ECON Midterm 2
How frequently is the survey hat determines unemployment released?
monthly
When the economy s doing well, a significant share of unemployment is frictional
true
Which of the choices is most directly related to cyclical unemployment?
recessions
Classify each of the scenarios as an example of interacting directly with a financial market or indirectly via a financial intermediary. Financial markets Financial intermediaries
Financial markets Jenna purchases a bond directly from the U.S. Treasury. Jerome purchases shares of Mastercard stock directly from Mastercard. Financial intermediaries Dominic purchases a share in a mutual fund. Kristi takes out a loan from her bank to purchase a new home
How do mutual funds reduce risk for the average individual investor?
Mutual funds reduce risk through portfolio diversification.
Which of the statements is true?
The nominal interest rate is typically greater than the real interest rate due to inflation.
The housing market often involves transactions with private information. a. Which response accurately characterizes the private aspect of the information involved? b. Which is a step often taken to minimize the information
a. The person selling a house has better knowledge about the condition of the house and the need for repairs than the person buying the house. b. Sellers will offer a home warranty.
An increase in information about job opportunities would...
decrease the natural rate of unemployment
Which of the statements best describes the idea of economic convergence?
Lower GDP per capita countries will catch up with higher GDP per capita countries.
Pros and Cons of Employment Insurance (EI)
Pros: smoothes income changes reduces the burden of unemployment increases job search efficiency and wage outcome Cons: increases frictional employment creates an incentive to delay looking for a job
failure to repay debt
default
Which is not a source of economic growth?
increases in average hours of vacation
Individuals who are involuntarily working part‑time are considered
underemployed
Which most accurately characterizes the method used to calculate inflation?
Analysts measure the cost of a bundle of goods representative of overall spending at two points in time and compare the difference in cost.
Please determine which countries would be classified as growth miracles or growth disasters. Growth miracles? Growth disasters? Which statement regarding economic growth is supported by the histories of the listed countries?
Growth Miracles Japan South Korea Growth disasters Nigeria Argentina Growth is not guaranteed, even when a country has experienced it in the past.
If the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the project, how will the borrowing business act?
The business will not take out the loan.
Suppose the civilian non-institutionalized working-age population is 35.935.9 million in in a hypothetical economy. Of these, 4.64.6 million are working part-time and 15.7115.71 million are working full-time. Assume the Bureau of Labor Statistics (BLS) definitions are used for calculating unemployment data. Among those not working, the most recent job-search activity for 3.203.20 million happened less than two weeks ago, while 1.721.72 million most recently looked for work between two and four weeks ago. An additional 0.860.86 million most recently looked for work five weeks ago, and the remaining 9.819.81 million who do not have jobs have not looked for work in the past six weeks. Round your answers to two decimal places.
What is the size of the total labor force? 25.23 How many people are unemployed? 4.92 What is the labor force participation rate? 70.28 What is the unemployment rate? -
Please select the correct term for each definition. a. the difference between the amount the government collects and how much it spends b. when the preceding term is combined with all of the privately‑held savings from across the country c. the result when the government spends more money than it takes in through taxes d. the net amount of funds coming into a country e. when the government spends less money than it takes in through taxes
a. budget balance b. national savings c. budget deficit d. capital inflow e. budget surplus
Complete the sentences on the role of government in promoting economic growth. a. The government's direct role in the production of physical capital is primarily focused on b. The government's direct role in creating human capital is primarily focused on c. Governments play an indirect role in private savings and investment through
a. developing infrastructure b. improving the education system c. regulating the financial system
Many economists think that long-run economic growth is important for the welfare of a nation. Classify the statements below regarding long-run economic growth as true or false. a. An economy that has experienced long-run economic growth has avoided painful recessions. b. Long-run economic growth is often a direct result of expansionary monetary policy. c. Long-run economic growth can be measured with per capita GDP. d. There has been more long-run economic growth in the last 100 e. A nation with a shrinking population cannot experience long-run economic growth. f. Long-run economic growth is often a result of increases in productivity.
a. false b. false c. true d. true e. false f. true
Use the graph to answer the questions. a. Which example is not a source of economic growth? b. Consider the productivity curves in the graph. Which source of economic growth would not result in the rotation of the productivity curve from PC to PC1?
a. increases in average hours of vacation b. increases in capital per worker
Indicate whether each of the following items is an input in the aggregate production function for GDP. a. Contributions to Social Security b. Bonds issued by an automaker c. Profits of a large investment company d. A significant amount of oil discovered in Texas e. A recent graduate with an engineering degree f. Unskilled migrant worker from Latin America g. A decrease in property taxes h. An upgrade of computers for Mikey's Motors
a. is not an input b. is not an input c. is not an input d. is an input e. is an input f. is an input g. is not an input h. is an input
Determine which economic principle is illustrated by each scenario. a. The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter and closes shop until the temperature warms back up near summertime. b. The local river has so much pollution that three-eyed fish are forming. Regulations are therefore enacted to limit the amount of chemicals dumped into the river. c. At a high-end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station, and one chef, who has an artistic eye, plate the food she is given. The result is increased service speed, enabling the kitchen to serve more customers in an evening. d. During the summer, a bumper crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus, and consumers enjoy the fruits of the farmers' labor.
a. market efficiency b. government intervention c.specialization d. equilibrium
The supply schedule contains individual supply curves for the only two firms in a hypothetical market for stuffed animals. Use the schedule to answer the questions. a. A third firm would mean b. With two firms in the market, the market quantity supplied at $7 is:
a. market supply increases b. 9200 stuffed animals
The accompanying graph shows the labor market in the country of Harmonia. Assume that the Harmonia labor market is at the market equilibrium before the new minimum wage. The Harmonian government decides to introduce a minimum wage of $6. a. Show the new minimum wage on the graph by shifting the minimum wage line. b. What is the increase in unemployment as a result of the minimum wage? c. Which type of unemployment is affected by the new minimum wage?
a. minimum wage shifts up b. 40 c. structural unemployment
Inflation can impose significant costs and adversely distort economic systems. Indicate whether the costs and distorting effects exemplify menu costs, shoe leather costs or unit of account costs. a. discourages people from holding money b. an reduce the quality of economic decisions c. an lead to stores listing prices n more stable currencies d. spending time converting money into something that better holds value e. makes money a less reliable source of measurement f. can cause distortion to the tax system g. causes difficulty in firms and individual planning h. causes costs associated with changing prices in stores
a. shoe leather costs b. unit of account costs c. menu costs d. shoe leather costs e. unit of accounts costs f. unit of accounts costs g. unit of accounts costs h. menu costs
funds that are kept in a bank that must be relinquished upon the owner's request
bank deposit
profits distributed to firms owners
dividend
The natural state of unemployment equals
frictional unemployment plus structural unemployment
A large number of young people entering the labor force would...
increase the natural rate of unemployment
an agreement between a lender and a borrower
loan
Collaboration with Congress during the Clinton Administration allowed for an aggressive deficit-cutting plan to pass. As a result, the government was able to reach a balanced budget at the end of the 90's. Move the supply and/or demand curves to describe the expected effect that this deficit-reduction likely had upon the loanable funds market. As a result, private investment should have
shift demand left increased because the cost of borrowing decreased.
The table shows employment statistics for a fictional country. Use the information to answer the questions. Round your percentages to two decimal places. category - number of people employed -5505 unemployed - 492 not in labor force - 571 what is the total labor force? what is the labor force participation rate? what is the unemployment rate Suppose 246246 of the 492492 unemployed people have been unemployed for so long that they stop looking for work. What is the new labor force? What is the new labor force participation rate? What is the new unemployment rate?
what is the total labor force? 5997 what is the labor force participation rate? 91.31 what is the unemployment rate? 8.20 what is the new labor force? 5751 what is the new labor force participation rate? 87.56 What is the new unemployment rate? 4.28
This group, consisting of individuals who would like to work but have not looked for work during the past four weeks, is included among:
marginally attached workers
a claim to ownership of part of a firm
stock
As interest rate decreases, what happens to the quantity of loanable funds demanded?
Quantity demanded will increase.
Which statement accurately characterizes the distribution of real GDP per capita internationally?
Real GDP per capita varies greatly across countries.
Which of the following best defines a financial intermediary?
a financial institution that transforms investor funds into financial assets
The Canadian nominal interest rate in 2010 was 0.90%.0.90%. Inflation in 2009 was measured at 2.52%.2.52%. Calculate the real interest rate. Round your answer to two places after the decimal. real interest rate:
-1.62
Worker productivity is one of the most important factors that help determine the performance of an economy. Which definition best describes productivity?
per capita GDP
When considering economic growth, many policy makers focus on real gross domestic product (GDP) per capita since it takes into account the potentially distorting effects of
population
Which of the factors would decrease the rate of frictional employment?
the advent of the internet, which makes finding jobs easier
Use the production function of the hypothetical economy represented in the graph to answer the questions. a. What is the steady-state level of output? steady-state level of output: _______ units b. The growth rate of output per capita will
a. 500 b. increase as the country benefits from high marginal product of capital.
Determine if each statement is true or false. a. Borrowers gain when inflation is lower than expected. b. Real interest rates will never go negative. c. Borrowers gain when inflation is higher than expected. d. If inflation is higher than the nominal interest rate, the real interest rate is negative. e. In 1980, nominal interest rates increased whereas real interest rates decreased.
a. false b. false c. true d. true e. false
Any large, sustainable increase in real GDP must be due to steadily increasing
labor productivity
Classify each statement as either true or false.
True a negative rate of inflation implies that deflation has taken place deflation means the overall price is decreasing False while theoretically possible, deflation has never been observed in the United States when the GDP deflation is under 100, deflation must have taken place this year deflation means that the overall price level is increasing at a decreasing rate
More funding for government worker training programs would...
decrease the natural rate of unemployment
Why is a hypothetical basket of goods used to measure inflation?
Consumers can see the general increase in price over time by using a basket of goods.
c. Which effect below characterizes the relationship between inflation expectations and nominal interest rates?
The Fisher Effect
Which of the terms acts as the "price" in the market for loanable funds?
interest rates
Which of these statements best summarizes the impact of the Fisher effect?
Consumers consider future inflation.
Place each statement in the appropriate category. GDP grows faster when rule of law is applied equally and generally respected with technological progress with efficient financial markets GDP grows slower
GDP grows faster when rule of law is applied equally and generally respected with technological progress with efficient financial markets GDP grows slower with deeply rooted tradition during war when children go to work instead of school with inadequate public heath
Select the scenario that is an example of a legal financial intermediation.
Lee borrowing money from the First Bank of Jackson that was deposited there by Lisa
How does funding from national savings differ from funding obtained from capital inflows?
National savings are repaid domestically, whereas capital inflows are repaid to foreigners.
lease classify each policy according to whether it tends to foster or inhibit economic growth. Policies that tend to foster economic growth Policies that tend to inhibit economic growth
Policies that tend to foster economic growth establishing a stable national government that promotes the rule of law and sets clear expectations for business behavior clearly defining and enforcing property rights that extend to all members of society creating a public infrastructure, including communication, education, medical services, sanitation, and transportation facilities encouraging multinational firms to establish a business presence in the country Polices that tend to inhibit economic growth establishing trade barriers to protect domestic industry
The average rate of growth for slow-growth countries is around 2% per year, and for fast-growth, greater than 5% per year. a.Suppose the growth rate of the economy is 2%. The size of the economy roughly doubles every b. If instead the growth rate is 7%, the doubling time for the economy is c. Economic growth is important to understand because
a. 35 years b. 10 years c. it is closely tied to standard
Determine whether each of the individuals is considered unemployed or not unemployed. a. Erik volunteers for 10 hours per week at his children's school and does no other work. He sends his resume to 10 potential employers daily. b. Laura works 20 hours in a paid position for her local animal shelter. c. Pete had a knee replacement two weeks ago and will not be available to work at his job as a mechanic for the next three months. d. Alex just turned 16 and started applying for jobs. He has not found a company that will hire him yet. e. James quit his job to stay at home with his children and has not worked in 15 years, nor has he looked for work.
a. unemployed b. not employed c. not employed d. unemployed e. not employed
Determine if the people in the example have benefited - i.e., are winners - or have been harmed - i.e., are losers - by unexpected inflation. a. The United States federal government, which had almost $15 trillion in debt in 2011 b. Karen, a retired school teacher who relies upon her fixed pension to pay for her expenses c. Third National, a bank that loaned many people money for home purchases d. Joy, who borrowed $40,000 to pay for her college education e. Herb, who keeps his savings in an old coffee can
a. winner b. loser c. loser d. winner e. loser
a legal obligation to repay debt at a specific date in the future
bond
Individuals who want to work, but have given up searching for a job because of limited prospects, are known as
discouraged workers
An increase in union membership would...
increase the natural rate of unemployment
Extra financial benefits for the unemployed would...
increase the natural rate of unemployment
Consider the labour statistics for the country of Menap, which consists of five districts and a capital region with varying degrees of poverty. Round your answers to two decimal places. What is the labour force in Menap? labour force: ________ millions of workers What is the unemployment rate in Menap? unemployment rate: _______ %
labor force: 348 Unemployment rate: 29.60
a group of investments packaged together and sold as one investment opportunity
mutual fund
Select the correct definition of financial intermediation.
the process of an institution operating between a saver with financial assets to invest and an entity who will receive those assets and pay a rate of return
dicate what factors tend to expand capital accumulation and what factors tend to lower it. Factors that tend to expand capital accumulation a vigorous entrepreneurial class that is willing to bear risks Factors that tend to lower capital accumulation political and social instability poor communication, energy, and transportation infrastructure arbitrary, cumbersome, and unjust tax policies and systems
Factors that tend to expand capital accumulation a vigorous entrepreneurial class that is willing to bear risks Factors that tend to lower capital accumulation political and social instability poor communication, energy, and transportation infrastructure arbitrary, cumbersome, and unjust tax policies and systems
There are two aspects of efficiency that the equilibrium of market for loanable funds exhibits. Select the TWO statements that characterize these two aspects of efficiency.
Investment projects that are financed by savers have larger rates of return than projects that do not receive financing. Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money.
Identify what type of unemployment each of the individuals faces. James is an architect who has been laid off owing to a slump in the demand for property. He feels he will have to wait until the economy picks up before he can get a new job. Eric is an experienced project manager who lost his job at a tech start-up because the company's product failed to become popular. He is confident he can get a new job and has already rejected a number of offers. Craig lost his job several months ago. He is having a hard time finding a job that pays him more than unemployment insurance does. Sarah is a recent economics graduate who is entering a difficult labor market, due to a severe recession. She is continuing to look for work but is having a hard time getting interviews. Hamid has just graduated as a lawyer from an esteemed law school. He is confident of getting a job and has already refused a few lower‑paying jobs.
James is facing cyclical unemployment Eric is facing frictional unemployment Craig is facing structural employment Sarah is facing cyclical unemployment Hamid is facing frictional unemployment
Assume that a simple model of the macroeconomy can be given as G−T=(S−I)+(M−X),G−T=(S−I)+(M−X), where G represents government spending, T represents taxes, S represents savings, I represents investment, and M and X represent imports and exports, respectively. Which statement about this model is true about a budget deficit?
Private savings, the trade deficit, or both must be positive
Classify the statements as true or false by placing them in the correct category.
True deflation occurs when aggregate price level falls deflation does not affect people in the economy uniformly. some people are made better off, some people are made worse off deflation often results in a decrease in aggregate demand False deflation is when the rate of inflation decreases deflation is a theoretical possibility but almost never occurs
Determine if each statement is true or false.
True loan contracts specify the nominal interest rate lenders gain when inflation is lower than expected if inflation is higher than the nominal interest rate, the real interest rate is negative False borrowers lose when inflation is higher than expected real interest will never go negative
Suppose a hypothetical economy is currently operating at point A on the per worker production function (PWPF) labeled PF1 in the accompanying graph. a. Which event could move the economy from point A to point B? b. Which event could shift the PWPF from PF1 to PF2, or from point A to point C?
a. increase in the amount of capital b. technological advancment
To convert the money spent on the basket to a useable figure, economists arbitrarily choose the *base year* or starting point from which we measure changes in prices. To simplify the task of interpreting the price levels for more realistic and complex baskets of goods, economists typically report the price level in each period as an *index number* rather than as the dollar amount for buying the basket of goods.
base year, index number
Anita Job is the new Treasury Secretary, and she is trying to interpret the inflation measures for two consecutive years. In year one, the aggregate price level increased by 11% and, in year two, the aggregate price level increased by 2% Which term describes the change in the price level from year one to year two?
disnflation
Reducing workers collective bargaining rights would...
decrease the natural rate of unemployment
Adjust the graph to show how an increase of $25.8 billion dollars in the government's budget deficit affects this loanable funds market, holding all else equal. Select the answer that describes the adjustment in the loanable funds market.
demand shifts rights The deficit increases the demand for loanable funds and shifts the demand curve to the right, increasing the interest rate and crowding out investment spending.
increasing minimum wage would...
increase the natural rate of unemployment
Consider the productivity curves in the graph. Which source of economic growth would not result in the rotation of the productivity curve from PC to PC1?
increases in labor hours
Complete the statment about economic policymaking. When considering economic growth, many policymakers focus on real GDP per capita because it takes into account the potentially distorting effects of *inflation* and *population change* Any large, sustainable increase in real GDP must be the result of increased *output per worker.* That is, a sustainable increase in real GDP must be due to higher *labor productivity*
inflation, population change output per worker, labor productivity
Select the best definition of labor productivity
output per worker
Who reports the official US unemployment rate?
U.S. Bureau of Labor Statistics
Which individual is out of the labor force?
James is without a job, is able to work, but is not actively looking for work
What effect will an increase in interest rates have on the quantity of loanable funds supplied?
Quantity supplied will increase.
In a small, closed economy, national income (GDP) is $250$250 million for the current month. Individuals have spent $150$150 million on the consumption of goods and services. They have paid a total of $25$25 million in taxes and the government has spent $25$25 million on goods and services this month. Use this information and the national income identity to answer the questions. a. How much does the economy spend on investment? b. What is national saving in the economy? c. How are investment and national saving related in an economy like this?
a. 75 b. 75 c. National saving equals investment
Suppose that the video game company Ultravision releases a new game called Call of Obligation: Modern Combat 3. This game can be analyzed using the tools of both microeconomics and macroeconomics. Classify each item below according to whether it represents an application of microeconomic or macroeconomic tools. a. Can Ultravision sell all the units of the Call of Obligation games it produces, or should it produce more units? b. How does Ultravision choose to market Call of Obligation? c. How much does Ultravision pay developers of the game? d. How much less economic output is produced nationwide because workers call in sick to play either Call of Obligation or another video game? e. How much will Ultravision charge for Call of Obligation? f. Have the millions of dollars that people have spent on video games worldwide affected the Gross Domestic Product (GDP) in their respective countries? g. Has the country's unemployment rate changed as Ultravision hired a huge team of workers to develop the game?
a. Microeconomics b. Microeconomics c. Microeconomics d. Macroeconomics e. Microeconomics f. Macroeconomics g. Macroeconomics
Indicate whether the given statements about climate change and economic growth are true or false. a. Poorer countries have historically been responsible for the bulk of world carbon emissions because of poor technology and environmental regulations. b. Tackling climate change issues is likely only to modestly dent long-term economic growth. c. Air and water quality in developed countries is generally much better today than it was several decades ago. d. Carbon emissions are negatively correlated with economic growth.
a. false b. true c. true d. false
Classify each example as either relating to human capital, physical capital, or technology. a. An increase in adult literacy affects b. An increase in the number of company cars impacts c. An increase in the number of college graduates impacts d. New distribution techniques affect technology. e. An increase in the number of company computers affects physical capital. f. More people graduating from culinary school affects human capital. g. A new cancer treatment affects technology. h. A doctor's knowledge about a new cancer treatment affects human capital.
a. human capital b. physical capital c. human capital d. technology e. physical capital f. human capital g. technology h. human capital
Consider the components of the national savings and investment identity, categorized below. Each scenario will affect one component of the identity. Classify each scenario according to the component it will affect. a. A worker's contribution to a retirement fund is b. A farmer buying a new tractor is c. A decrease in automobile exports is d. A domestic company building a factory is e. The government building a bridge affects f. Mitchell quitting his job to go back to school affects g. An increase in French wine imports is h. A family cutting down on expenses affects
a. private domestic savings b. private doemestic investment c. an inflow of foregin capital d. private domestic investment e. government budget deficit f. private domestic savings g. an inflow of foreign capital h. private domestic savings
Determine which type of financial asset is described in each scenario. a. Caleb has developed a prototype garlic-peeling device that he hopes to sell to the public. He is having his startup issue securities that offer buyers the promise to pay a specified amount of interest each year plus the principal in five years. Caleb is b. Audrey wants to buy a new car but does not have enough cash. She gets funding from her local bank with the promise that she will make monthly payments for the next three years to repay the original amount lent to her plus 66% interest. Audrey is c. Lyle and Shane start a business selling pencil sharpeners to elementary schools. Their company becomes an instant success, and they decide to allow people to start buying small shares of their company. This gives individuals who buy shares the right to vote in company decisions and a small percentage of the profits. Lyle and Shane are d. Rand Capital, a financial industry conglomerate, pools together several hundred home mortgages and sells shares in them to groups of investors. However, many investors decide against this option because of the risk involved and the difficulty of assessing the quality of such a large number of individual mortgages. Rand Capital is e. Jack decides to build a chateau in the mountains of Colorado and operate it as a ski resort. He secures funding from a local commercial bank after discussing his business plan with the bank. He promises to pay back the principal plus interest over the next 2020 years. Jack is
a. selling bonds b.taking out a loan c. selling stock d. floating a loan-backed security e. taking out a loan
Please read the description and identify to which region the text is referring. a. Historically, this region has suffered from extreme poverty, which continues to this day. Growth has been effectively zero since the 1960s. Problems such as political instability, poor public health, and a lack of effective institutions have all contributed to its stagnation. b. Until the middle of the last century, these countries were relatively poor. Beginning in the mid 1970s, real GDP per capita growth has averaged 6% per year. The growth was achieved, in part, because of high levels of investment spending in the development of human and physical capital, and rapid technological progress. c. In the early 1990s, this region was in the middle of substantial social and economic reform. Countries in this region have experienced variable growth rates, depending on their ability to adapt to the modern market economy. d. In the early 20th century, this region was reasonably prosperous. Since that time, however, growth has stagnated, owing to government instability banking failures, and run-away inflation. Recently, some countries in the region have begun to grow more consistently, with one country becoming a powerhouse of world economic development.
a. sub-Saharan Africa b. Asian Tigers c. European transition economies d. South America
Determine whether the statements listed regarding the savings-investment spending identity are true or false. a. The budget balance can be either positive or negative. b. National budget deficits are NOT included in the calculation of national savings. c. The national savings are the combined value of all private savings and the budget balance. d. Outflows of funds can only be generated by countries with a larger gross domestic product (GDP) per capita than the country receiving the funds. e. Why do funding from national savings and funding obtained from capital inflows differ?
a. true b. false c. true d. false e. national savings are repaid domestically, whereas capital inflows are repaid to a foreigner.
Determine if each statement is true or false. a. An increase in government transfer payments can crowd out private investment. b. An improvement in the budget balance increases the demand for financial capital. c. An increase in private consumption may crowd out private investment. d. Lower interest rates can lead to private investment being crowded out. e. An improvement in the trade balance must come from an increase in national savings. f. For an open economy, if private savings is equal to private investment, then there is neither a budget surplus nor a budget deficit.
a. true b. false c. true d. false e. false f. false
Indicate whether each the following statements are true or false. a. An increase in government spending can crowd out private investment. b. An improvement in the budget balance increases the demand for financial capital. c. An increase in private consumption may crowd out private investment. d. Lower interest rates can lead to private investment being crowded out. e. A trade balance in surplus increases the supply of financial capital. f. If private savings is equal to private investment, then there is neither a budget surplusnor a budget deficit.
a. ture b. false c. true d. false e. false f. false
A promise to pay issued by a borrower with annual interest payments and a principal payment at maturity
bond
Economists almost unanimously view international trade as beneficial for an economy. However, not everyone wins. Some lose depending on the sector and direction of exchange. a. Use the bins below to sort the effects of imports and exports. b. One outcome is certain regardless of whether a nation imports or exports:
a. Imports consumers gain surplus producers lose surplus domestic price decreases Exports consumers lose surplus producers gain surplus domestic price increase b. total economic surplus increases
Please use the graph to answer the given questions. Assume the people act rationally. a. Which of the statements best describes a situation represented by point A? b. Given the market conditions, what will be the prevailing interest rate? c. Given the market conditions, how much will be available in loanable funds?
a. Wayne projects that if he takes out a loan to open another gym franchise, he will earn a lower return than the interest rate he would have to pay, so he decides against it. b. 10% c. $50 billion
Please decide whether each of the scenarios related to the loanable funds market will result in a shift in supply or a shift in demand. a. China decides to reduce its capital investment in the United States, as it expects low returns due to a weak U.S. economy. b. Calopolis, a college town in Northern California, has for many years banned the presence of fast food restaurants in city limits. As of 2012, however, the city will allow several fast food companies to open franchised locations. c. Due to an increase in revenues after a tax hike, the United States is able to eliminate the deficit and begins to maintain a balanced budget for the first time in several decades. d. As a result of a stock market boom, individuals begin to feel richer and spend more while also saving less.
a. shift in supply b. shift in demand c. shift in demand d. shift in supply
The schedule describes the Laotian market for cheese where free trade is allowed. Quantity is listed in millions of pounds. Suppose the world price of cheese is $6 per pound and that Laos imposes an import tariff of $2 per pound on foreign cheese. Describe the consumer surplus (CS) and producer surplus (PS) areas to describe the new welfare situation. a. What constitutes the area of consumer surplus after an import tariff is imposed? b. What constitutes the area of producer surplus after an import tariff is imposed? c. Which statement best describes the way the tariff changes consumer surplus? d. Which statement best describes the way the tariff changes producer surplus?
a. The area below the demand curve, above the price with tariff included, with a quantity demanded of 20 million pounds. b. The area above the supply curve, below the price with tariff included, with a quantity supplied of 12 million pounds. c. Consumer surplus is still larger compared to the amount with the non-trade equilibrium, but smaller than the amount of surplus with free trade and no tariff. d. Producer surplus is smaller than the amount with a non-trade equilibrium, but larger than the amount of surplus with free trade and no tariff.
The accompanying table (entitled PPF 1) contains the production possibilities frontier (PPF) for Rubberland. Rubberland only makes two products, rubber band balls and rubber hoses, and on a given day can produce according to the PPF in the table. Rubberland currently produces 80 rubber band balls and 50 rubber hoses. When a new method of rubber processing is discovered, the productivity of all Rubberland's inputs increases. The new combination of outputs is listed in the table entitled PPF 2. Indicate what happens graphically in the multiple choice question that follows. Assume that Rubberland does not make more rubber band balls than they originally made on PPF 1 but still maximize their productive capabilities. How many more rubber hoses do they now produce per day than before? a. When Rubberland discovered a new technology that increases productivity of all inputs, what happens graphically to the PPF curve? b. Rubberland produces _____ more hoses per day c. Since Rubberland is maximizing their productive capabilities, they are producing at a point ________
a. The entire curve shifts outward b. 20 c. on the PPF curve
In 2000, a small country has real GDP of $20,000 and a population of 150. By 2010, real GDP has grown to $30,000, and improved nutrition has allowed the population to increase to 220. a. Which statement must be true for this nation? As the nation's leading expert in economics, you have been asked to present a series of economic policies you believe would be helpful to the nation. Because of budget constraints, the legislature also wants you to rank your suggestions. b.Which policy would be last on your list of policy proposals?
a. The standard of living is higher in 2010 than it was in 2000. b. strict population control measures
Consider these statements about a family in South America. Match each situation with the term that best describes it. Each term is used only once, so it is important to determine the situation that best fits the term. a. As a teenager, Juan Carlos worked as an assistant to an electrician after school. Consequently, he learned a lot about being an electrician, an important skill that can result in gainful employment. After graduating from high school, Juan Carlos was able to go to the United States to study. After earning his college degree, he took a job at a prestigious American firm, married his American girlfriend, and settled in to stay in the United States. b. Juan Carlos's father, Alberto, had always been envious of his neighbor's tractor. The tractor allowed the neighbor to produce 50% more than Alberto produced, although their farms are virtually identical. c. When the neighbor bought a second tractor for his son to drive, his output increased again. However, the second tractor did not increase his output by as much as the first tractor had. Appreciative of his father's hard work, Juan Carlos buys Alberto a new tractor with an air‑conditioned cab. Alberto is thrilled when the new machine allows him to almost triple his output; he is now producing more than all of his neighbors, many of whom have old tractors. d. Alberto and his neighbors are troubled by the lack of water in the river that runs by their farms. The laws of their country allow farmers to take limited amounts of water from the river for crop irrigation, but a wealthy celebrity built a villa upstream of the farms and unlawfully diverted much of the water onto his land for a decorative stream and waterfall. Local officials refuse to do anything to help the farmers until they pay a small unofficial "fee."
a. human capital b. brain drain c. physical capital d. diminishing returns e. catch-up effect f. property rights
Indicate whether each scenario is a characteristic or an example of a stock or bond. a. Joline purchases a financial asset that gives her partial ownership of a company. b. Nissan finances an expansion of its operations by giving investors small ownership stakes in the company. c. Mason lends money to his city. The city issues him a certificate specifying when Mason will be repaid and the interest he will earn. d. Mars, Inc. wants to build a new factory but does not have the cash on hand to pay for it. It finances its new factory through debt financing.
a. stocks b. stocks c. bonds d. bonds
a share of ownership in a company
stock
