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Page 1 ECONOMICS 3220 INTERMEDIATE MACROECONOMICS Homework 2: Ch 3 1. The circular flow model shows that households use income for: A) consumption, saving, and factor payments. B) consumption, taxes, and factor payments. C) taxes, saving, and factor payments. D) consumption, taxes, and saving. 2. In the circular flow diagram, firms receive revenue from the _____ market, which is used to purchase inputs in the _____ market. A) goods; financial B) factor; financial C) goods; factor D) factor; goods 3. In the circular flow model, households receive income from the _____ market and save through the _____ market. A) goods; financial B) factor; financial C) goods; factor D) factor; goods 4. In the long run, the level of national income in an economy is determined by its: A) factors of production and production function. B) real and nominal interest rate. C) government budget surplus or deficit. D) rate of economic and accounting profit. 5. An economy's factors of production and its production function determine the economy's: A) labor force participation rate. B) budget surplus or deficit. C) population growth rate. D) output of goods and services.
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6. In the long run, what determines the level of total production of goods and services in an economy? A) the interest rate and the amount of national saving B) the quantity of capital and labor and production technology C) consumption, investment, and government spending D) the marginal products of capital and labor, constant returns to scale, and competition 7. The two most important factors of production are: A) goods and services. B) labor and energy. C) capital and labor. D) saving and investment. 8. Unlike the real world, the classical model with fixed output assumes that: A) all factors of production are fully utilized. B) all capital is fully utilized but some labor is unemployed. C) all labor is fully employed but some capital lies idle. D) some capital lies idle and some labor is unemployed. 9. A production function is a technological relationship between: A) factor prices and the marginal product of factors. B) factors of production and factor prices. C) factors of production and the quantity of output produced. D) factor prices and the quantity of output produced. 10. The production function feature called “constant returns to scale” means that if we: A) multiply capital by z 1 and labor by z 2 , we multiply output by z 3 . B) increase capital and labor by 10 percent each, we increase output by 10 percent. C) increase capital and labor by 5 percent each, we increase output by 10 percent. D) increase capital by 10 percent and increase labor by 5 percent, we increase output by 7.5 percent. 11. If an increase of an equal percentage in all factors of production results in an increase in output of the same percentage, then a production function has the property called: A) constant marginal product of labor. B)
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This note was uploaded on 02/09/2011 for the course ECON 3220 taught by Professor Schultz during the Spring '11 term at UNO.

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