Exam #3

Wages in excess of their equilibrium level help explain

structural but not frictional unemployment.

Which of the following is correct

studies show that when they unemployment become ineligible for benefits the probability of their finding a home rise marketdly

If a firm wants to borrow it can

supply bonds by selling them

Minimum wages create unemployment in markets where they create a

surplus of labor. Unemployment of this type is called structural.

Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would cause

the demand for this company 's stock to decrease, so the price would fall

If there is a surplus of loanable funds, then

the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium

If the efficient markets hypothesis is correct then,

the stock market is informationally efficient.

Borrowers can (and sometimes do) default on their loans when

they declare bankruptcy.

Malthus predicted that the power of population

was greater than the power of the earth to produce subsistence. His forecast was off the mark.

Suppose government expenditures on goods and services increase, transfers are unchanged and taxes rise by less than the increase in expenditures. These changes in the governments budget cause

The equilibrium interest rate to rise and the equilibrium quantity to loanable funds fall

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?

The first of these is public saving; the second one is private saving

The future value of a deposit in a savings account will be larger

The longer a person waits to withdraw funds, the higher interest rate is, the larger the initial deposit is

Unions contribute to

The natural rate of unemployment but not frictional unemployment

As the number if stocks in a persons portfolio increases

The risk of the portfolio decreases as indicated by the decreasing value of the standard deviation of the portfolio

As the number if stocks in a persons portfolio increases

The risk of the portfolio decreases, as indicated by decreasing the value of the standard deviation of the portfolio

The word efficient int he term efficient markets hypothesis refers to the idea that

The stock market is informationally efficient

If Joanna is risk averse, then

she dislikes bad things more than she likes comparable good things

People who hold well-diversified portfolios of stocks have greatly reduced or eliminated

firm-specific risk, but still they have reason to worry about their wealth decreasing as a result of recessions

A bond buyer is a

saver. Bond buyers may sell their bonds prior to maturity.

As of 2008, using real GDP per person as a measure, we would classify

Canada as an advanced economy, Mexico as a middle-income country, and Pakistan as a poor country.

Which if the following would shift the demand or loanable funds to the right

Congress and the president pass an investment tax credit

Spells of unemployment end about

1/2 of the time with the person leaving the labor force

In June 2009 the BLS reported an adult population of 234.9 million unemployment of 12.4 million, and employment of 141.6 million based in these numbers the labor force participation rate was

154/234.9

If the nominal interest rate is 7 percent and the rate of inflation is 3 percent then the real interest rate is

4 percent

If the inflation rate is 2 percent and the real interest rate is 3 percent then the nominal interest rate is

5 percent

Country A has a population of 1,000 of whom 800 work 8 hours a day to make 128,000 final goods. Country b has a population of 2,000 of whom 1,800 work 6 hours a day to make 270,000final goods.

Country A has lower productivity and lower real GDP per person than country B

You deposit $3000 into an N-year certificate of deposit that pays 4.5 percent annual interest, and at the end of the N years you have $4082.59. What is the number of years, N?

7

Crowing out occurs when investment declines because

A budget deficit makes interest rates rise

On the basis of theory and empirical evidence, economists have reached several conclusions about economic growth. Which of the following is not one of these conclusions?

A relatively simple way to increase growth rates permanently is to increase a country's saving rate.

Which of the following is a source of frictional unemployment

changes in the composition of demand among industries or regions

Other things the same when an economy increases its saving rate

consumption falls now and production rises later

Which if the following make insurance premiums higher than otherwise

Adverse selection and moral hazard

Which of the following make insurance premiums higher than otherwise

Adverse selection and moral hazard

Which of the following best illustrates moral hazards

After a person obtains life, insurance she takes up skydiving

The problem of moral hazard arise because

After people by insurance, they have less incentives to be careful about their risky behavior

Which if the following is an example of an efficient wage

An above equilibrium wage offered by a firm to attract a more talented pool of jobs applicants

Unions

And firms paying wages above equilibrium to improve worker effort both create structural unemployment

Suppose that congress were to repeal an investment tax credit, what would happen in the market for lovable funds

The demand for loanable funds would shift leftq

Which of the following could explain a decrease in the equilibrium quantity of loanable funds

The demand for lovable funds shifted leftward

No particular stock is a better buy than any other stock if

The efficient markets hypothesis is correct

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

!000, 500 and 1,500 respectively

Two years ago Darryl put $3000 into an account paying 3 percent interest. How much does he have in the account today?

$3,182.70

Which of the following is the correct expression for finding the present vale of $500 payment two years from today if the intrest rate is 6 percent

$500/(1.06)^2

What is the future value of $500 one year from today if the interest rate is 6 percent

$530

Minimum wage laws, unions and efficiency waged contribute to

Both structural unemployment and the natural rate of unemployment

As real interest rates fall, firms desire to

Buy more new equipment and buildings, this response helps explain why the demand for loanable funds is downward slopping

The traditions view of the production process is that captial os subject to

Diminishing returns

Which of the following is not correct

Diversification can eliminate market risk but not firm specific risk

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Earnings

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will

Fall and remain lower for a long time

Over extend periods of time, population growth

Has uncertain effects in the standard of living

Efficient wage theory suggests that paying

High wages might be profitable because they raise the efficiency of a firms workers

Perry accumulated a lot of mathematical skills while in high school, college and graduate school. Economists include these skills as part of Perry's

Human captial

In answering which of the following questions would you find it necessary to calculate future value

If Jill puts $5000 today into a bank acccount that pays 3 percent invest rate then how much will she have in the account after 2 years

Sectoral shifts ind Em and for output

Increase unemployment due to job search

An increase in the minimum wage

Increases structural unemployment

Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of trucks change. In which case do these changes both make them less likely to buy the truck?

Interest rates rise and truck prices rise.

A person who is not employed and claims to be trying to find a job, but really is not trying had to find a job

Is counted as unemployed but should be counted as out of the labor force

If the government currently has a budget deficit then

It does not necessarily have a debt, its debt is increasing, government expenditures are greater than taxes

The theory of efficiency wages explains why

It may be in the best interest of firms to offer wages that are above the equilibrium level

if congress institutes an investment tax credit

It would make buying capital goods more desirable so the demand for loanable funds would shift

John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available.

John is frictionally unemployed, and Curtis is structurally unemployed.

Who of the following would be included int the bureaus of labor statistics unemployed category

Juli who is on temporary staff

Four employers have justified their actions as follows. Whose logic is not consistent with the logic of efficiency wage theory?

Kay pays her workers less than the equilibrium wage so they won't have the time or money to look for work somewhere else.

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

Not change

Volume, as reported in stock tables refers to the

Number of shares traded

Economists Robert Fogel focused on which of the following factors as one determinant of long-run economic growth

Nutrition

Diversifaction reduces

Only firm specific risk

Which of the following concepts is most helpful in explaining why investment increases when the interest rate falls

Present value

Which of the following is not always correct for a closed economy

Private saving equals investment.

In the 1990s Ireland made unemployment benefits generous, this change would likely have

Reduced frictional unemployment and the a natural rate of unemployment

The source of the supply of loanable funds is

Savings, and the source of the demand for loanable funds is investment

Which of the following is correct concerning a risk averse oerson

She would not play games where the probability of winning and losing a dollar are the same, she might not buy health insurance if she thinks her risks are low, her marginal utility of wealth decreases as her income increases

According to the efficient markets hypothesis, which of the following would increase the price of stock in the Simpson corporation

Simpson announces that its profits were low but not as low as the market had expected

After adjusting for inflation, over time the prices of most natural resources have been

Steadily or falling, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling

For an economy that engages in international trade, GDP is divided into four components. Which of the following is not one of them

Taxes

An understanding of the best ways to produce goods and service is called

Technology

Jerry has the choice of two bonds, one that pays 3 percent interest and one tat pays 6 percent interest. Which of the following is most likely

The 6 percent bod has a longer term than the 3 percent bond

Which of the following is not correct

Unemployment insurance decreases frictional unemployment

The supply of loanable slopes

Upward because an increased in the interest rate induces people to save more

Which of the following is not correct

When unions raise wages above equilibrium, the quantity of labor supplied decreases, and the quantity of labor demanded increases.

Other things the same if the government increases transfer payments to household, then the effect of this on the governments budget

Will make the rate of interest rise

Suppose the government were to replace the income tax with a consumption tax sot hat interest on savings was not taxed. The result would be that the interest rate

Would decrease and investment would increase

Which of the following is adverse selection

a high-risk person being more likely to apply for insurance

In effect an annuity provides insurance

against the risk of living too long

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

and quantity of loanable funds rises

If you believe that stock prices follow a random walk, then probably you

believe in the validity of the efficient markets hypothesis

Retained Earnings are

earnings of a company that are not paid out to stockholders.

Other things the same, which of the following could explain an increase in productivity

either an increase in human capital or an increase in physical capital

Other things the same, when the interest rate rises, the present value of future revenues from investment projects

falls, so investment spending falls

Discounting refers directly to

finding the present value of a future sum of money

In the early 1900s Henry ford introduced

high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory.

Compounding refers directly to

interest being earned on previously-earned interest

When the government has a budget surplus

it buys more of its bonds from the public than it sells to the public.

Economists would predict that, other things the same, the more generous unemployment compensation a country has, the

longer the duration of each spell of unemployment and the higher the unemployment rate.

Meredith recently graduated from college but has not yet started working. To be counted as unemployed she

must have looked for work no more than 4 weeks ago

In a closed economy, what remains after paying for consumption and government purchases is

national saving

From the standpoint of the economy as a whole the role of insurance is

not to eliminate the risks inherent in life, but to spread them around more efficiently

In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise of G, what would happen to the public and national saving

public and national saving would fall

Other things the same, a government budget deficit

reduces both public and national saving

unemployment insurance

reduces search effort which raises unemployment