williamson_MCQ_ch8

williamson_MCQ_ch8 - Chapter 8 A Two-Period Model: The...

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Chapter 8 A Two-Period Model: The Consumption-Savings Decision and Ricardian Equivalence T Multiple Choice 1. Consumption smoothing refers to (a) the tendency of all consumers to choose the same amount of current consumption. (b) the tendency of consumers to seek a consumption path over time that is smoother than income. (c) the tendency of consumers to seek an income path over time that is smoother than consumption. (d) consumer’s concerns about going heavily into debt. Answer: B 2. Intertemporal decisions involve economic decisions (a) made within a given period of time. (b) made in between two periods of time. (c) involving tradeoffs across periods of time. (d) that ignore concerns about the future. Answer: C 3. The simplest device to analyze dynamic decisions is a (a) one-period model. (b) two-period model. (c) model that includes only the number of years of a typical consumer’s lifetime. (d) continuous time model. Answer: B 4. For all bonds to be indistinguishable, (a) all consumers must never be expected to default on their debts. (b) the government must guarantee all bonds. (c) all consumers must be identical. (d) they must be traded through financial intermediaries. Answer: A
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Chapter 8 A Two-Period Model: The Consumption-Savings Decision and Ricardian Equivalence 59 5. A one-period bond is a promise to repay (a) 1 (1 ) r + units of goods in the second period. (b) r units of goods in the second period. (c) (1 ) r + units of goods in the second period. (d) the original amount lent. Answer: C 6. The consumer’s lifetime budget constraint states that (a) the present value of lifetime consumption must be equal to the present value of lifetime gross income. (b) the present value of lifetime consumption must be equal to the present value of lifetime disposable income. (c) the present value of lifetime consumption plus the present value of lifetime taxes to be paid must be equal to the present value of lifetime income. (d) the present value of lifetime taxes to be paid by the consumer must be equal to the present value of government spending. Answer: B 7. The endowment point is the consumption bundle in which (a) first-period consumption is equal to zero. (b) second-period consumption is equal to zero. (c) the consumer finds the most utility. (d) consumption is equal to disposable income in each period. Answer: D 8. If we represents a two-period consumer’s lifetime wealth and r denotes the real rate of interest, the vertical (future consumption) intercept of the consumer’s budget line is equal to (a) we (b) (1 ) r we + (c) (1 ) we r + (d) (1 ) r we + Answer: B 9. If we represents a two-period consumer’s lifetime wealth and r denotes the real rate of interest, the horizontal (current consumption) intercept of the consumer’s budget line is equal to (a) we (b) (1 ) r we + (c) (1 ) we r + (d) (1 ) r we + Answer: A
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60 Williamson • Macroeconomics, Second Edition 10. If we represents a two-period consumer’s lifetime wealth and r denotes the real rate of interest, the
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This note was uploaded on 04/10/2008 for the course ECON 252 taught by Professor Ionescu during the Spring '05 term at Colgate.

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williamson_MCQ_ch8 - Chapter 8 A Two-Period Model: The...

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