ECON 202 test 2

Table 28-10 The table below lists the number of people by labor force classification for the country of Springfield. Employed 78 million Part-time employed 22 million Unemployed 12 million Marginally attached 3 million Not in the Labor Force 30 million Discouraged 4 million 14. Refer to Table 28-10. Calculate the U-5 unemployment rate.

16.1%

12. ​If real income per person was $47,210 in the U.S. in 2010, and $55,860 in 2014, what was the annual growth rate over this time period? a. ​4.29 percent per year b. ​1.83 percent per year c. ​8.45 percent per year d. ​1.18 percent per year

A

21. An organization that tries to encourage the flow of investment to poor countries is the a. World Bank. b. Organization of Less Developed Countries. c. Alliance of Developing Countries. d. International Development Alliance.

A

42. Mary looks over reports on four of her workers. Jack made 30 baskets in 5 hours. Rudy made 32 baskets in 8 hours. Sam made 40 baskets in 12 hours. Walter made 22 baskets in four hours. Who has the greatest productivity? a. Jack b. Rudy c. Sam d. Walter

A

47. Which of the following counts as part of the supply of loanable funds? a. bank deposits and purchases of bonds b. bank deposits but not purchases of bonds c. purchases of bonds but not bank deposits d. neither purchases of bonds nor bank deposits

A

48. As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is a. borrowing directly. b. borrowing indirectly. c. lending directly. d. lending indirectly.

A

5. Upland has a population of 15,000, of whom 9,000 work 8 hours a day to produce real output of $342,000. Lowland has a population of 8,000, of whom 7,000 work 7 hours a day to produce real output of $171,500. a. Upland has higher productivity and higher real GDP per person than Lowland. b. Upland has higher productivity but lower real GDP per person than Lowland. c. Upland has lower productivity but higher real GDP per person than Lowland. d. Upland has lower productivity and lower real GDP per person than Lowland.

A

51. Crowding out occurs when investment declines because a. a budget deficit makes interest rates rise. b. a budget deficit makes interest rates fall. c. a budget surplus makes interest rates rise. d. a budget surplus makes interest rates fall.

A

53. If the demand for loanable funds shifts to the right, then the equilibrium interest rate a. and quantity of loanable funds rises. b. and quantity of loanable funds falls. c. rises and the quantity of loanable funds falls. d. falls and the quantity of loanable funds rises.

A

6. The long-run effects of an increase in the saving rate include a. a higher level of productivity. b. a higher growth rate of productivity. c. a higher growth rate of income. d. All of the above are correct.

A

60. A budget deficit a. changes the supply of loanable funds. b. changes the demand for loanable funds. c. changes both the supply of and demand for loanable funds. d. does not influence the supply of or the demand for loanable funds.

A

64. The source of the supply of loanable funds a. is saving and the source of demand for loanable funds is investment. b. is investment and the source of demand for loanable funds is saving. c. and the demand for loanable funds is saving. d. and the demand for loanable funds is investment.

A

65. Suppose that an American company opens and operates a restaurant in Ireland. This is an example of a. foreign direct investment. American saving is used to finance Irish investment. b. foreign direct investment. American saving is used to finance American investment. c. foreign portfolio investment. American saving is used to finance Irish investment. d. foreign portfolio investment. American saving is used to finance American investment.

A

75. Index funds a. buy all the stocks in a given stock index. b. promise to beat the market by a certain percentage known as an index. c. provide a return that is adjusted for changes in the consumer price index. d. buy industries within a particular category of the North American Industry Classification System.

A

89. Retained earnings are a. earnings of a company that are not paid out to stockholders. b. the amount of revenue a corporation receives for the sale of its products minus its costs of production as measured by its accountants. c. the single most important piece of information about a stock. d. computed by multiplying the dividend yield by the price of the stock.

A

93. A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a a. bond. b. stock. c. mutual fund. d. All of the above are correct.

A

94. A low P/E for a stock indicates that a. people may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition. b. its dividends have been low so that no one is willing to pay very much for it. c. the corporation is possibly overvalued. d. All of the above are correct.

A

96. In a market economy, we know that a resource has become scarcer when a. its price rises relative to other prices. b. it is non-renewable and some of it is used. c. people search for substitutes. d. All of the above are correct.

A

Table 28-6 Civilian labor force 100 million Persons unemployed 15 weeks or longer 1.6 million Job losers and persons who have completed temporary jobs (excludes job leavers) 3.1 million Total unemployed 6.2 million Total unemployed plus discouraged workers 7.0 million Total unemployed plus all marginally attached workers 8.1 million Total unemployed plus all marginally attached workers plus total employed part-time for economic reasons 9.2 million 13. Refer to Table 28-6. What is the U-1 measure of labor underutilization? a. 1.6% b. 3.1% c. 6.2% d. 7.0%

A

1. Other things the same, if the government increases transfer payments to households, then the effect of this on the government's budget a. will make investment rise. b. will make the rate of interest rise. c. will make public saving rise. d. All of the above are correct.

B

15. Over the past century in the United States, real GDP per person has grown, on average, by about a. 1 percent per year. b. 2 percent per year. c. 3 percent per year. d. 5 percent per year.

B

17. Suppose a country increases trade restrictions. This country would be pursing an a. inward policy, which most economists believe has beneficial effects on the economy. b. inward policy, which most economists believe has adverse effects on the economy. c. outward policy, which most economists believe has beneficial effects on the economy. d. outward policy, which most economists believe has adverse effects on the economy.

B

56. All or part of a firm's profits may be paid out to the firm's stockholders in the form of a. retained earnings. b. dividends. c. interest payments. d. capital accounts.

B

66. Which of the following expressions must be equal to national saving for a closed economy? a. Y - I - G - NX b. Y - C - G c. Y - I - C d. G + C - Y

B

73. Which of the following terms is used to refer to the ability of people to exercise authority over the resources they own? a. natural rights b. property rights c. input control d. collective control

B

79. A bond buyer is a a. saver. Bond buyers must hold their bonds until maturity. b. saver. Bond buyers may sell their bonds prior to maturity. c. borrower. Bond buyers must hold their bonds until maturity. d. borrower. Bond buyers may sell their bonds prior to maturity.

B

85. Index funds a. typically have a higher rate of return and higher costs than managed mutual funds. b. typically have a higher rate of return and lower costs than managed mutual funds. c. typically have a lower rate of return and higher costs than managed mutual funds. d. typically have a lower rate of return and lower costs than managed mutual funds.

B

87. If a firm sells a total of 100 shares of stock, then a. each share represents 1 percent of the firm's indebtedness. b. each share represents ownership of 1 percent of the firm. c. the firm is engaging in term finance. d. All of the above are correct.

B

9. Suppose that college professors at public universities are unionized. If public university college professors change their minds and vote not to be unionized, the quantity of public university college professors demanded will a. rise. The supply of workers in other similar professions will also rise. b. rise. The supply of workers in other similar professions will fall. c. fall. The supply of workers in other similar professions will rise. d. fall. The supply of workers in other similar professions will also fall.

B

92. Late in the 2000-2009 decade, real estate prices in the U.S. fell by a greater percentage than they had fallen since the a. 1890s. b. 1930s. c. 1950s. d. 1970s.

B

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. 19. Refer to Scenario 26-1. For this economy, private saving amounts to a. $22,000. b. $18,000. c. $15,000. d. $37,000.

B

Table 28-6 Civilian labor force 100 million Persons unemployed 15 weeks or longer 1.6 million Job losers and persons who have completed temporary jobs (excludes job leavers) 3.1 million Total unemployed 6.2 million Total unemployed plus discouraged workers 7.0 million Total unemployed plus all marginally attached workers 8.1 million Total unemployed plus all marginally attached workers plus total employed part-time for economic reasons 9.2 million 10. Refer to Table 28-6. What is the U-2 measure of labor underutilization? a. 1.5% b. 3.1% c. 4.7% d. 6.2%

B

71. A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

Borrowing

11. All else equal, which of the following would increase the unemployment rate? (i) an increase in the number of women who return to work after being stay-at-home mothers (ii) a preference among older men to retire early (iii) an increase in the maximum number of weeks for which someone can receive government unemployment benefits (iv) an increase in the number of previously unemployed women who stop looking for work and become discouraged workers a. (i) and (ii) only b. (iii) only c. (ii) and (iii) only d. (ii), (iii), and (iv) only

C

18. In which of the following countries has economic growth been sufficiently high that income would double every ten years? a. India b. Mexico c. South Korea d. Zimbabwe

C

20. In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving? a. $5 billion and $45 billion b. -$5 billion and $45 billion c. $5 billion and $50 billion d. -$5 billion and $50 billion

C

30. By definition, equity finance a. is accomplished when units of government sell bonds. b. is accomplished when firms sell bonds. c. is accomplished when firms sell shares of stock. d. involves "fair" interest rates or dividend yields.

C

33. A basic principle of economics is that a country's standard of living depends on its a. quantity of physical capital. b. abundance of natural resources. c. ability to produce goods and services. d. ability to thrive economically without having to interact with other countries.

C

34. According to research by Robert Fogel, what proportion of the British population in 1780 was so malnourished that they could not perform manual labor? a. 5 percent b. 10 percent c. 20 percent d. 25 percent

C

37. Foreign saving is used for domestic investment when foreigners engage in a. foreign direct investment. b. foreign portfolio investment. c. either foreign direct investment or foreign portfolio investment. d. None of the above is correct.

C

39. Midwestern corporation issues bonds. Southern corporation issues stock. Which corporation used equity financing? a. both Midwestern corporation and Southern corporation b. Midwestern corporation but not Southern corporation c. Southern corporation but not Midwestern corporation d. neither Midwestern nor Southern corporation

C

4. The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will a. fall temporarily, but will return to where it was when the new owners learn how to farm. b. increase because the total amount of human capital in the country will increase as the new owners learn how to farm. c. fall and remain lower for a long time. d. not be affected unless widespread civil disorder or civil war results.

C

43. Two countries are the same, except one is poorer. Assuming the traditional assumption about the production function is made there are a. diminishing returns to capital so the poor country grows slower. b. increasing returns to capital so the poor country grows slower. c. diminishing returns to capital so the poor country grows faster.

C

44. Productivity is defined as the quantity of a. labor required to produce a nation's GDP. b. labor required to produce one unit of goods and services. c. goods and services produced from each unit of labor input. d. goods and services produced per unit of time.

C

46. Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth? a. education b. research and development c. nutrition d. trade restrictions

C

52. The labor-force participation rate tells us the fraction of the population that a. is able to participate in the labor market. b. has ever been employed. c. has chosen to participate in the labor market. d. has chosen not to participate in the labor market.

C

55. Which of the following statements is correct? a. The total income in the economy that remains after paying for consumption and government purchases is called private saving. b. The sum of private saving and national saving is called public saving. c. For a closed economy, the sum of private saving and public saving must equal investment. d. For a closed economy, the sum of consumption, national saving, and taxes must equal GDP.

C

67. The Bureau of Labor Statistics is part of the U.S. Department of a. the Treasury. b. Commerce. c. Labor. d. the Interior.

C

68. According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would a. raise both private and public saving. b. raise private saving and lower public saving. c. lower private saving and raise public saving. d. lower private and public saving.

C

7. Last year a country had 800 workers who worked an average of 8 hours and produced 12,800 units. This year the same country had 1000 workers who worked an average of 8 hours and produced 14,000 units. This country's productivity was a. higher this year than last year. A possible source of this change in productivity is a change in the size of the capital stock. b. higher this year than last year. A change in the size of the capital stock does not affect productivity. c. lower this year than last year. A possible source of this change in productivity is a change in the size of the capital stock. d. lower this year than last year. A change in the size of the capital stock does not affect productivity.

C

8. Some people who are employed or who are not making serious effort to find employment will report themselves as unemployed. Some people who want to find work will be counted as out of the labor force. a. Both the first and the second fact tend to make the reported unemployment rate lower than otherwise. b. Both the first and the second fact tend to make the reported unemployment rate higher than otherwise. c. The first fact tends to make the reported unemployment rate higher than otherwise, while the second fact tends to make the reported unemployment rate lower than otherwise. d. The first fact tends to make the reported unemployment rate lower than otherwise, while the second fact tends to make the reported unemployment rate higher than otherwise.

C

86. You bake cookies. One day you double the time you spend, double the number of chocolate chips, flour, eggs, and all your other inputs, and bake twice as many cookies. Your cookie production function has a. decreasing returns to scale. b. zero returns to scale. c. constant returns to scale. d. increasing returns to scale.

C

95. Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year before it was 4,100. By about what percentage did Olympian real GDP per person grow during the period? a. 1.6 percent b. 2.5 percent c. 3.7 percent d. 6 percent

C

98. Borrowers can (and sometimes do) default on their loans when a. the dividend yield on their shares of stock reaches zero. b. they convert their bonds into perpetuities. c. they declare bankruptcy. d. they cannot find enough buyers of their bonds to sell all the bonds they wish to sell.

C

16. A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

Closed economy

101. If the government's expenditures exceeded its receipts, it would likely a. lend money to a bank or other financial intermediary. b. borrow money from a bank or other financial intermediary. c. buy bonds directly from the public. d. sell bonds directly to the public.

D

25. Which of the following would increase productivity? a. an increase in the physical capital stock per worker b. an increase in human capital per worker c. an increase in natural resources per worker d. All of the above are correct.

D

29. If in a closed economy Y = $11 trillion, which of the following combinations would be consistent with national saving of $3 trillion? a. C = $8 trillion, G = $3 trillion b. C = $13 trillion, G = -$1 trillion c. C = $9 trillion, G = $5 trillion d. C = $7 trillion, G = $1 trillion

D

3. Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0. Country a. A had the higher level of real GDP and real GDP per person. b. A had the higher level of real GDP and Country B had the higher level of real GDP per person c. B had the higher level of real GDP and Country A had the higher level of real GDP per person d. B had the higher level of real GDP and real GDP per person.

D

36. The identity that shows that total income and total expenditure are equal is a. GDP = Y. b. Y = DI + T + NX. c. GDP = GNP - NX. d. Y = C + I + G + NX.

D

58. Country A has twice as many workers as Country B. Country A also has twice as much physical capital, twice as much human capital, and access to twice as many natural resources as Country B. Assuming constant-returns to scale, which of the following is higher in Country A? a. both output per worker and productivity b. output per worker but not productivity c. productivity but not output per worker d. neither productivity nor output per worker

D

61. Proprietary technology is technology a. that the government prohibits firms from using. b. conserves natural resources. c. that is useful while other types of technology are outdated. d. that is known or controlled only by the company that discovered it.

D

82. Suppose that in a closed economy GDP is equal to 15,000, government purchases are equal to 3,000, consumption equals 10,500, and taxes equal 3,500. What are private saving and public saving? a. 1,500 and -500, respectively b. 1,500 and 500, respectively c. 1,000 and -500, respectively d. 1,000 and 500, respectively

D

83. Mandy purchases 68.2 shares of a mutual fund for $1,500. Cassie's purchase of these shares contributes $1,500 to which magnitude in the identity Y = C + I + G? a. C b. I c. G d. None of the above are correct.

D

84. Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called a. the natural rate of unemployment. b. cyclical unemployment. c. structural unemployment. d. frictional unemployment.

D

91. ​In order to promote growth in living standards, policymakers must a. protect property rights. b. maintain political stability. c. ​encourage the accumulation of factors of production. d. ​All of the above

D

97. Which of the following statements about mutual funds is correct? a. A mutual fund is not a financial intermediary. b. A disadvantage of buying mutual funds is a lack of diversification c. People who buy shares from a mutual fund are guaranteed a minimum return. d. On average index funds outperform managed funds.

D

23. Economists generally agree on the role the government should play in promoting productivity and economic growth. a. True b. False

False

49. When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving. a. True b. False

False

50. Minimum-wage laws affect all workers. a. True b. False

False

54. The sale of either stocks or bonds to raise money is known as equity finance. a. True b. False

False

63. Banks and mutual funds are examples of financial markets. a. True b. False

False

69. Within the U.S. population, teenagers (ages 16-19) have similar rates of labor-force participation than adults of prime working age (ages 25-54), regardless of race or gender. a. True b. False

False

80. Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has gradually increased. a. True b. False

False

88. Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment. a. True b. False

False

90. Index funds are usually outperformed by mutual funds that are actively managed by professional money managers. a. True b. False

False

99. Rupert is collecting unemployment insurance benefits. To continue to receive his benefits, he must be looking for work. Because he'd like to continue collecting benefits rather than take a job, he applies at places that are unlikely to hire him. People like Rupert make the reported unemployment rate less than it would otherwise be. a. True b. False

False

62. Give an historical example of an efficiency wage that was considered by the firm to be "one of the finest cost-cutting moves we ever made."

Henry Ford paid $5 to Ford Motor Company workers, a wage that greatly exceeded market wages for that time (1914)

2. What are the long-run effects on productivity and income of an increase in the saving rate?

In the long run, a higher saving rate leads to higher levels of productivity and income per person but not to higher growth in these variables

100. In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the government has a budget surplus of $25, what are investment, taxes, private saving, and national saving?

Investment = $100, taxes = $225, private saving = 75, national saving = 100

22. How do outward-oriented policies affect a nation's productivity?

Most economists believe that poor nations are better off pursuing outward-oriented policies that promote free trade. Countries that use their comparative advantage in trade are, in effect, helping themselves through the gains from trade in the same way that nations that develop new technology raise their standard of living. Hence, a country that eliminates trade restrictions will experience the same kind of economic growth that would occur after a major technological advance. Inward-oriented trade policies are akin to a country choosing to restrict the use of superior technologies.

27. Public saving is the difference between _____ and _____.

Tax revenue, government purchases

78. Consider the nations of Canada, the United Kingdom, and the United States. Since 1870, which of these nations has progressed, in an economic sense, more slowly than the other two nations?

The UK's growth rate (1.43% per year) is considerably lower than the growth rates of canada (2% per year) and the US (1.77% per year)

59. Which well-known economist from the past asserted that "the power of population is infinitely greater than the power in the earth to produce subsistence for man?"

The economist was Thomas Robert Malthus

Table 28-9 The table below lists the number of people by labor force classification for the country of Shelbyville. Employed 80 million Unemployed 20 million Not in the Labor Force 60 million 72. Refer to Table 28-9. What is the size of the labor force, and the size of the adult population?

The labor force is 100 million, and the adult population is 160 million

31. What word do we use to refer to the amount of goods and services produced for each hour of a worker's time?

The word in question is productivity

24. Unions are exempt from U.S. antitrust laws. a. True b. False

True

26. If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then job search would not be a problem. a. True b. False

True

28. Both full-time and part-time workers are included in the Bureau of Labor Statistics' "employed" category. a. True b. False

True

32. Advocates of unions contend that unions are a necessary antidote to the market power of the firms that hire workers and that unions are important for helping firms respond efficiently to workers' concerns. a. True b. False

True

35. For 2015 the U.S. natural rate of unemployment was estimated to be about 4.9 percent, which was close to the actual unemployment rate in 2015. a. True b. False

True

38. A firm might offer efficiency wages so its workers will eat a more nutritious diet and therefore be healthier and more productive. a. True b. False

True

40. Increases in both human capital per worker and physical capital per worker increase productivity. a. True b. False

True

41. Retirees are included in the Bureau of Labor Statistics' "not in the labor force" category. a. True b. False

True

45. When a country keeps its workers as fully employed as possible, it achieves a higher level of GDP than if many of its workers were idle. a. True b. False

True

57. Within the U.S. population, blacks of prime working age (ages 25-54) have higher rates of unemployment than whites of prime working age (ages 25-54), regardless of gender. a. True b. False

True

70. One reason economies always experience some unemployment is job search. a. True b. False

True

74. The efficiency-wage theory of worker health is more relevant for less developed countries than rich countries. a. True b. False

True

76. Economists generally believe that policies such as reducing barriers to trade are likely to foster economic growth. a. True b. False

True

77. Almost half of all spells of unemployment end when the unemployed person leaves the labor force. a. True b. False

True

81. If the wage is kept above the equilibrium level for any reason, the result is unemployment. a. True b. False

True