macro test 11/8/16

Laws that make it more difficult (and more expensive) to fire workers

lead to higher rates of long-term unemployment.

In the life cycle theory of saving, one's consumption path is ______ one's income path.

less volatile than

An increase in unemployment benefits tends to

lower the incentive to search for a job and raise frictional unemployment.

A zero-coupon bond matures in one year. The price of the bond is $500, and it will pay $1,000 in one year's time. What is the rate of return on the bond?

100 percent

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is

110 million.

If a zero-coupon bond with a face value of $1,000 costs $800, then the rate of return if held to maturity would be

25%

What is the unemployment rate for a nation with 6 million employed and 2 million unemployed?

25%

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force participation rate is

55%

If the nominal interest rate is 9% and the inflation rate is 2% what is the real interest rate?

7%

What problem do employment protection laws create?

Employers are reluctant to hire new workers.

Problems with social security (as a forced savings program) include that

It forces people with credit card debt to save rather than pay off their debt. It forces people to save at periods of their life in which they should not

If the inflation rate goes up, what will most likely happen

Nominal interest rates will rise, and Bond prices will fall

Why is savings so minimal in nations with a high population of AIDS victims?

People with a short-life expectancy tend to save less.

Historically, this is true regarding minimum wages in the United States

They tend to hurt high school dropouts They might help college kids They do not effect the aggregate economy very much

In the loanable funds market, an increase in government borrowing will most likely

decrease bond prices and increase interest rates.

If the government decides to drastically increase spending (and by extension the budget deficit) during an economic recession, it will increase the ______ loanable funds and ______ equilibrium interest rates.

demand for; increase

According to the consumption-smoothing theory, people with a longer life expectancy

have higher savings rates in their lifetimes than those with shorter life expectancy.

Increases in the minimum wage will most likely lead to

higher unemployment.

If a national government increases its unemployment benefits, its unemployment rate will most likely

increase.

John Stossel's dart-throwing experiment showed that:

picking stocks at random can outperform the stock picks of major Wall Street experts.

The labor force includes persons who are

recently laid off and have given up looking for work.

The unemployment rate measures the

share of the labor force that is unemployed.

Which of the following best explains the crowding-out effect?

the decrease in investment from higher interest rates that results from increased government borrowing to finance larger budget deficits

Crowding-out is...

the decrease in private consumption and investment that occurs when government borrows more.

Why do people borrow?

to engage in consumption smoothing, to sustain themselves through periods of unemployment, and to fund unexpected expenditures