Econ Exam 3 Prep

D. B to C.

According to the Figure: Technological Progress and Productivity Growth, if there is significant technological progress (all other factors remaining unchanged), it would be best indicated by a move from: A. A to B. B. B to A. C. C to B. D. B to C.

A. A to B

According to the Figure: Technological Progress and Productivity Growth, which change in real GDP would have been most likely to result from an increase in domestic savings? A. A to B B. B to A C. C to B D. C to A

C. 100 million.

According to the Table: Unemployment and Employment Data, the labor force in this economy is: A. 170 million. B. 140 million. C. 100 million. D. 98 million.

A. 6.25 percent. (2 divided by 32)

According to the data from the Table: Employment Data, the unemployment rate is: A. 6.25 percent. B. 6.45 percent. C. 9.09 percent. D. 9.37 percent.

C. B to C

According to the figure, which change in real GDP would be most likely to result from an increase in the quality (as well as quantity) of government spending on education? A. A to B B. B to A C. B to C D. C to B

A. Cyclical (There is a recession)

Due to the current slump, Melanie has been laid off from her programming job. Her employer promises to rehire her when business picks up. What type of unemployment is Melanie facing? A. Cyclical B. Frictional C. Structural D. Natural

C. Higher saving.

Economic growth will likely involve: A. A reduction in investment. B. A decrease in the capital stock. C. Higher saving. D. Lower saving.

B. adding to the stock of human capital. - The emphasis on quality education in East Asia is partially responsible for the sustained healthy economic growth there.

Education provided for an economy's citizens will enhance economic growth by: A. Creating more employment for teachers. B. Adding to the stock of human capital. C. Increasing the size of the labor force. D. Encouraging everyone to be more environmentally conscious.

A. $4050. (50 x $81)

Scenario: The Aggregate Production Function After holding the human capital per worker and technology unchanged, the estimated aggregate production function in Jamaica is: Y / L = 50 × K / L, where Y = real output, L = number of workers, and K = quantity of physical capital. Reference: Ref 18-3 According to the Scenario: The Aggregate Production Function, if the quantity of physical capital per worker or K / L = $81, then the real GDP per worker is: A. $4050. B. $4000. C. $4096. D. $40,500.

D. More people seeking jobs in a labor market than there are jobs available at the current wage rate.

Structural unemployment consists of people who are unemployed because of? A. Temporary changes in jobs. B. An excess in the quantity of labor demanded over the quantity of labor supplied. C. The time it takes for employers and workers to find each other. D. More people seeking jobs in a labor market than there are jobs available at the current wage rate.

D. Increase; less - An increase in natural resources increases output and natural resources are a less important source of productivity growth.

Increasing a country's natural resources should ____________ output, and the impact of this factor should be considered a ____________ important source of productivity growth than human capital. A. Increase; more B. Decrease; more C. Decrease; less D. Increase; less

C. Upward.

Investment in human capital shifts the aggregate production function: A. Downward. B. Leftward. C. Upward. D. Rightward.

B. Greater; higher; smaller - The addition of physical capital increases productivity and real GDP per worker but at a diminishing rate.

Other things equal, a ________ quantity of physical capital per worker leads to ________ real GDP per worker, and each successive addition to physical capital per worker produces a ________ increase in productivity. A. Greater; higher; larger B. Greater; higher; smaller C. Lesser; lower; larger D. Lesser; lower; smaller

B.

A binding minimum wage is likely to cause: A. Frictional unemployment. B. Structural unemployment. C. Cyclical unemployment. D. Natural unemployment.

B. Structural unemployment. - Structural unemployment refers to a persistent surplus of job-seekers in a particular labor market. The government-mandated price floor (the minimum wage) results in the quantity supplied of labor being greater than the quantity demanded.

A binding minimum wage is likely to cause: A. Frictional unemployment. B. Structural unemployment. C. Cyclical unemployment. D. Natural unemployment.

A. providing a way for savings to be channeled into business investment. - Banks establish a market in which savers can interact with borrowers, with savings then channeled into business investment.

A healthy banking system can contribute to the growth of an economy by A. Providing a way for savings to be channeled into business investment. B. Redistributing income between rich and poor citizens. C. Increasing the amount of gold held by its citizens. D. Adding to the overall level of employment.

D. Not counted in the unemployment statistics.

A person who is not working and is not looking for work is: A. Included in the unemployment rate. B. Underemployed. C. A member of the labor force who is not working. D. Not counted in the unemployment statistics.

B. 16.7%

A survey reveals that on a small island 1,000 people have jobs, 200 people are looking for jobs, and 200 people are neither working nor looking for work. The unemployment rate on the island is: A. 12.5% B. 16.7% C. 20% D. 30%

B. 20%

A survey reveals that on a small island 100 people have jobs, 25 people are looking for jobs, and 45 people are neither working nor looking for work. The unemployment rate on the island is: A. 12.5 percent. B. 20 percent. C. 25 percent. D. 50 percent.

C. C to B

According to the figure, which change in real GDP would be most likely to result over time from excessive government intervention that results in a decline in property rights? A. A to B B. B to A C. C to B D. C to A

A. A to B

According to the figure, which change in real GDP would have been most likely to result from an increase in domestic savings? A. A to B B. B to A C. C to B D. C to A

A. natural unemployment plus cyclical unemployment. - Actual unemployment consists of natural unemployment (frictional and structural) plus that form of unemployment due to the business cycle (cyclical unemployment).

Actual unemployment is equal to: A. Natural unemployment plus cyclical unemployment. B. Natural unemployment minus cyclical unemployment. C. Frictional unemployment plus structural unemployment. D. Natural unemployment minus frictional unemployment.

A.

Actual unemployment is equal to: A. Natural unemployment plus cyclical unemployment. B. Natural unemployment minus cyclical unemployment. C. Frictional unemployment plus structural unemployment. D. Natural unemployment minus frictional unemployment.

D. characterized by the poor health of their population, political corruption, and weak property rights. - These negative conditions make it difficult to introduce policies that have successfully promoted growth in other regions of the world.

African countries south of the Sahara are: A. experiencing sustained economic growth due to improvements in agriculture. B. politically stable but economically unstable. C. likely to follow the path of the East Asian economic miracle. D. characterized by the poor health of their population, political corruption, and weak property rights.

B. Frictional (she is taking time to search for a new job that is a good fit)

After completing a complex programming project, Melanie is laid off. Her prospects for a new job requiring similar skills are good, and she has signed up with a programmer placement service. She has passed up offers for low-paying jobs. What type of unemployment is Melanie facing? A. Cyclical B. Frictional C. Structural D. Natural

C. Savings; investment; physical.

All else equal, a nation that has a high rate of ___ will have a high rate of ___ and therefore a higher growth rate of ___ capital. A. Investment; savings; human. B. Savings; investment; natural. C. Savings; investment; physical. D. Savings; consumptions; physical.

D. Most economists agree that it is impossible to continue long-run economic growth while taking steps to protect the environment. - Most economists agree that various steps can be taken to protect the environment with only a modest decrease in the long-term rise of real GDP.

All of the statements regarding the relationship between economic growth and the environment are true EXCEPT: A. Greenhouse gas emissions are positively related to growth. B. Emerging economies like China have dramatically increased carbon dioxide emissions. C. Since pollution is a negative externality, individuals, firms, and even countries have no incentive to protect the environment. D. Most economists agree that it is impossible to continue long-run economic growth while taking steps to protect the environment.

D. Real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California.

An example of the frictionally unemployed is a(n): A. Autoworker who is temporarily laid off because of a decline in sales. B. Geologist who is permanently laid off from an oil company due to a new technological advance. C. Worker at a fast-food restaurant who quits work and attends college. D. Real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California.

C. B to C.

An improvement in technology with everything else remaining unchanged is shown on the Figure: Productivity as a movement from: A. B to A. B. A to B. C. B to C. D. A to C.

B. Lower the official unemployment rate.

An increase in the number of discouraged workers in the economy tends to: A. Raise the official unemployment rate. B. Lower the official unemployment rate. C. Lower the number of people who are frictionally unemployed. D. Increase the number of people who are structurally unemployed

A. Frictionally unemployed.

Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experienced surgeon who is interviewing with several hospitals in Boston. Anna is: A. Frictionally unemployed. B. Structurally unemployed. C. Cyclically unemployed. D. Counted as employed, since she is likely to receive a job offer soon.

B. the amount of output per worker increases, but at a decreasing rate. - This is known as the principle of diminishing returns to physical capital. Consider the shape of the aggregate production function. That function shows a relationship between real GDP per worker (along the y-axis) and physical capital per worker (along the x-axis). As physical capital per worker rises, the production function becomes flatter.

As more physical capital is added to the production process but the number of workers remains constant: A. The amount of output per worker declines. B. The amount of output per worker increases, but at a decreasing rate. C. The amount of output per worker increases at an increasing rate. D. Productivity declines.

C.

Assume that neither minimum wages nor efficiency wages have been established. Labor unions also do not have a presence in this economy. In this scenario, if wages are flexible, then a decline in the demand for labor would likely result in: A. Higher levels of employment. B. No changes in employment. C. A lower level of employment but likely no change in the unemployment rate. D. A lower level of employment and a higher unemployment rate.

A. 3.85 Percent

Based on the Table: Labor Force Distribution, the unemployment rate is: A. 3.85 percent. B. 10 percent. C. 4.55 percent. D. 6.75 percent.

C. Also increase the level of technology and human capital per worker.

Diminishing returns to physical capital may disappear if we: A. Look only at high-tech industries. B. Look only at low-tech industries. C. Also increase the level of technology and human capital per worker. D. Allow a long time period for adjustment.

A. technology improves. - When technology improves, the effect of diminishing returns can be counteracted. Please read the section on The Aggregate Production Function.

Diminishing returns to physical capital may disappear if: A. Technology improves. B. Human capital declines. C. Technology declines. D. The years of education of those in the workforce decline.

A. Above equilibrium to encourage better performance.

Efficiency wages are: A. Above equilibrium to encourage better performance. B. Below equilibrium to encourage better performance to get a raise. C. Responsible for all structural unemployment. D. Above equilibrium to encourage better performance and are responsible for all structural unemployment.

A. very large share; investment goods. - Fast-growing economies grow fast because their capital stock is increasing rapidly. The increase in capital stock can only occur if there is a high level of investment spending.

Fast-growing economies typically spend a _______ share of their GDP on _______. A. Very large share; investment goods. B. Large share; government-provided goods and services. C. Very large share; consumer goods. D. Very small share; investment goods.

D. Cost of technological progress.

Growth accounting allows us to calculate the: A. Time it takes for output per worker to double. B. Time it takes for real GDP to rise by more than the rate of population growth. C. Effects of greater physical and human capital per worker on economic growth. D. Cost of technological progress.

A. You would expect the farm worker using the more costly machine to be more productive, but not twice as productive. - Correct: Due to the effect of diminishing returns to physical capital, you would expect the productivity difference to be something less than twice as much.

Holding technology and human capital constant, you would expect that a farm worker who is operating a $100,000 harvesting machine to be how much more productive than a farm worker who is operating a $50,000 machine? A. You would expect the farm worker using the more costly machine to be more productive, but not twice as productive. B. The farm worker with the more costly machine would be exactly twice as productive. C. The farm worker with the more expensive machine should be more than twice as productive. D. You would expect no difference in productivity levels between the two workers.

C.

Holding technology and human capital fixed in Techland, increasing physical capital per worker from $25,000 to $100,000 would have led to a doubling of real GDP per worker, from $40,000 to $80,000 during the 1980 to 2010 period. However, not only did physical capital per worker increase from $25,000 to $100,000, but technological progress shifted the productivity curve upward so that the actual increase in real GDP per worker during the 1980 to 2010 period was from $40,000 to $320,000. According to the Scenario: Technological Progress and Productivity Growth in Techland, what was the growth rate of real GDP per capita in Techland during the 1980 to 2010 period? A. 2.0 percent B. 4.5 percent C. 6 percent D. 17.5 percent

C.

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is: A. 4 percent. B. 7.5 percent. C. 10 percent. D. 67.5 percent.

D. 2.2%

If actual unemployment is 6.2% and the natural rate of unemployment is 4%, cyclical unemployment is: A. 6.2% B. 10.2% C. 4% D. 2.2%

D. Rising population growth would cause productivity to fall.

In 1798, the English economist Thomas Malthus predicted that: A. Countries with a large supply of natural resources would always enjoy economic growth. B. The recently independent American colonies would rejoin the British empire out of economic necessity. C. The French Revolution would improve the economies of most European countries. D. Rising population growth would cause productivity to fall.

D. Engage in investment spending. - Investment spending, or increases in the economy's stock of physical capital, provides a way to create higher output in the future.

In order to increase its stock of physical capital, an economy must: A. Have a generous endowment of natural resources. B. Have a high level of government spending. C. Have a high level of consumption spending. D. Engage in investment spending.

A. Q1

Look at the Figure: The Minimum Wage on the labor market. What is the quantity of labor demanded at a binding minimum wage of P3? A. Q1. B. Q2. C. Q3. D. Q4.

C. 75% 𝐿𝐹𝑃𝑅= (𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒)/(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 16 𝑜𝑟 𝑜𝑙𝑑𝑒𝑟)×100 LFPR = 150/200 = 75%

Suppose a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment. The country's labor force participation rate is A. 10% B. 67.5% C. 75% D. 90%

C. 10% Labor Force = Employed + Unemployed Labor Force = 135 + 15 = 150 Unemployment Rate = 15/150 = 10%

Suppose a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment. The country's unemployment rate is A. 4% B. 7.5% C. 10% D. 67.5%

C. 105 million Labor force participation: 𝐿𝐹𝑃𝑅= (𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒)/(𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 16 𝑜𝑟 𝑜𝑙𝑑𝑒𝑟)×100 𝐿𝐹=𝐿𝐹𝑃𝑅/100×𝑃𝑜𝑝 16 𝑜𝑟 𝑜𝑙𝑑𝑒𝑟 𝐿𝑅=0.7×150 𝑚𝑖𝑙𝑙𝑖𝑜𝑛=105 𝑚𝑖𝑙𝑙𝑖𝑜𝑛

Suppose the labor force participation rate is 70%, the labor force is equal to? A. 1,200 million B. 50 million C. 105 million D. 400 million

A. 8 million (105 = 60% of 150, 93 + 8 = 105 )

Suppose the labor force participation rate is 70%. The number of unemployed adults is: A. 8 million B. 53 million C. 103 million D. 50 million

A. Diminishing returns to physical capital.

The aggregate production function exhibits: A. Diminishing returns to physical capital. B. Constant returns to physical capital. C. Increasing returns to physical capital. D. Negative returns to physical capital.

B. Should eventually have rates of growth of real GDP per capita that approach those of rich countries.

The convergence hypothesis states that relatively poor countries: A. Should always have lower rates of growth of real GDP per capita as compared to rich countries. B. Should eventually have rates of growth of real GDP per capita that approach those of rich countries. C. Will never converge to the growth rates of real GDP per capita experienced by rich countries. D. Will eventually have much higher rates of growth of real GDP per capita as compared to rich countries.

A. Cyclical unemployment.

The deviation of the unemployment rate from the natural rate of unemployment is called: A. Cyclical unemployment. B. Inflation. C. Frictional unemployment. D. Structural unemployment.

A.

The deviation of the unemployment rate from the natural rate of unemployment is called: A. Cyclical unemployment. B. Inflation. C. Frictional unemployment. D. Structural unemployment.

A. Political instability, low rates of saving, and poor educational systems. - Policy makers have been trying to change these factors in order to put Latin American economies on a higher growth path.

The economic stagnation in Latin America is generally attributed to: A. Political instability, low rates of saving, and poor educational systems. B. The historical record of poverty in the region. C. Excessive imports. D. Lack of natural resources.

C. when they changed the way office work is done. - Economic history shows that the enhanced efficiency that resulted from new technologies usually occurred as the workplace was redesigned to accommodate them.

The evidence seems to suggest that innovations in information technology made the most significant contributions to productivity: A. When they were first introduced. B. When they were being developed. C. When they changed the way office work is done. D. Before they were put into widespread use.

D. Convergence hypothesis.

The idea that relatively poor nations should have higher rates of growth of real GDP per capita than relatively rich nations is known as the: A. East Asian miracle. B. Industrial Revolution. C. Sustainable development hypothesis. D. Convergence hypothesis.

B. Everyone who is employed plus everyone who is unemployed.

The labor force is considered to be: A. Everyone who is employed. B. Everyone who is employed plus everyone who is unemployed. C. The population of the nation. D. Those not frictionally unemployed plus all others employed.

C.

The natural rate of unemployment arises from the effects of: A. Frictional unemployment only. B. Structural unemployment only. C. Frictional and structural unemployment. D. Frictional, structural, and cyclical unemployment .

B.

The natural rate of unemployment consists of: A. Structural plus cyclical unemployment. B. Structural plus frictional unemployment. C. Frictional plus cyclical unemployment. D. Structural plus cyclical plus frictional unemployment.

B.

The natural rate of unemployment: A. Does not change. B. Will rise if there is a rise in the number of young workers. C. Falls as labor unions become stronger. D. Cannot be changed by government policies.

A. high rates of investment; high rates of domestic savings - Most countries grow by drawing upon high domestic savings to fuel high levels of investment.

The prime reason most countries grow is that they have ________ due to ________. A. High rates of investment; high rates of domestic savings B. High rates of investment; low rates of domestic savings C. High rates of investment; high rates of foreign capital D. Low rates of investment; low rates of foreign capital

B. Number of people looking for work by the number of people looking for work plus the number of people employed.

The rate of unemployment is found by dividing the: A. Number of people looking for work by the population. B. Number of people looking for work by the number of people looking for work plus the number of people employed. C. Labor force by the number of people looking for work. D. Unemployed and discouraged workers by the labor force.

A. Savings by households, government, and foreigners.

The sources of funds for investment spending are: A. Savings by households, government, and foreigners. B. Taxes and transfer payments. C. Always equal to U.S. spending on imports. D. Directed to their most productive uses by the U.S. government.

C. technological progress. - Total factor productivity cannot be observed directly, but it is calculated as the residual component of growth not explained by observable factors. It explains the increase in output beyond what can be accounted for by additions to the labor force, the level of human capital, and the stock of physical capital.

Total factor productivity is a measure of A. The increase in human capital. B. The increase in physical capital. C. Technological progress. D. Income distribution.

A.

Unemployment due to the time workers spend in searching for jobs is called: A. Frictional unemployment. B. Structural unemployment. C. Cyclical unemployment. D. Natural unemployment.

B.

Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate is called: A. Frictional unemployment. B. Structural unemployment. C. Cyclical unemployment. D. Natural unemployment.

C. 17 percent (1,000 divided by 6,000 = 16.6)

Use the Table: Population Data for Estill County. What is the unemployment rate in the county? A. 64 percent B. 48 percent C. 17 percent D. 6 percent

C. 17% Labor force = 5000 + 1000 = 6000 UR = 1000/6000 = 16.667% or 17% Note, Working age population: Total population - Under the age of 16 9400 - 2000 = 7400

What is the unemployment rate? A. 64% B. 48% C. 17% D. 6%

C. Growth accounting

What technique do economists use to identify the contribution made to economic growth by each of the individual factors in the aggregate production function? A. Productivity metrics B. Technology accounting C. Growth accounting D. Capital assessment

C. Structural (a shock has hit the programming industry that leaves supply greater than demand at current wages)

When Melanie and her coworkers refused to accept pay cuts, her employer outsourced their programming to workers in another country. This phenomenon is occurring throughout the programming industry. What type of unemployment is Melanie facing? A. Cyclical B. Frictional C. Structural D. Natural

D. Rises at a decreasing rate. - This is correct since adding more capital results in diminishing returns when labor and technology are fixed.

When the amounts of human capital and technology stay fixed and workers are given more and more physical capital, then output: A. Rises at an increasing rate. B. Stays constant. C. Falls. D. Rises at a decreasing rate.

A. Each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity.

When there are diminishing returns to capital? A. Each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity. B. Each successive increase in the amount of physical capital per worker leads to a larger increase in productivity. C. Increasing the amount of physical capital in the production process will not increase output. D. Improvements in technology will not be effective in improving output.

D.

Which calculation is correct? A. Unemployment rate = unemployed / employed x 100 B. Unemployment rate = unemployed / population x 100 C. Unemployment rate = employed / labor force x 100 D. Unemployment rate = unemployed / labor force x 100

C. imposing tariffs on imports - Imposing tariffs on imports insulates domestic businesses from competition, but productivity will decrease from the lack of incentives.

Which of the following government actions do NOT contribute to productivity growth? A. building infrastructure B. investing in education C. imposing tariffs on imports D. investing in research and development

C.

Which of the following is NOT a cause of structural unemployment? A. The government establishes a minimum wage higher than the equilibrium wage. B. Firms choose to establish an efficiency wage. C. The economy suffers a deep recession. D. Labor unions set the wage higher than the equilibrium wage in a market.

D. Governments that provide and maintain a good infrastructure for economic activity can enhance productivity and growth. - One of the key elements of good infrastructure for economic activity is the maintenance of public health, which enhances productivity and thus growth.

Which statement is TRUE? A. The research and development projects funded by a government will provide benefits for corporations who use them, but do not provide benefits for the economy overall. B. A system of well-defined property rights will help some people preserve their wealth, but it does not contribute to economic growth. C. Extensive government intervention in the business sector will promote growth by encouraging decisions that are healthy for the economy. D. Governments that provide and maintain a good infrastructure for economic activity can enhance productivity and growth.