ECO 302 Week 5 Quiz – Strayer
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Chapters 6 and 7
Chapter 6
TRUE/FALSE
1. Bond
holdings and interest income are zero for the whole economy.
2. The
household real budget constraint shows that household real consumption is equal
to household real income plus household real saving.
3. In
the Barro model prices like the real wage adjust to clear markets like the
labor market.
4. In
the Barro model the nominal rate of return on capital, (R/P) - is greater than the nominal return on bonds,
i, because capital is viewed by households as more risky than bonds.
5. Real
profit equals real output plus spending on capital and labor inputs.
6. In
the bond market, a higher interest rate means that borrowing is less expensive
than before.
7. Household
decisions depend on the nominal values for wages and rent rather than the real
values for wages and rent.
8. In
the Barro model, households use money as a means for trading goods and
services.
9. In
the Barro market model, gold serves as money.
10. The
market-clearing interest rate depends on the marginal productivity of capital.
MULTIPLE CHOICE
1. The
market clearing approach assumes that:
a. people are not able to affect prices
that influence their decisions. c. firms are not able to affect prices
that influence their decisions.
b. prices adjust to clear markets. d. all
of the above.
2. The
market clearing approach assumes that:
a. people are not able to affect prices
that influence their decisions. c. firms are able to affect prices that
influence their decisions.
b. prices change very slowly. d. all
of the above.
3. The
market clearing approach assumes that:
a. people are able to affect prices that
influence their decisions. c. firms are able to affect prices
that influence their decisions.
b. prices adjust to clear markets. d. all
of the above.
4. The
market clearing approach assumes that:
a. people are able to affect prices that
influence their decisions. c. firms are not able to affect prices
that influence their decisions.
b. prices change very slowly. d. all of the above.
5. The
labor market clears when:
a. the real wage causes LS = LD. c. the
marginal product of labor is zero.
b. the real wage causes LS to be minimized.
d. the
real wage causes LS to be as large as possible.
6. In
the goods market in the Barro model households can buy:
a. bonds. c. labor services.
b. goods to increase their stock of
capital. d. all of the above.
7. The
goods market the price, P, is:
a. the price level. c. the
price of a particular good.
b. the rental price of goods. d. the
interest rate.
8. In
the rental market in the Barro model, households buy and sell:
a. real estate. c. the use of
capital for one period.
b. consumer durables like cars. d. all
of the above.
9. A
bond that is traded in the bond market in the Barro model is piece of paper
that:
a. is the lenders claim to the amount owed
by the borrower. c. is the lenders claim to ownership in the
company.
b. is the borrowers claim to the amount
owed by the lender. d. assures the person is who they say they
are.
10. Money
in the Barro model is held because:
a. for its own sake. c. to
earn interest.
b. to trade fairly soon for something
else. d. all of the above.
11. Money
in the Barro model is:
a. gold. c. interest earning.
b. a medium of exchange. d. all
of the above.
12. One
unit of money in the Barro model has a purchasing power of:
a. the price level time that one unit, P. c. the
interest rate, i.
b. the price level over the interest rate,
(P/i). d. one over the price level, (1/P)
13. If
a household has $2,000 in money and the price level is 10, then the real value
of its money is:
a. $10. c. 200 goods.
b. $20,000. d. 1,900
goods.
14. The
real wage is:
a. hourly earning after taxes. c. the
value of a worker’s time in goods received.
b. wages plus fringe benefits. d. the
price level divided by the nominal wage rate.
15. If
the nominal wage rate is $10 per hour and the price level is 2, then the real
wage a worker earns is:
a. five units of goods per hour. c. twenty
units of goods per hour.
b. eight units of goods per hour. d. one-fifth
unit of goods per hour.
16. If
the rental price of a capital good is $100 and the price level is 25, then when
renting the capital the owner’s real earnings are:
a. 4 units of output per period. c. seventy
five units of output per period.
b. 2,500 units of output per period. d. one-forth
unit of output per period.
17. The
rental price of capital is:
a. a dollar amount per unit of capital. c. a
nominal interest rate
b. a real interest rate. d. profit.
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