answerstopracticequestions6fall2004 - 18) False – SS are...

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Econ 102 Fall 2004 Practice Questions 6 – Answer Key 1) False – only long-run 2) False – only real values 3) True – all markets clear 4) True 5) False – it is partially reasonable only in the long run 6) False – economy will achieve full employment on its own 7) False - households are on the supply side and firms are on the demand side 8) False – at full employment there is no cyclical unemployment 9) False – all resources besides labor must be fixed 10) False - aggregate production function displays decreasing returns to labor because each additional unit of labor has fixed amount of resources available for production, hence productivity decreases 11) True 12) False – Net taxes and savings are the leakages 13) True 14) True 15) False-exports are an injection into the income-expenditure stream 16) False – Completely crowd out investment and consumption spending 17) False – government spending is impotent under the classical model
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Unformatted text preview: 18) False – SS are transfer payments and have no influence on the economy 19) False – decrease productivity 20) b 21) b 22) d 23) a In this economy income will stay the same no matter what the government does - Y=C+S+T. But T increases, so C or S must decrease to preserve the equality. Because the government has a balanced budget we could simply write from the Loanable funds market that S=I+G-T. Since G-T stays the same, if S goes down a little bit, so must I. 24) a 25) $40, 90, $5.2 billion 26) a) Excess demand for workers b) Real wage will go up to ensure the market clears c) $15 d) $1,300,500,000 27) a) $ 1.5 billion surplus b) $ 4 billion c) $ 4 billion d) Yes e) $ 5.5 billion 28) a) 9 Widgets per worker b) 3 Widgets c) 5 Widgets per worker, 3 Widgets...
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This note was uploaded on 08/08/2008 for the course ECON 102 taught by Professor Drozd during the Spring '08 term at Wisconsin.

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answerstopracticequestions6fall2004 - 18) False – SS are...

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