Econ 362 Multiple Choice Exam 2

When a person purchases a 90-day Treasury bill, he or she cannot know the:

ex post real interest rate

Short-term unemployment is most likely to be ____ unemployment, while long-term unemployment is most likely to be______ unemployment:

frictional, structural

Analysis of population growth around the world concludes that countries with high population growth tend to:

have a lower level of income per worker than other parts of the world

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will ______ the number unemployed:

increase

Discouraged workers are individuals who:

want a job but have given up looking for one

Menu costs

The cost of changing prices, such as printing a new menu.

If the real interest rate declines by 1 percent and the inflation rate increases by 2 percent, the nominal interest rate must:

increase by 1 percent

In the solow growth model, if investment exceeds depreciation, the capital stock will _____ and output will _____ until the steady state is attained:

increase, increase

Empirical evidence supports the theory that free trade:

increases economic growth

If the real return on government bonds in 3 percent and the expected rate of inflation is 4 percent, then the cost of holding money is ______ percent:

7

If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals ________ percent:

9

Shoeleather costs

A metaphor for the cost and inconvenience of trying to reduce money holding.

In the solow growth model with population growth, but no technological change, a higher level of steady-state output per worker can be obtained by all of the following except:

increasing the population growth rate

Two economies are identical except that the level of capital per worker is higher in highland than in lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker:

more in Lowland

The general demand function for real balances depends on the level of income and the:

nominal interest rate

Other things being equal, all of the following government policies are likely to increase national savings except:

running a budget deficit

The fact that the Soviet Unions input was the same as the U.S. but produced only 1/3 of the U.S. GDP highlights the importance of which factor of growth:

Efficiency

Monetary Neutrality

In the Long run, changing the money supply does not affect any real variables. only affects nominal variables.

Real money balances equal the:

amount of money expressed in terms of the quantity of goods and services it can purchase.

Heather loses her teaching job at Vestal Middle School because the local governments must cut spending during a recession. What type of unemployment is it:

cyclical

All of the following are causes of structural unemployment except:

unemployment insurance

If the fraction of employed workers who lose their jobs each month (the rate of job seperations) is 0.01 and the fraction of the unemployed who find a job each month is 0.09 ( the rate of job findings ), then the natural rate of unemployment is:

10 percent

If the capital stock equals 200 units in year 1 and the depreciation rate is 5 percent per year, the in year 2, assuming no new or replacement investment, the capital stock would equal ____ units:

190

If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is ______ times per year:

5

Classical Dichotomy

In the Long run, the determination of real variables does not involve any nominal variables.

Among the four countries- the United States, the United Kingdom, Germany, and Japan- the one that experienced the most rapid growth rate of output per person between 1948 and 1972 was:

Japan

Fisher Equation

Nominal Interest = Real interest rate + inflation

The balanced growth property of the solow growth model with population growth and technological progress predicts which of the following sets of variables will grow at the same rate in the steady state? :

Output per worker, capital per worker, real wage

Seigniorage

Revenue that government raises by printing money.

Which of the following is not a proposed explanation for that fact that Americans on average work 20 percent more hours than the typical resident of western Europe:

The underground economy is larger in American than in Europe

According to the Institutions theory of economic growth, which of the following is essential for a countrys economic development:

a fair legal system which protects property rights

In the case of an unanticipated inflation:

creditors with an unindexed contract are hurt because they get less than they expected in real terms

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

depreciation

In the solow growth model with no population growth and no technological progress, the higher the steady capital-per-worker ratio, the higher the steady state:

level of output per worker

What are the three main reasons why some countries are poorer than others:

low saving and human capital, slow technological progress, and low efficiency

The unemployment resulting when the real wages are held above equilibrium is called _______ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called _______ unemployment:

structural and frictional