5. Using the Cobb-Douglas production function, while holding other inputs constant, if the amount of a specific factor is increasing ________. 

(A) the increased amount of output from an extra unit of input declines
(B) the increased amount of output from an extra unit of input increases
(C) that factor's share of output is declining
(D) that factor's share of output is increasing  

1. The reason only newly produced goods and services are counted in GDP is that ________. (A) it is very difficult to impute a value to used goods (B) most expenditures on used goods and services take place outside the market (C) it does not help economists make better economic predictions because second-hand goods rarely have any residual value (D) it allows economists to avoid double counting the production of goods and services

2. Many borrowers defaulted on subprime mortgages ultimately disrupting financial markets by August 2007. Which of the following is a likely result of this increase in financial frictions? (A) The AD curve likely shifted left which caused a positive inflation gap. (B) The AD curve likely shifted right which caused a positive inflation gap. (C) The AD curve likely shifted left which caused an upward movement along the MP curve to a higher general equilibrium interest rate. (D) none of the above

3. To avoid double counting in the calculation of GDP, which types of goods are typically excluded from the calculation? (A) intermediate goods (B) capital goods (C) inventory goods (D) nonmarket goods

4. In a country with unusually high tax rates, one might expect that ________. (A) GDP might be overstated because the government might avoid running surpluses (B) GDP might be understated because its citizens might avoid reporting some of their income (C) GDP might be overstated because the government might raise its outlays (D) GDP might be understated because its citizens might flee the country

6. Based on the table 1 "Real and Nominal GDP," if year one is the base year, then the real GDP in year two, is ________. (A) 5000 (B) 5250 (C) 5900 (D) 6175

7. A technology shock could have a different impact than a natural catastrophe because ________. (A) the former would likely lower TFP and the latter raise labor productivity (B) the former would likely lower output and the latter raise production (C) the former would likely raise output and the latter would raise TFP (D) the former would likely raise TFP and the latter would curtail production

8. In the long run, larger budget deficits lead to ________. (A) higher saving levels (B) a fall in investment (C) lower interest rates (D) all of the above

9. When the Fed buys government securities in the open market, the money supply ________ because ________. (A) decreases； banks lose liquidity, they make fewer loans and checking account deposits decrease (B) increases； banks gain liquidity, they make more loans and checking account deposits increase (C) increases； banks lose liquidity, they make more loans and checking account deposits increase (D) decreases； banks gain liquidity, they make fewer loans and checking account deposits decrease 

10. M1 does not include cash that is held in ATMs or bank vaults, because ________. (A) no one really owns that money (B) that money is included in M2 (C) that money earns no interest (D) the right to access that money is counted already as bank deposits

11. Rising inflation causes quantity demanded to decline, because ________. (A) the central bank raises the nominal interest rate by more than the increase in expected inflation (B) households and businesses are reluctant to spend when prices rise (C) higher inflation causes the IS curve to shift to the left (D) all of the above