Macro Exam 3

Table 26-1. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. The quantity of loanable funds demanded is

$1.4 trillion.

Suppose that in a closed economy GDP is equal to $33,000, consumption equal to $18,000, government purchases equal $6,500, and taxes equal $6,750. What are private saving, public saving, and national saving?

$8,250, $250, and $8,500, respectively

Suppose a closed economy had public saving of −$7 trillion and private saving of $16 trillion. What are national saving and investment for this country?

$9 trillion, $9 trillion

Suppose that the Bureau of Labor Statistics reported that there were 62 million people over age 25 whose highest level of education was some college or an associate degree. Of these, 45.3 million were employed and 3.6 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group?

78.9% and 7.4%

If the natural rate of unemployment is 4.7 percent and the actual rate of unemployment is 5.5 percent, then by definition there is

cyclical unemployment amounting to 0.8 percent of the labor force.

Crowding out occurs when investment declines because a budget

deficit makes interest rates rise.

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

demand for existing shares of the stock and the price will both fall.

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then the

demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate.

The demand for workers often rises in one region of the U.S. and falls in another. This illustrates

frictional unemployment created by sectoral shifts.

Matilda loses her job and decides to sit on the beach rather than look for work during the next few months. Other things the same, the unemployment rate

increases, and the labor-force participation rate decreases.

Suppose that the adult population in the country of Atlantis is 140 million. If 90 million people are employed and 10 million are unemployed, then

40 million are not in the labor force.

The following data is about the labor market in the city of Productionville. If the local government imposed a minimum wage of $7 in Productionville, how many people would be unemployed?

5,000

Alex buys 1,000 shares of stock issued by Greg Brewing. In turn, Greg uses the funds to buy new machinery for one of its breweries.

Alex is saving; Greg is investing.

Which of the following is an example of an efficiency wage?

An above-equilibrium wage paid by a firm to reduce turnover costs

Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?

Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate.

Natalia worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?

Both Natalia and Tabitha

The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. Which of the following events would shift the demand curve from D1 to D2?

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.

The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves.Which of the following events would shift the supply curve from S1 to S2?

In response to tax reform, households are encouraged to save more than they previously saved.

If the Apple corporation sells a bond it is

borrowing directly from the public.

When a union bargains successfully with employers, in that industry,

both wages and unemployment increase.

Given that Sarah's income exceeds her expenditures, Sarah is best described as a

saver or as a supplier of funds.

Evidence from research studies by economists

shows that increased unemployment benefits decrease the job search efforts of the unemployed.