Unformatted text preview: equals ______ percent. A) 50 B) 58 C) 60 D) 67 22. A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bread for $6. The value added by the miller is: A) $1. B) $2. C) $3. D) $6. 23. If output is described by the production function Y = AK0.2L0.8, then the production function has: A) constant returns to scale. B) diminishing returns to scale. C) increasing returns to scale. D) a degree of returns to scale that cannot be determined because we do not know the value of A. 24. Which of the following is a flow variable? A) auto loan outstanding B) the number of machines in a factory C) Wal Mart’s inventory D) CO2 emission 25. Assume that equilibrium GDP (Y) is 5,000. Consumption is given by the equation C = 500 + 0.6(Y – T). Taxes (T) are equal to 1,000. Government spending is 600. In this case, equilibrium investment is: A) 600. B) 1,100. C) 1,500. D) 2,200. 26. In a small open economy, if net exports are negative, then: A) domestic spending is greater than output. B) saving is greater than investment. C) net capital outflows are negative. D) imports are less than exports. 27. In the case of an unanticipated inflation: A) creditors with an unindexed contrac...
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 Spring '07
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 Macroeconomics

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