenditures on plant and equipment.

5. Currency in circulation.

42. Which of the following is not a stock variable?

(A) Government debt.

(B) The labor force.

(C) The amount of money held by the public

(D) Inventory investment.

43. All of the following are a stock except:

(A) A consumer's wealth.

(B) The government budget deficit.

(C) The number of unemployed people.

(D) The amount of capital in the economy.

(E) The number of houses in the economy

44. All of the following are a flow except:

(A) Purchases of new automobiles.

(B) People losing their jobs

(C) Business expenditures on plant and equipment.

(D) The government debt

(E) Disposable personal income.

45. Which of the following is not a flow variable?

(A) Net exports

(B) Depreciation

(C) Transfer payments

(D) National debt

(E) Aggregate product

46. Which of the following is a stock variable?

(A) Labor services.

(B) Trade surplus.

(C) Personal wealth.

(D) Household saving.

(E) All of the above

47. The difference between money and income is that

1. Money is a flow and income is a stock.

2. Money is a stock and income is a flow.

3. There is no difference-‑money and income are both stocks.

4. There is no difference-‑money and income are both flows.

5. No true answer.

Model of circular flows

48. The simplified circular flow diagram links

(A) Households and businesses via incomes and spending.

(B) Households and businesses via taxes and spending.

(C) Businesses and government via taxes and spending.

(D) Businesses and government via income and spending.

49. Which of the following is included in the more complicated circular flow diagram?

(A) Households

(B) Businesses

(C) Government

(D) Foreign sector

(E) All of the above

50. Which of the following is a direct accurate link within the circular flow?

(A) Goods and services are exchanged for inputs via the factor markets.

(B) Wages and rents are exchanged for income via the product markets.

(C) Household expenditures result in revenues for firms via the product markets.

(D) Household income results in revenues via the factor markets.

(E) Firms exchange revenues for land, labour, and capital via the product markets.

51. The circular flow of income for a private sector model shows

(A) The flow of income between the household and business sectors

(B) The flow of income between the government and business sectors

(C) The flow of income between the household, business and government sectors

(D) The flow of income to the household and government sectors

52. In a private sector model

(A) Household saving is a leakage from the circular flow.

(B) Investment is a spending injection.

(C) Saving leakages equal investment injections.

(D) All of the above.

(E) None of the above.

53. In a model in which there is no government, net investment, capital replacement or international trade, the market value of final output equals

(A) Aggregate consumption

(B) The sum of the receipts of economic resources

(C) The sum of wages, rent, interest and profit

(D) All of the above

(E) None of the above

54. Which of the following is true according to the circular flow model?

(A) Firms are demanders in the product markets and suppliers in the factor markets.

(B) The government is a demander in the product market only.

(C) Firms are suppliers in both the product and factor markets.

(D) Households are demanders in both the product and factor markets.

(E) Households are demanders in the product markets and suppliers in the factor markets.

55. The circular flow of economic activity between consumers and producers includes which of the following?

I. Households buy factor services from firms.

II. Households sell factor services to firms.

III. Households buy outputs from firms.

IV. Households sell outputs to firms.

(A) III only

(B) II and III only

(C) IV only