Eco 119 Exam 2

Which of these policies adopted by the government is NOT aimed at reducing the natural rate of unemployment? a. unemployment insurance b. government employment agencies c. public retraining programs d. the Illinois bonus program for unemployment insurance claimants who found jobs quickly

a. unemployment insurance

As the relative demand for unskilled workers falls, wages for unskilled workers _____, and unemployment compensation becomes a _____ attractive option. a. fall; more b. fall; less c. rise; more d. rise; less

a. fall; more

An increase in the saving rate starting from a steady state with less capital than the Golden Rule causes investment to _____ in the transition to the new steady state. a. increase b. decrease c. first increase and then decrease d. first decrease and then increase

a. increase

One reason for unemployment is that: a. it takes time to match workers and jobs. b. all jobs are identical. c. the labor market is always in equilibrium. d. a laid-off worker can immediately find a new job at the market wage.

a. it takes time to match workers and jobs.

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the real wage were rigid, this would lead to: a. no change in the real wage and a rise in unemployment. b. no change in the real wage and no change in unemployment. c. no change in the real wage and a fall in unemployment. d. a decrease in the real wage.

a. no change in the real wage and a rise in unemployment.

In the Solow growth model, the steady-state level of output per worker would be higher if the _____ increased or the _____ decreased. a. saving rate; depreciation rate b. population growth rate; depreciation rate c. depreciation rate; population growth rate d. population growth rate; saving rate

a. saving rate; depreciation rate

If y = k1/2, the country saves 10 percent of its output each year, and the steady-state level of capital per worker is 4, then the steady-state levels of output per worker and consumption per worker are: a. 2 and 1.6, respectively. b. 2 and 1.8, respectively. c. 4 and 3.2, respectively. d. 4 and 3.6, respectively. Feedback

b. 2 and 1.8, respectively.

In the Solow model with population growth and technological progress, an economy's output per worker grows at 3 percent and the total output grows at 5 percent. Therefore, we can conclude that the technology is growing by _____ and the population is growing by _____. a. 2 percent; 2 percent b. 3 percent; 2 percent c. 2 percent; 3 percent d. 3 percent; 3 percent

b. 3 percent; 2 percent

In the Solow growth model with population growth but no technological progress, if in the steady state the marginal product of capital equals 0.10, the depreciation rate equals 0.05, and the rate of population growth equals 0.03, then the capital per worker ratio _____ the Golden Rule level. a. is above b. is below c. is equal to d. will move to

b. is below

If an economy moves from a steady state with positive population growth to a zero-population growth rate, then in the new steady state, total output growth will be _____, and growth of output per person will be _____. a. lower; lower b. lower; the same as it was before c. higher; higher than it was before d. higher; lower

b. lower; the same as it was before

Discouraged workers are counted as: a. part of the labor force. b. out of the labor force. c. employed. d. unemployed.

b. out of the labor force.

According to Thomas Malthus, large populations: a. save and invest a large amount of output, resulting in higher living standards. b. place great strains on an economy's productive resources, resulting in perpetual poverty. c. are a prerequisite for technological advances and higher living standards. d. are not a factor in determining living standards.

b. place great strains on an economy's productive resources, resulting in perpetual poverty.

If an economy is in a steady state with no population growth or technological change and the marginal product of capital is less than the depreciation rate: a. the economy is following the Golden Rule. b. steady-state consumption per worker would be higher in a steady state with a lower saving rate. c. steady-state consumption per worker would be higher in a steady state with a higher saving rate. d. the depreciation rate should be decreased to achieve the Golden Rule level of consumption per worker.

b. steady-state consumption per worker would be higher in a steady state with a lower saving rate.

In the Solow growth model with population growth but no technological progress, when the economy finds itself at the Golden Rule steady state, the marginal product of capital minus the rate of depreciation will equal: a. 0. b. the population growth rate. c. the saving rate. d. output per worker.

b. the population growth rate.

If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach: a. a higher level of output per person than before. b. the same level of output per person as before. c. a lower level of output per person than before. d. the Golden Rule level of output per person.

b. the same level of output per person as before.

The macroeconomic problem that affects individuals most directly and severely is: a. inflation. b. unemployment. c. low savings. d. low investment.

b. unemployment.

A policy that increases the job-finding rate _____ the natural rate of unemployment. a. will increase b. will decrease c. will not change d. could either increase or decrease

b. will decrease

In the Solow growth model, the steady-state growth rate of output per effective worker is _____, and the steady-state growth rate of output per actual worker is _____. a. the sum of the rate of technological progress plus the rate of population growth; zero b. zero; the rate of technological progress c. zero; zero d. the rate of technological progress; the rate of population growth

b. zero; the rate of technological progress

If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals _____ percent (rounded to the nearest percent). a.0 b.9 c.11 d.20

b.9

If the fraction of employed workers who lose their jobs each month (the rate of job separation) is 0.01 and the fraction of the unemployed who find a job each month is 0.09 (the rate of job findings), then the natural rate of unemployment is: a. 1 percent. b. 9 percent. c. 10 percent. d. about 11 percent.

c. 10 percent.

Which of these hypotheses is consistent with fewer hours worked per year in Europe than in the United States? a. fewer mandated holidays in Europe than in the United States b. higher employment-to-population ratios in Europe than in the United States c. higher tax rates in Europe than in the United States d. a smaller underground economy in Europe than in the United States

c. higher tax rates in Europe than in the United States

According to Olivier Blanchard, Europeans are more likely to use increases in real wages resulting from technological progress to increase _____, and Americans are more likely to use these increases in real wages to increase _____. a. hours of work; hours of leisure b. consumption of goods and services; hours of leisure c. hours of leisure; consumption of goods and services d. unemployment insurance benefits; efficiency wages

c. hours of leisure; consumption of goods and services

Exhibit: Output, Consumption, and Investment In this graph, when the capital stock per worker is OA, AB represents: ​ a. investment per worker, and AC represents consumption per worker. b. consumption per worker, and AC represents investment per worker. c. investment per worker, and BC represents consumption per worker. d. consumption per worker, and BC represents investment per worker.

c. investment per worker, and BC represents consumption per worker.

Wage rigidity: a. forces labor demand to equal labor supply. b. is caused by sectoral shifts. c. prevents labor demand and labor supply from reaching the equilibrium level. d. increases the rate of job finding.

c. prevents labor demand and labor supply from reaching the equilibrium level.

When an economy's capital is below the Golden Rule level, reaching the Golden Rule level: a. produces lower consumption at all times in the future. b. requires higher consumption levels at all times. c. requires initially reducing consumption to increase consumption in the future. d. requires initially increasing consumption to decrease consumption in the future.

c. requires initially reducing consumption to increase consumption in the future.

If the capital per worker in the economy is 4 units and the capital per effective worker is 2 units, then the efficiency of each worker is equal to: a.1/2. b.1. c.2. d.4.

c.2.

Suppose that over the course of a year 100 people are unemployed for four weeks each (the short-term unemployed), while 10 people are unemployed for 52 weeks each (the long-term unemployed). Approximately what percentage of the total weeks of unemployment were attributable to the long-term unemployed? a. 9 percent b. 10 percent c. 43.5 percent d. 56.5 percent

d. 56.5 percent

Suppose the economy is originally at a steady state where the marginal product of capital is equal to the depreciation rate. If the saving rate of the economy increases, then at the new steady state: a. capital per worker will be lower compared to the original steady state. b. output per worker will be lower compared to the original steady state. c. investment per worker will be lower compared to the original steady state. d. consumption per worker will be lower compared to the original steady state.

d. consumption per worker will be lower compared to the original steady state.

Exhibit: Capital per Worker and the Steady State In this graph, capital-labor ratio k2 is not the steady-state because: a. the saving rate is too high. b. the investment ratio is too high. c. gross investment is greater than depreciation. d. depreciation is greater than gross investment.

d. depreciation is greater than gross investment.

Short-term unemployment is MOST likely to be _____ unemployment, while long-term unemployment is mostly likely to be _____ unemployment. a. structural; frictional b. structural; the natural rate of c. the natural rate of; frictional d. frictional; structural

d. frictional; structural

Sectoral shifts: a. lead to wage rigidity. b. explain the payment of efficiency wages. c. depend on the level of the minimum wage. d. make frictional unemployment inevitable.

d. make frictional unemployment inevitable.

When f (k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the curve denotes: a. output per worker. b. output per unit of capital. c. the marginal product of labor. d. the marginal product of capital.

d. the marginal product of capital.

In the Solow growth model, the assumption of constant returns to scale means that: a. all economies have the same amount of capital per worker. b. the steady-state level of output is constant, regardless of the number of workers. c. the saving rate equals the constant rate of depreciation. d. the number of workers in an economy does not affect the relationship between output per worker and capital per worker.

d. the number of workers in an economy does not affect the relationship between output per worker and capital per worker.

If the production function is y = k1/2, the steady-state value of y in the Solow model with population growth and technological progress is: a. y = ((s + g) / (δ + n))1/2. b. y = (s + g) / (δ + n). c. y = (2 / (δ + n + g))1/2. d. y = s / (δ + n + g).

d. y = s / (δ + n + g).

In an economy with population growth at rate n, the change in capital stock per worker is given by the equation: a. Δk = sf (k) + δk. b. Δk = sf (k) - δk. c. Δk = sf (k) + (δ + n) k. d. Δk = sf (k) - (δ + n) k.

d. Δk = sf (k) - (δ + n) k.