Answer the following Quiz’s questions & problems, and the written answers should be sent

directly by yourself (not via any assignment group) to pakcharles48@gmail.com on June

19, 2020, the latest at 17.00.

QUIZ II 2020

Multiple Choice Questions

1. Of the following, the most often used measure of changing living standards is
A) the growth rate of nominal GDP.
B) the growth rate of real GDP.
C) the growth rate of nominal GDP per capita.
D) the growth rate of real GDP per capita.
E) unemployment per capita.

2. For this question, assume that a country experiences a permanent increase in its saving rate.
Which of the following will occur as a result of this increase in the saving rate?
A) a permanently faster growth rate of output
B) a permanently higher level of output per capita
C) a permanently higher level of capital per worker
D) all of the above
E) both B and C.

3. Given the narrow interpretation of technology, technology will include which of the
following?
A) how well firms are run
B) the organization and sophistication of markets
C) the political environment
D) none of the above

4. Suppose an economy experiences an increase in technological progress. This increase in

technological progress will
A) allow more output to be produced with the same number of workers.
B) allow the same amount of output to be produced with fewer workers.
C) lead to changes in the types of goods produced.
D) all of the above
E) none of the above

5. The evidence suggests that recent technological change

A) permanently increased the natural rate of unemployment.
B) is different from past technological change, in that it has no impact on productivity.
C) has increased productivity in the service sector only.
D) has increased productivity in the manufacturing sector only.
E) has increased the wage gap between skilled and unskilled workers.

6. An increase in productivity will likely cause

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A) the AS (Aggregate Supply) curve to shift upward, but has no effect on the AD (Aggregate
Demand) curve.
B) the AS curve to shift downward, and the AD curve to shift leftward.
C) the AS curve to shift upward and the AD curve to shift rightward.
D) the AS curve to shift downward and the AD curve to shift rightward.
E) the AS curve to shift downward, and have an ambiguous effect on the AD curve.

7. Changes in future expected interest rates can affect current consumption. Suppose individuals
expect future interest rates to decrease. Consumption will change as a result of this lower
expected future interest rate because of its effects on which of the following?
A) human wealth
B) the value of stocks
C) the value of bonds
D) all of the above
E) none of the above

8. Which of the following will NOT cause AD to increase?

A) an increase in expected future real interest rates
B) an increase in government spending
C) a reduction in future taxes
D) all of the above
E) none of the above

9. A change in which of the following variables will cause increase in investment in the current
period?
A) the current interest rate
B) current output
C) current taxes
D) all of the above
E) none of the above

10. The quantity of imports will increase when there is

A) a reduction in the real exchange rate.
B) an increase in domestic output.
C) an increase in foreign output.
D) all of the above
E) none of the above

11. Exports will decrease when there is

A) an increase in the real exchange rate.
B) an increase in domestic output.
C) an increase in foreign output.
D) all of the above
E) none of the above

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12. Which of the following occurs when the goods market is in equilibrium?
A) domestic output (Y) equals the demand for domestic goods.
B) Y equals the domestic demand for goods.
C) Y equals the domestic demand for domestic goods.
D) net exports equals 0.
E) demand for domestic goods equals the domestic demand for goods.

13. In an open economy, an increase in government spending will cause

A) a reduction in domestic output.
B) a reduction in imports.
C) a reduction in net exports.
D) all of the above
E) none of the above

14. An increase in government spending will have a greater impact on net exports when
A) the marginal propensity to save is smaller.
B) the economy is closed.
C) the sensitivity of investment to income is smaller.
D) all of the above
E) none of the above

15. The evidence suggests that in rich countries, a depreciation

A) immediately improves the trade balance.
B) eventually improves the trade balance.
C) first improves, but then worsens the trade balance.
D) has no effect on the trade balance.
E) none of the above

Essays:

1. Briefly explain what effect an increase in the saving rate will have on economic growth.
A higher saving rate does not permanently affect the growth rate in the Solow model.  A higher saving
rate does result in a higher steady-state capital stock and a higher level of output.   The shift from a lower
to a higher steady-state level of output causes a temporary increase in the growth rate.  In some newer
theories of growth, a higher saving rate may permanently raise the rate of economic growth.  These
newer theories have not been subjected to rigorous empirical testing, however.

2. “One of the options to counteract shocks to the economy is the use of a stabilization policy
in monetary sectors. For that, policy makers should always be considerate about lag constraints.
If there are long lags of the policy effects on the economic condition, then its possible that by the
time a chosen policy can have an impact, the economy could have already changed direction.
This is the reason why monetary policy makers concern over actual duration time needed for a
certain policy is felt in the economy – once the chosen policy is to be implemented. And they
must be forward looking, regardless of the limited information available”. (The opinion of Marie
E. Sushka, Arizona State University).
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What is your commentary on the above mentioned statements?:

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