Macro Exam #2 Hw Questions

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value.

Option 2; Option 3; Option

Which of the following is an example of human capital?

The things you have learned this semester

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

and quantity of loanable funds rise

If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in 6 years?

$2,591.85

Suppose your uncle offers you $100 today or $150 in 10 years. You would prefer to take the $100 today if the interest rate is

5 percent

At an annual interest rate of 10 percent, about how many years will it take $100 to double in value?

7

According to the efficient markets hypothesis, worse-than-expected news about a corporation will

lower the price of the stock

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, there is a

surplus and the interest rate is above the equilibrium level.

Veronica deposited $1,000 into an account two years ago. The first year she earned 7 percent interest; the second year she earned 5 percent. How much money does Veronica have in her account today?

$1,123.50

Which of the following demonstrates human capital and physical capital in that order?

For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen

A firm has three different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B will give the firm $15 million at the end of one year, $10 million at the end of two years, and $5 million at the end of three years. Option C will give the firm $30 million at the end of one year, and nothing thereafter. Which of these options has the highest present value?

Option C

In a closed economy, what does (Y − T − C) represent?

Private saving

In the production function Y=AF(L,K,H,N), what does H represent?

Quantity of human capital

A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth?

The first but not the second

Suppose private saving in a closed economy is $12b and investment is $10b.

The government budget deficit must equal $2b

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 270,000 final goods

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

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 270,000 final goods.

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

A mutual fund

is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of both stocks and bonds.

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment.

The key determinant of the standard of living in a country is

the amount of goods and services produced from each hour of a worker's time.

Quantity of human capital

the bond market and the stock market

If the efficient markets hypothesis is correct, then

the stock market is informationally efficient

Suppose a small closed economy has GDP of $5 billion, consumption of $3 billion, and government expenditures of $1 billion. Then investment and national saving are both $1 billion. Correct!

true

​Index funds are financial intermediaries, but municipal bonds are not.

true

Which of the following actions best illustrates moral hazard?

A person purchases homeowners insurance and then checks his smoke detector batteries less frequently.

Which of the following actions best illustrates adverse selection?

A person who has narrowly avoided many accidents applies for automobile insurance

Suppose the vertical distance between the points (0, A) and (0, B) is 5. If her wealth increased from $1,050 to $1,350, then

Britney's subjective measure of her well-being would increase by less than 5 units

Which of the following is not consistent with the efficient market hypothesis?

News has no effect on stock prices

Which of the following statements accurately describes catch-up growth?

a. In one generation, Zimbabwe will be the world richest country, since Zimbabwe's per person GDP grew 9% in the last couple of decades. b. In one generation, China will be one of the richest countries in the world, if China's GDP per person continues to grow 9% per year. c. In one generation, even if China's GDP per person will decline 9% per year, China will remain one of richest countries in the world. d. In one generation, Zimbabwe will be one of middle-income countries, since Zimbabwe's per person GDP fell by 27% in the last couple of decades. answer:b

Which of the following can be measured by the level of real GDP per person?

a. Neither the standard of living nor productivity b.Productivity but not the standard of living c. Productivity and the standard of living d. The standard of living but not productivity answer d

Other things the same, a country that increases its savings rate will have

higher future capital and higher future real GDP per person.

The catch-up effect is a theory that developing economies will catch up to more developed economies in terms of per capita income. It is based on the law of constant marginal returns, which means that investment at the national level, and the empirical observation that growth rates tend to be constant as an economy grows.

false

Financial intermediaries are

financial institutions through which savers can indirectly provide funds to borrowers.

Apple founder Steve Jobs received patents on many of his ideas. While the patents existed, his ideas were

private goods and proprietary knowledge.

Productivity is the amount of goods and services

produced for each hour of a worker's time. It is linked to a nation's economic policies.