macro 2

If currency held by the public equals $100 billion, reserves held by banks equal $50 billion, and bank deposits equal $500 billion, then the money supply equals:

$600 billion

If the production function is y=k^1/3, the steady state value of k in the solow model with population growth and technological progress is

(s/(δ+n+g))^3/2

If the steady-state rate of unemployment equals 0.10 and the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.02, then the fraction of unemployed workers who find jobs each month (the rate of job findings) must be:

0.18

If the households hold one third of their money in currency and the banks are required to set aside 50% of their deposits at the Fed as reserves, then the money multiplier equals

1.5

If y=k^1/3, population growth at the rate of 1%, 5% of capital depreciates each year, and the country saves 20 percentof output each year, then the steady state level of income per person is

1.826

Suppose an economy has a money demand function given by (M/P)^d= 0.4*(Y/√i). If output is 1000, the money supply is $1,500 and the nominal interest rate is 9 percent, what is the price level?

11.25

If y=k^1/2, 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:

2 and 1.8 respectively

In the solow model with population growth, if the per worker production function is given by y=k^1/2, the savings rate is 0.2, and the depreciation rate is 0.1 and the population growth rate is 0.02, then the steady state value of k (capital per worker) is:

2.778

Suppose an economy has 100 units of capital, 100 units of labor, and the efficiency of each worker is equal to 2. The effective number of workers for this economy is ________ and the capital per effective worker is

200; 1/2

Use quantity theory. If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be _____ percent

3

Consider the money demand function that takes the form (M/P)^d = Y/(4i), where M is the quantity of money, P is the price level, Y is real output, and I is the nominal interest rate. What is the velocity of money in this economy?

4i

If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is ______ times per year.

5

Based on the quantity theory of money and the Fisher equation, if the money growth increases by 3 percent and the real interest rate equals 2 percent, then the nominal interest rate will increase

5 percent

If the labor force is growing at a 3 percent rate and the efficiency of a unit of labor is growing at a 2 percent rate, then the number of effective workers is growing at a rate of:

5 percent

In a hypothetical economy, 10,000 people are unemployed while 100,000 are employed. The number of people finding jobs is 8,000 while the number of people losing jobs is 5,000. What is the natural unemployment rate for this economy?

5.9 percent

According to the quantity theory of money, a 5 percent increase in money growth increases inflation by _____ percent. According to the Fisher equation, a 5 percent increase in the rate of inflation increases the nominal interest rate by ____ percent

5; 5

If the number of employed workers equals 200 million and the number of employed workers equals 200 million, the unemployment rate equals _______ percent (rounded to the nearest percent).

9

In the solow model with population growth and labor augmenting technological progress, which of these describes the condition for the maximization of consumption per effective worker at the steady state?

MPK-δ= n+g

If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is 10%, then the current unemployment rate is _______ the equilibrium rate, and in the next period it will move _______ the equilibrium rate.

below; toward

If the demand for money depends on the nominal interest rate, then via the quantity theory and the Fisher equation, the price level depends on

both the current and expected future money supply

If the Fed announces that it will raise the money supply today

both the nominal interest rate and the current price level will increase

Most hyperinflations end with _____ reforms that eliminate the need for _____.

fiscal; seigniorage

Short-term unemployment is most likely to be _____________ unemployment, while long-term unemployment is most likely to be _________ unemployment.

frictional; structural

According to Solow model, countries with high saving rates generally have high levels of output per person because

high saving rates lead to high levels of capital per worker

The Solow growth model describes:

how saving, population growth, and technological change affect output over time.

If the reserve-deposit ratio is less than one, and the monetary base increases by $1 million, then the money supply will:

increase by more than $1 million

Starting from a steady state equilibrium, if the saving rate increases, all else equal, capital per worker will

increase until the new steady state is reached

In the solow growth model, if investment exceeds depreciation, the capital stock per worker will _______, and output per worker will _____ until the steady state is attained

increase; increase

When the Fed decreases the interest rate paid on reserve balances of commercial banks at the Fed, it

increases the money multiplier (m)

Use solow model with no population growth. With a per-worker production function y=k^2/3, then the steady state capital stock per worker (k*) is given by:

k*=(s/δ)^3.0

When an economy starts with a savings rate above the Golden Rule level, reaching the Golden Rule level:

results in higher consumption at all times in the future

According to the Solow model, persistently rising living standards can only be explained by:

technological progress

The theoretical separation of real and monetary variables is called

the classical dichotomy

When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the line denotes:

the marginal product of capital per worker

When the unemployment rate is at a steady state:

the number of people finding jobs equals the number of people losing jobs

In the solow growth model with population growth, when the economy finds itself at the Golden Rule steady state, the marginal product of capital minus the rate of depreciation will equal

the population growth rate

Which of the following is an example of frictional unemployment?

Dave searches for a new job after voluntarily moving to San Diego.

The ex post real interest rate will be greater than the ex ante real interest rate when the:

actual rate of inflation is less than the expected rate of inflation

"Inflation tax" means that:

as the price level rises, the purchasing power of money held by the public decreases

In the Solow growth model, the steady state occurs when

capital per worker is constant

When the Fed makes an open market sale of government bonds, it

decreases the monetary base (B)

During a hyperinflation, real tax revenue of the government often drops substantially because of the

delay between when a tax is levied and when it is collected

In the solow growth model with population growth and labor-augmenting technological change, the break-even level of investment must cover:

depreciating capital, capital for new workers, and capital for effective workers

In the solow growth model of an economy with population growth but no technological change, the break even level of investment must do all of these except

equal the marginal productivity of capital (MPK)

Assume that two economies are identical in every way except that one has a higher population growth rate. According to the solow growth model, in the steady state, the country with the higher population growth rate will have a ______ level of capital per person and ______ level of output per person compared to the country with the lower population rate.

lower, a lower

The ex ante real interest rate is equal to the nominal interest rate

minus the expected inflation rate

Evidence from the past 40 years in the United States supports the Fisher effect and shows that when the inflation rate is high, the _____ interest rate tends to be _____.

nominal; high

Any policy aimed at lowering the natural rate of unemployment must either ______ the rate of job separation or ______ the rate of job finding.

reduce; increase

In the Solow growth model of chapter 8, the economy ends up with a steady state level of capital:

regardless of the starting level of capital

In the model of the steady-state unemployment rate with a fixed labor force, the rate of job finding equals the percentage of the ______ who find a job each month, while the rate of job separation equals the percentage of the ______ who lose their job each month.

unemployed, employed

Workers unemployed as a result of wage rigidity are:

waiting for a job to become available