Macroeconomics International Edition 5th Edition by Stephen D. Williamson – Test Bank

Chapter 11 A Real Intertemporal Model with Investment

1) A consumer may increase her saving by
A) working more hours and consuming more goods in the present period.
B) working more hours and consuming fewer goods in the present period.
C) working fewer hours and consuming more goods in the present period.
D) working fewer hours and consuming fewer goods in the present period.
Answer: B
Question Status: Previous Edition

2) In the real intertemporal model with investment
A) we abstract from labor/leisure choice.
B) consumers always save a constant fraction of their income.
C) there are many different consumers.
D) consumers make choices over current consumption and leisure, and future consumption and leisure.
Answer: D
Question Status: New

3) The condition, MRS1,C = w, describes the representative consumer’s
A) investment decision.
B) consumption – savings decision.
C) current period work – leisure decision.
D) future period work – leisure decision.
Answer: C
Question Status: Previous Edition

4) In the real intertemporal model with investment, there is intertemporal substitution with respect to
A) consumption and leisure.
B) government spending.
C) capital.
D) current consumption.
Answer: A
Question Status: New

5) The condition, MRS1,’C’ = w ‘, describes the representative consumer’s
A) investment decision.
B) consumption – savings decision.
C) current period work – leisure decision.
D) future period work – leisure decision.
Answer: D
Question Status: Previous Edition

6) At the end of the future period, in the real intertemporal model with investment
A) the firm’s capital becomes useless and is thrown away.
B) the firm’s capital is used to produce more capital for the distant future.
C) the firm can convert capital one-for-one into consumption goods.
D) the firm’s capital is converted into labor.
Answer: C
Question Status: New

7) The condition, MRSC,C’ = 1 + r, describes the representative consumer’s
A) investment decision.
B) consumption – savings decision.
C) current period work – leisure decision.
D) future period work – leisure decision.
Answer: B
Question Status: Previous Edition

8) The assumption that current-period labor supply is positively related to the current-period real wage is justified as long as the
A) income effect dominates the substitution effect in the short run.
B) income effect dominates the substitution effect in the long run.
C) substitution effect dominates the income effect in the short run.
D) substitution effect dominates the income effect in the long run.
Answer: C
Question Status: Previous Edition

9) For the firm in the real intertemporal model with investment
A) depreciation occurs more quickly if the firm produces more output.
B) depreciation takes place at a constant rate.
C) depreciation can be slowed with more maintenance.
D) depreciation is always 100%.
Answer: B
Question Status: Previous Edition

10) In the real intertemporal model with investment
A) the firm maximizes the present value of profits.
B) the firm maximizes current profits.
C) the firm maximizes the present value of revenues.
D) the firm maximizes current profits plus future profits.
Answer: A
Question Status: New