Quiz 10

1. ambiguous effects on profit per unit of capital.
2. a decrease in profit per unit of capital.
3. no change in profit per unit of capital.
4. an increase in profit per unit of capital.
5. none of the above

1. A low income person expecting continued low income throughout life.
2. A high income person expecting continued high income throughout life.
3. A low income person expecting a dramatic rise in income in the future.
4. A high income person expecting to retire soon, and live for a long time afterward.
5. A high income person expecting a dramatic drop in income in the future.

1. has decreased steadily over time.
2. tends to decrease in recessions, increase in expansions.
3. tends to increase in recessions, decrease in expansions.
4. is not influenced by the business cycle.
5. tends to increase in even years, and decrease in odd years, although no one can explain why.

1. the difference between current and expected profits.
2. the interest rate that should be used in present discounted value calculations.
3. the rate at which consumers deplete their total wealth in retirement.
4. how much usefulness a machine loses from year to year.
5. the difference between current and expected income.

1. a one-time tax cut of $4000
2. a one-time increase in income (e.g. a bonus) of $4000
3. a permanent increase in annual salary of $2000
4. both B and C

1. a decrease in current disposable income
2. a decrease in human wealth
3. a decrease in financial wealth
4. all of the above
5. both B and C

1. decrease or remain unchanged, depending on the value of the real interest rate.
2. decrease by at most $50,000.
3. decrease by more than $50,000.
4. remain unchanged.
5. decrease, remain unchanged, or increase, depending on the value of the real interest rate.

1. social security benefits.
2. personal savings.
3. home equity.
4. collectibles, like stamps, coins and art.
5. stocks and bonds.

1. increase.
2. decrease.
3. remain unchanged if the real interest rate increases by the same amount.
4. none of the above

1. an increase in the value of one's house
2. a permanent increase in salary
3. an increase in the value of one's stock portfolio
4. all of the above
5. none of the above

1. The real interest rate decreases.
2. The expected profit from the machine decreases.
3. The rate of depreciation increases.
4. all of the above
5. none of the above

1. Consumers look ahead to the future in making current spending decisions.
2. Consumption spending depends on income, rather than wealth.
3. Consumption spending should fluctuate widely from year to year.
4. all of the above
5. none of the above

1. financial wealth minus housing wealth
2. the present discounted value of expected future after-tax labor income
3. total wealth minus housing wealth
4. the sum of financial and housing wealth
5. wealth that cannot be taken from a person, by law

1. have a strong negative relationship.
2. have a strong positive relationship.
3. are positively related during expansions, and negatively related during recessions.
4. move independently.
5. are positively related during recessions, and negatively related during expansions.

1. A drop in consumer confidence, with unchanged current income, often causes total consumption spending to fall.
2. People save very little for their retirement.
3. The pre-announced phased-in tax cuts of 1981-83 caused little change in consumption in 1981.
4. all of the above
5. none of the above

1. business firms do not use discounting.
2. business firms do not care about profit.
3. business firms do not care about interest rates.
4. cash flow does not matter for investment.
5. cash flow matters for investment.

1. housing wealth
2. human wealth
3. financial wealth
4. none of the above

1. pt
2. rt
3. pet
4. all of the above
5. none of the above

1. $75,131
2. $100,000
3. $70,000
4. $88,899
5. $96,153

1. The real interest rate rises.
2. The rate of depreciation falls.
3. The expected profit from the machine decreases.
4. all of the above
5. none of the above

1. inheriting $10,000 from a relative
2. getting a one-time $10,000 bonus from your employer
3. winning $10,000 in the lottery
4. taking a new job with a salary that is $10,000 higher than your current salary
5. obtaining $10,000 by winning a lawsuit

1. Modigliani
2. Lucas
3. Friedman
4. Keynes

1. no change in profit per unit of capital.
2. ambiguous effects on profit per unit of capital.
3. a decrease in profit per unit of capital.
4. an increase in profit per unit of capital.
5. none of the above

1. r_t
2. r_t + δ
3. π_t
4. π_t /( r_t + δ)
5. none of the above

1. Low income people may prefer to postpone some consumption until later years, when their incomes are higher.
2. The anticipation of future financial distress makes some people reluctant to borrow.
3. Banks will not always lend money to those who want to consume more than their income.
4. all of the above
5. none of the above