1.

In an economic model, an exogenous variable is

A) a stand-in for more complicated variables.
B) determined by the model itself.
C) determined outside the model.
D) a variable that has no effect on the workings of the model.

2. In the one-period competitive model we have been studying

A) both consumption and total factor productivity are exogenous.
B) consumption is exogenous and total factor productivity is endogenous.
C) consumption is endogenous and total factor productivity is exogenous.
D) both consumption and total factor productivity are endogenous.

3. For a competitive equilibrium to occur, all of the following has to happen except
A) agents are price takers.
B) the government sets taxes at zero.
C) markets clear.
D) the actions of all agents are consistent.

4. The production possibilities frontier represents

A) all combinations of consumption and leisure for fixed output.
B) all equally affordable combinations of consumption and leisure for a given wage.
C) all technologically feasible combinations of consumption and leisure.
D) all equally liked combinations of consumption and leisure.

5. A Pareto optimum is a point that

A) a malevolent dictator would choose.
B) a cooperative coalition of some altruistic consumers would choose.
C) a cooperative coalition of some socially responsible firms would choose.
D) a social planner would choose.

6. The first fundamental theorem of welfare economics states that

A) under certain conditions, a competitive equilibrium is Pareto optimal.
B) a competitive equilibrium is always Pareto optimal.
C) under certain conditions, a Pareto optimum is a competitive equilibrium.
D) a Pareto optimum is always a competitive equilibrium.

7. An increase in government spending shifts the PPF

A) upward, but does not change its slope.
B) upward, and also changes its slope.
C) downward, but does not change its slope.
D) downward, and also changes its slope.

8. An increase in total factor productivity shifts the PPF

A) upward, but does not change its slope.
B) upward, and also changes its slope.
C) downward, but does not change its slope.
D) downward, and also changes its slope.

9. If the government replaces a lump sum tax with a proportional labor income tax, then
A) employment and output increase.
B) employment increases and output decreases.
C) employment decreases and output increases.
D) employment and output decrease.

10. A steady state is

A) a temporary equilibrium.
B) a Pareto Optimum.
C) a long-run equilibrium.
D) an economy with ongoing fluctuations.

11. In the Malthusian model, state-mandated population control policies are likely to
A) decrease the equilibrium size of the population and increase the equilibrium level of
consumption per worker.
B) decrease the equilibrium size of the population and have no effect on the equilibrium level of
consumption per worker.
C) have no effect on the equilibrium size of the population and increase the equilibrium level of
consumption per worker.
D) have no effect on either the equilibrium size of the population or the equilibrium level of
consumption per worker.

12. Malthus was wrong in what sense?

A) He did not predict the high rates of future growth in standards of living.
B) He argued that the Solow growth model could not be correct.
C) He predicted that the U.S. would not overtake the U.K. as the world's industrial leader.
D) He predicted that he would be remembered as "the dismal scientist."

13. In the Solow growth model, long run growth in the standard of living is propelled by
A) government spending.
B) technological change.
C) growth in the capital stock.
D) growth in the labor force.

14. In Solow's exogenous growth model, the economy reaches a stable steady state because
A) the marginal return of capital is decreasing.
B) capital is growing at a constant rate.
C) the substitution effect is stronger than the income effect.
D) conditional convergence holds.
15. The Golden Rule of capital accumulation maximizes the steady-state level of
A) output per worker.
B) capital per worker.
C) consumption per worker.
D) investment per worker.

16. Convergence means that

A) if poor countries grow fast, then fast growing countries are poor.
B) all countries grow at the same rate.
C) all countries tend towards the same per capita income.
D) the savings rate is positively related to per capita income.

17. In the Solow growth model, countries with identical total factor productivities, identical labor
force growth rates, and identical savings rates
A) always have identical levels of capital per worker and output per worker.
B) in equilibrium, have identical levels of capital per worker and output per worker.
C) in equilibrium, have identical levels of capital per worker but not necessarily identical levels
of output per worker.
D) in equilibrium, have identical levels of output per worker but not necessarily identical levels
of capital per worker.

18. What characteristic of the endogenous growth model is crucial in giving the possibility of
sustained growth?
A) It is embodied in people.
B) It has constant returns to scale in production.
C) It takes time to accumulate it.
D) It grows at the same rate as consumption.

19. The endogenous growth model predicts that

A) there is convergence in incomes per capita across countries.
B) output per capita is constant.
C) rich countries will always become poor.
D) differences in per capital incomes across countries persist forever.

20. Endogenous growth theory is about

A) welfare of indigenous people.
B) explaining growth.
C) studying education.
D) studying fertility choices.