Questions

Note that the classical model involves some critical assumptions at this point: the capital stock, the labor force, and the production technology are fixed, there is no unemployment, wages and prices are flexible, there is no foreign trade, and money has no effect on the economy. Also, the factors of production, along with technology, determine output.

What is the broken window fallacy? Explain a situation when a bad economist might apply it to an event in Alabama.

Who was J.B. Say and what did he say about the market-clearing process? What are leakages and injections, and why should they equal each other, according to Say?

Differentiate between private and public saving. Are these examples of leakages or injections? How are each affected by (say) a decrease in taxes? an increase in government spending?

What affects investment demand? How does the interest rate affect your personal investment demand (in your human capital)?

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The marginal product of labor is:
A) output divided by labor input.
B) additional output produced when one additional unit of labor is added.
C) additional output produced when one additional unit of labor and one additional unit of capital are added.
D) value of additional output when one dollar's worth of additional labor is added.

All of the following transactions that took place in 2006 would be included in GDP for 2006 except the purchase of a:
A) 2004 Honda SUV built in Lincoln, Alabama.
B) ticket to see the movie “2001: A Space Odyssey.”
C) year 2007 calendar printed in 2006.
D) book printed in 2006, entitled The Year 4000.

Macroeconomics does not try to answer the question of:
A) why do some countries experience rapid growth.
B) what is the rate of return on education.
C) why do some countries have high rates of inflation.
D) what causes recessions and depressions.

The CPI is determined by computing:
A) an average of prices of all goods and services.
B) the price of a basket of goods and services that changes every year, relative to the same basket in a base year.
C) the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.
D) nominal GDP relative to real GDP.