Macro Midterm 2 Review I

41. Refer to Table 24-11. The nominal interest rate for 2012 is A. 4.47 percent. B. 0.93 percent. C. 4.44 percent. D. 6.70 percent.

A

43. Refer to Table 9-1. The labor force participation rate for this economy equals A. (11,000/15,000) × 100 B. (11,000/20,000) × 100. C. (10,000/11,000) × 100 D. (10,000/15,000) × 100

A

Christopher is an unpaid, stay-at-home father who works as a volunteer at the local Habitat for Humanity chapter. Currently, Christopher is not looking for a paid job. The Bureau of Labor Statistics counts Christopher as A. neither in the labor force nor unemployed. B. unemployed and in the labor force. C. unemployed but not in the labor force. D. in the labor force but not unemployed.

A

Crowding out occurs when A. investment declines because a budget deficit makes interest rates rise. B. investment increases because a budget surplus makes interest rates rise. C. investment increases because a budget surplus makes interest rates fall. D. investment declines because a budget deficit makes interest rates fall.

A

If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as A. $20.00 purchased in 1955. B. $4.75 purchased in 1955. C. $500 purchased in 1955. D. $95.00 purchased in 1955.

A

In 2010, Acme Foods produced 300,000 bags of pretzels, employing 12,000 hours of labor. In 2011, it produced 322,000 bags of pretzels, employing 14,000 hours of labor. Acme Foods productivity A. decreased by 8%. B. was unchanged. C. increased by 6.8%. D. increased by 7.3%.

A

Northwest Wholesale Foods sells common stock. The company is using A.Debt financing and the return shareholders earn depends on how profitable the company is. B.Debt financing and the return shareholders earn is fixed. C.Equity financing and the return shareholders earn depends on how profitable the company is. D.Equity financing and the return shareholders earn is fixed

A

Sari puts $100 into an account with an interest rate of 10 percent. According to the rule of 70, about how much does she have at the end of 21 years? A. $800 B. $210 C. $1,010 D. $300

A

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free. This would shift the A. supply of loanable funds to the right, causing interest rates to fall. B. supply of loanable funds to the left, causing interest rates to rise. C. demand for loanable funds to the right, causing interest rates to rise. D. demand for loanable funds to the left, causing interest rates to fall.

A

Suppose that efficiency wages become more common in the economy. Imposing efficiency wages A.decreases the quantity demanded and increases the quantity supplied of labor. B. increases the quantity demanded and decreases the quantity supplied of labor. C. decreases the quantity demanded and increases the quantity supplied of labor. D. increases the quantity demanded and decreases the quantity supplied of labor.

A

Suppose the economy is closed with national saving of $3 trillion, consumption of $10 trillion, and government purchases of $4 trillion. What is GDP? A. $17 trillion B. $11 trillion C. $9 trillion D. $3 trillion

A

The CPI is more commonly used as a gauge of inflation than the GDP deflator is because A. the CPI better reflects the goods and services bought by consumers. B. the GDP deflator cannot be used to gauge inflation. C. the CPI is calculated more often than the GDP deflator is. D. the CPI is easier to measure.

A

The level of real GDP person A. and the growth rate of real GDP per person vary widely across countries. B. differs widely across countries, but the growth rate of real GDP per person has been similar across countries. C. is very similar across countries, but the growth rate of real GDP per person has differed widely across countries. D. and the growth rate of real GDP per person are similar across countries.

A

Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called A. frictional unemployment. B. the natural rate of unemployment. C. cyclical unemployment. D. structural unemployment.

A

When the quality of a good improves while its price remains the same, the purchasing power of the dollar A. increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. B. decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for. C. increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. D. decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.

A

Which of the following is an example of physical capital? A. bulldozers, backhoes and other construction equipment B. a taxi-cab driver's knowledge of the fastest routes to take C. the available knowledge on how to make semiconductors D. All of the above are correct.

A

Which of the following is not correct? A. With a growth rate of about 2 percent per year, average income per person doubles about every 60 years. B. In some countries real income per person has changed very little over many years. C. Across countries there are large differences in the average income per person. These differences are reflected in large differences in the quality of life. The ranking of countries by average income changes substantially over time.

A

Yoyo's Frozen Yogurt, Inc. is thinking of building a new warehouse. They believe that this will give them $50,000 of additional revenue at the end of one year, $60,000 additional revenue at the end of two years, and $70,000 in additional revenue at the end of three years. If the interest rate is 5 percent, To build the warehouse now, Yoyo would be willing to pay A. $160,000, but not $170,000. B. $170,000, but not $180,000. C. $140,000, but not $150,000. D. $150,000, but not $160,000.

A

. Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then A. both the unemployment rate and labor-force participation rate would be lower. B. both the unemployment rate and labor-force participation rate would be higher. C. the unemployment rate would be lower, and the labor-force participation rate would be higher. D. the unemployment rate would be higher ,and the labor-force participation rate would be lower.

B

23. The supply of loanable funds is upward sloping if the ________ the interest rate, the ________ the share of their incomes that households will save, and the ________ the quantity supplied of loanable funds A. lower; smaller; greater B. higher; greater; greater C. higher; smaller; greater D. lower; greater; greater

B

Financial intermediaries are A. a more general name for financial assets such as stocks, bonds, and checking accounts. B. financial institutions through which savers can indirectly provide funds to borrowers. C. the same as financial markets. D. individuals who make profits by buying a stock low and selling it high.

B

Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries. In the terminology of macroeconomics A. Fran is investing; Miller is saving. B. Fran is saving; Miller is investing. C. Fran and Miller are both saving. D. Fran and Miller are both investing.

B

In the 1800s, Europeans purchased stock in American companies that used the funds to build railroads and factories. The Europeans who did this engaged in a. foreign indirect investment. b. foreign portfolio investment. c. indirect domestic investment. d. foreign direct investment.

B

President Bigego is running for re-election against Senator Pander. Bigego proclaims that more people are working now than when he took office. Pander says that the unemployment rate is higher now than when Bigego took office. You conclude that A. both of them could be telling the truth if the labor force grew slower than employment. B. both of them could be telling the truth if the labor force grew faster than employment. C. one of them must be lying. D. both of them could be telling the truth if the labor force and employment grew at the exact same rate.

B

Refer to Table 24-11. Megan's 2011 salary in 2013 dollars is A. $70,850. B. $67,588. C. $67,600 D. $67,489.

B

Refer to Table 28-1. How many in the sample are in the labor force? A. 11 B. 10 C. 9 D. 8

B

Refer to Table 28-7. If the local government imposed a minimum wage of $4 in Productionville, how many people would be unemployed? A. 2,000 B. 0 C. 10,000 D. 3,000

B

Suppose that an increase in capital per hour worked from $15,000 to $20,000 increases real GDP per hour worked by $500. If capital per hour worked increases further to $25,000, by how much would you expect real GDP per hour worked to increase if there are diminishing returns? A. by exactly $500 B. by less than $500 C. by more than $500 but less than $5,000 D. by more than $5,000 but less than $20,000

B

The logic behind the catch-up effect is that A. the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital. B. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. C. workers in countries with low incomes will work more hours than workers in countries with high incomes. D. None of the above is correct.

B

The slope of the demand for loanable funds curve represents the A. positive relation between the real interest rate and saving. B. negative relation between the real interest rate and investment. C. negative relation between the real interest rate and saving. D. positive relation between the real interest rate and investment.

B

. Which of the following is true about the U.S. labor force participation rate since 1950? A. Since about 1990, females have participated at the same rates as males. B. Female participation rates have risen steadily throughout the entire period. C. Male participation rates have been falling throughout the period D. Prior to the Great Recession, overall participation had been constant throughout the period.

C

3. Refer to Table 9-4. Assume the market basket for the consumer price index has two products — meat and potatoes — with the values in the table in 2006 and 2011 for price and quantity: The Consumer Price Index for 2011 equals a. 96 b. 180 c. 150 d. 120

C

An increase in the price of imported coffee shows up A. in neither the consumer price index nor in the GDP deflator. B. in the GDP deflator, but not in the consumer price index. C. in the consumer price index, but not in the GDP deflator. D. in the consumer price index and in the GDP deflator.

C

If the inflation rate is 5 percent and a $1000 bank deposit increases in one year to $1120, then the real interest rate for that deposit is A. 12 percent B. 12.5 percent C. 7 percent D. 7.2 percent

C

In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving? A. $5 billion and $45 billion B. -$5 billion and $50 billion C. $5 billion and $50 billion D. -$5 billion and $45 billion

C

Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate a. increases, and the labor-force participation rate is unaffected. b. and the labor-force participation rate both increase. c. and the labor-force participation rate are both unaffected. d. increases, and the labor-force participation rate decreases.

C

On a production function, as capital per worker increases, output per worker A. decreases. This decrease is larger at larger value of capital per worker. B. increases. This increase is larger at larger values of capital per worker. C. increases. This increase is smaller at larger values of capital per worker. D. decreases. This decrease is smaller at larger value of capital per worker.

C

Other things the same, an increase in the interest rate A. would shift the demand for loanable funds to the right. B. would increase the quantity of loanable funds demanded. C. would decrease the quantity of loanable funds demanded. D. would shift the demand for loanable funds to the left.

C

Over the last century, U.S. real GDP per person grew at a rate of about A. 2 percent per year, so that it is now 2 times as high as it was a century ago. B. 4 percent per year, so that it is now 8 times as high as it was a century ago. C. 2 percent per year, so that it is now 8 times as high as it was a century ago. D. 4 percent per year, so that it is now 2 times as high as it was a century ago.

C

Refer to Table 24-9. What is the inflation rate for May?

C

Refer to Table 28-1. How many in the sample are unemployed? A. 5 B. 4 C. 3 D. 2

C

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? A. Both private saving and public saving are negative. B. Private saving is negative; public saving is positive. C. Private saving is positive; public saving is negative. D. Private and public saving are both positive.

C

All of the following may create upward bias in the CPI for measuring changes in the price level, except A. consumers tend to substitute away from products whose prices are increasing relatively rapidly B. new products that appear over time are not immediately included in the CPI market basket C. the BLS may be slow to take account of consumers' shopping for many items online to get better prices D. food producers have been reducing the standard size of many products , such as cookies and potato chips, which the BLS has not taken into account

D

Among the following, which is the best measure of how the level of well-being in a country has changed over time? A. growth rate of real GDP. B. growth rate of nominal GDP. C. level of nominal GDP per person. D. growth rate of real GDP per person.

D

Because different countries use different currencies, comparisons of real GDP across countries usually use the concept of "purchasing power parity." This means A. using official poverty income levels in different countries to convert all currencies to dollars B. converting all other currencies to dollars using official exchange rates C. using the price of gold in different currencies to convert all to dollars D. pricing the same market basket in different countries to convert other currencies to dollars

D

If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in 6 years? A. $3,040.63 B. $2,420.68 C. $2,996.33 D. $2,591.85

D

In the production function , which symbol reflects the state of technology? A. N B. H C. K D. A

D

Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was A. 100.10. B. 97.14. C. 109.38. D. 102.94.

D

Which of the following can explain why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita? A. Countries that are relatively poor are more likely to experience wars and revolutions. B. Many of these developing countries do not have a functioning court system that can effectively enforce laws. C. Countries that are relatively poor have a difficult time generating savings, and many have not welcomed foreign investment. D. All of the above

D

Which of the following is correct? A. Unpaid homemakers are counted as "employed" by the Bureau of Labor Statistics. B. The labor force includes all adults who are able to work. C. The Bureau of Labor Statistics uses data collected from those applying for unemployment insurance to compute the unemployment rate. D. People working part time are counted as "employed" by the Bureau of Labor Statistics.

D

Which of the following is true of discouraged workers, as defined by the Bureau of Labor Statistics? A. They are counted as part of the labor force B. They are dissatisfied with their current jobs and are considering quitting C. They are working part-time but would like full-time work D. They have not looked for work in the last 4 weeks, but would like a job and are available for work

D

Workers and management agree on a contract that gives a 5% wage increase for each of the next three years. Everyone expected 3% inflation but inflation turned out to be 5% per year. Then at the end of three years A. real wages will be higher than was expected. B. real wages will have fallen C. nominal and real wages will have changed by the same percentage. D. real wages will be lower than was expected.

D

You are tearing down a building and find $1 in change that someone lost when working on the building 140 years ago. If, instead of being careless with the $1 in change, this person had deposited it into a bank and earned 2 percent interest every year for 140 years, how much would be in the account today according to the rule of 70? a.$8 b.$32 c.$4 d.$1

D