Test Make-Up V1

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's unemployment rate?

25%

In a small economy, the quantity of money circulating in the economy is $2.5 million. Real GDP for the current year is $5 million, and the average price level is 2. What is the velocity of money?

4

A country has a population of 160 million. Thirty million of its people are under the age of 16 and 10% of the population is either in the military or institutionalized. Seventy million people have jobs, and five million are looking for work. What is the labor force participation rate in this country?

66%

According to the quantity theory of money, money growth in the long run:

Affects Infaltion Only

A decrease in the price level is called:

Deflation

What is the term for workers who have given up looking for a job but would still like one?

Discouraged workers

_____ is the knowledge and skills that a worker needs to understand to make productive use of technology, whereas _____ is knowledge about how the world works that is used to produce goods and services.

Human capital; technological knowledge

An increase in the banking system's willingness to lend will cause the money multiplier to:

Increase

When workers lose their jobs and become officially unemployed, the unemployment rate:

Increase

Which is NOT a duty performed by the Federal Reserve System?

Print Money

If spending grows by 3% while real growth is 1% and velocity is stable, then prices will be _____ at a rate of _____ according to the aggregate demand curve.

Rising 2%

People with a high time preference are less likely to:

Save

The most important tax for determining an individual's incentive to work is:

The marginal Tax rate

In what way are monetary and fiscal policies similar?

They both target aggregate demand to overcome business fluctuations.

Social Security redistributes wealth across income classes.

True

The tools of fiscal policy are government expenditure and taxation.

True

The average number of times a dollar is spent on final goods and services during a year is the:

Velocity of Money

If a real economic shock shifts the LRAS curve to the left, which of the following will NOT further reduce real GDP growth and inflation?

a monetary policy rule that is credible

The shadow banking system includes each of the following except:

commercial banks

M2 refers to:

currency, checkable deposits, savings deposits, money market mutual funds, and small time deposits

Which of the following is NOT a negative aggregate demand shock?

decrease import growths

When a person withdraws money from a savings account, M2 decreases but M1 increases.

false

The national debt held by the public is the amount of:

federal debt held by individuals and organizations outside the federal government.

Examples of expansionary fiscal policy include increases in:

government spending

Saving is:

income that is not spent on consumption goods

Assuming the velocity of money and real GDP are fixed, the quantity theory of money predicts that a 2% increase in the money supply causes a 2%:

increase in the average price level.

Capital growth is the difference between:

investment and depreciation.

Irreversible investments can be costly because they:

involve Sunk Costs

The "long run" is a period of time:

long enough that prices and wages are fully flexible.

Frictional unemployment is:

short-term unemployment due to the normal difficulties of matching employers and employees.

Which of the following represents ownership in a corporation?

stocks

An open market operation occurs when:

the Fed buys or sells government bonds.

Nearly 70% of all U.S. federal income taxes are paid by:

the top 20% of income earners.

The desire to have goods and services soon rather than later is called:

time preference

The Solow model implies that countries farther away from their steady states will grow faster than countries closer to their steady states.

true

In the short run, a monetary contraction leads to increased unemployment because:

wages and prices are sticky.