e304ex1_practice

# e304ex1_practice - 304 Practice Exam 1 According to Okun's...

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304 Practice Exam 1. According to Okun's law, an increase in the unemployment rate will cause ________ in the level of employment and ________ in the level of output. A)an increase; an increase B) a decrease; a decrease C)a decrease; an increase D) an increase; a decrease E) none of the above. 2. You are trying to figure out how much capacity to add to your factory. You will increase capacity as long as A) the expected marginal product of capital is positive. B) the expected marginal product of capital is greater than or equal to the marginal product of capital. C) the expected marginal product of capital is greater than or equal to the user cost of capital. D) the expected marginal product of capital is greater than or equal to the expected marginal product of labor. E) none of the above. 3. Full-employment output is the level of output that firms in the economy supply when A) all capital is fully utilized. B) the unemployment rate is zero. C) taxes are zero. D) wages and prices have fully adjusted. E) all labor is fully utilized. 4. The Widget Company has the following production function. Number of Workers Number of Cases Produced 0 0 1 9 2 17 3 24 4 30 5 35 If widgets sell for \$6 each and the wage rate is \$33, how many workers will the company hire? A) 1 B) 4 C) 0 D) 2 E) 5

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5. What is the unemployment rate if there are 150 million people employed, 25 million people unemployed, and 25 million not in the labor force? A) 14.3% B) 12.5% C) 13.4% D) 25.0% E) 10.2% 6. How did Keynes propose to solve the problem of high unemployment? A) Allow wages to decline, so that firms will want to hire more workers. B) Increase the growth rate of the money supply. C) Put on wage and price controls, so wages won't rise and firms won't have to lay people off to cut costs. D) Have the government increase its demand for goods and services. E) do nothing: let the invisible hand of the market fix the problem. 7. Research on labor supply generally shows that A) labor supply rises in response to a permanent increase in the real wage, but falls in response to a temporary increase in the real wage. B) labor supply rises in response to both a temporary and a permanent increase in the real wage. C) labor supply rises in response to a temporary increase in the real wage, but falls in response to a permanent increase in the real wage. D) labor supply falls in response to both a temporary and a permanent increase in the real wage. E) none of the above. 8. With no inflation and a nominal interest rate (i) of .03, a person can trade off one unit of current consumption for ________ units of future consumption. A) 1.03
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## This note was uploaded on 09/15/2009 for the course ECON 304 taught by Professor Stone,mistyriano,alejandro during the Fall '07 term at Penn State.

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e304ex1_practice - 304 Practice Exam 1 According to Okun's...

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