Macro Econ Unit 2

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Which of the following is an example of an efficiency wage?

An above-equilibrium wage paid by a firm to reduce turnover costs

Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?

Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate

Which of the following countries achieved higher economic growth, in part by mandating a reduction in population growth?

China

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate

Which of the following demonstrates human capital and physical capital in that order?

For a restaurant, the chefs' knowledge about preparing food and the equipment in the kitchen

Which of the following statements is correct about the relationship between inflation and interest rates?

In order to fully understand interest rates, we need to know how to correct for the effects of inflation

From 1960 to 1990, in which of the following countries has investment resulted in economic growth sufficiently higher than that in the United States?

South Korea

Which of the following is correct?

The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.

Which of the following makes a positive contribution to a nation's GDP?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

In 2002 mortgage rates fell and mortgage lending increased. Which of the following could explain both of these changes?

The supply of loanable funds shifted rightward

Who of the following is not included in the Bureau of Labor Statistics' "employed" category?

Those waiting to be recalled to a job from which they had been laid off

The level of real GDP per person

and the growth rate of real GDP per person vary widely across countries.

When a union bargains successfully with employers, in that industry,

both wages and unemployment increase

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchase

Real GDP is the yearly production of final goods and services valued at

constant prices

Crowding out occurs when investment declines because a budget

deficit makes interest rates rise

In the actual economy, households

divide their income among spending, taxes, and saving

If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will

double but productivity will not change

Which of the following observations about GDP is accurate?

either the revenue firms receive from the sales of goods and services or the payments they make to factors of productions

financial intermediaries are

financial institutions through which savers can indirectly provide funds to borrowers

Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called

frictional unemployment

Right-to-work laws

give workers in a unionized firm the right to choose whether to join the union

An increase in the minimum wage above the equilibrium wage

increases structural unemployment

The introduction of the video cassette recorder in the 1970s exemplified a problem in measuring the cost of living; that problem is the problem of

introduction of new goods

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment

The catch-up effects refers to the idea that

it is easier for a country to grow fast and so catch-up if it starts out relatively poor

Internation data on GDP and socioeconomic variables

leave no doubt that a nation's GDP is closely associated with its citizens' standard of living

Katleen is considering expanding her dress shop. If interest rates rise she is

less likely to expand. This illustrates why the demand for loanable funds slopes downward

During periods of deflation, the nominal interest rate will be

lower than the real interest rate

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily

market prices

The behavior of market prices over times indicates that natural resources are

not a limit to economic growth

Unemployment compensation is

not part of GDP because it is a transfer payment.

Marginally attached workers are people who are

not working and are not looking for work, but would work if asked

The labor force equals the

number of people employed plus the number of people unemployed

One variable responsible for most significant explanation of variations in living standards around the world is

productivity

In order to promote growth in living standards, policymakers must

protect property rights and maintain political stability

If real GDP doubles and the GDP deflator doubles, then nominal GDP

quadruples

At the broadest level, the financial system moves the economy's scarce resources from

savers to borrowers

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

saving and interest rate

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

sell bonds

Evidence from research studies by economists

shows that increased unemployment benefits decrease the job search efforts of the unemployed.

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called

substitution bias

Core CPI is

the CPI excluding only food and energy

The key determinant of the standard of living in a country is

the amount of goods and services produced from each other of a worker's time

Public saving is best defined as

the amount of tax revenue the government has left after paying for its spending

If the price of Italian shoes imported into the United States increases, then

the consumer price index will increase, but the GDP deflator will not increase

In the long run, the unemployment rate equals

the natural rate of unemployment

The term inflation is used to describe a situation in which

the overall level of prices in the economy is increasing

Indexation refers to

using a law or contract to automatically correct a dollar amount for the effects of inflation.

GDP is defined as the

value of all final goods and services produced within a country in a given period of time


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