Economics 102
Answers to Practice Questions 3
Spring 2001
Answer Key:
I. True/False and explain
- F. It is to the opposite, the classical model takes a
long-run view.
- F. Should be real values.
- F. All markets clear.
- F. In the classical model, full employment is
automatically satisfied.
- F. Aggregate production function graphs the
relationship between output and employment holding capital, land and
technology level fixed.
- T.
- T.
- F. It’s consistent with Say’s law, which shows that
total value of spending will equal the total value of output. As long as
the excess supplies or excess demands in these markets are balanced, Say’s
law still holds true.
- T.
- F. Not including exports.
- T.
- F. It’s equally true when the government is running a
budget surplus.
- T.
- T.
- T.
- T.
- F. They both increase employment, but they have
different effect on wage rate: increase in labor demand will increase wage
rate, while increase in labor supply will decrease it.
- T.
- F. In this case, capital per worker decreases, and
productivity will decrease.
- F. It gives firms incentives to spend more on
investment such as accumulation of capital or R & D.
- T.
- F. Their population growth rate is generally high,
requiring most of resources used in producing consumption goods to keep
the minimum consumption level. And their capital per worker is low,
resulting in a low productivity.
II. Multiple Choices
1.D 2.B 3.B 4.D 5.A
6.B 7.D 8.C 9.B 10.A
11.D 12.B 13.C 14.D 15.D