Question

9. Impacts of taxes can be felt in: (a) changes in the propensity to take on risk; (b) alterations of the work-leisure tradeoff; (c) adjustments in the capital-to-labor ratio and investment; (d) all of the above.

10. In order to grow over the long term, societies need to: (a) move directly from agricultural to information-based economies; (b) enact protectionist legislations; (c) delay some current consumption in order to save and invest in capital equipment; (d) increase the size of the natural resources sector.

11. To pay for securities it purchases in the open market, the Fed: (a) creates reserves; (b) has a clearing bank credit the account of the bank at which a primary dealer does business; (c) creates additional liabilities on its balance sheet; (d) all of the above.

12. In the so-called “steady state,” there is a level of capital per worker such that the: (a) rate of saving equals the rate of consumption; (b) the rate of capital depreciation equals the marginal efficiency of capital; (c) the rate of saving equals the rate of investment; (d) the rate of depreciation equals the level of investment.

Answer 1

Answer 9. all of the above

reason- Changes in taxes affect the consumption, work life, capital to labor ratio etc.

Answer 10. (c) delay some current consumption in order to save and invest in capital equipment

reason- Increase in savings leads to increase in investment which leads to growth in the economy

Answer 11. all of the above

reason- The fed creates reserves and liabilities to pay for the government bonds purchased during open market.

Answer 12. (d) the rate of depreciation equals the level of investment.

reason-Rate of depreciation equlas rate of investment, it means capital stock is constant. So there is steady state