Macroeconomics Exam 2

Suppose that in a closed economy GDP is equal to 20,000 consumption equal to 15,000, government purchases equal to 4,000 & taxes equal to 3,000. What is private saving, public saving, & national saving? A. -2,000. 1,000, & 2,000 respectively B. 2,000, -1,000, & 1,000 respectively C. 2,000, 1,000, & 2,000 respectively D. 1,000, 2,000 & 3,000 respectively

B. 2,000, -1,000, & 1,000 respectively

Suppose your uncle offers you $100 today/$150 in 10 years. You would prefer to take the $100 today if the interest rate is A. 4% B. 5% C. 2% D. 3%

B. 5%

Civilian labor force: 100 million Persons unemployed 15 weeks/longer: 1.6 million Job losers & persons who have completed temporary jobs (excludes job leavers): 3.1 million Total unemployed: 6.2 million Total unemployed +discouraged workers: 7.0 million Total unemployed plus all marginally attached workers: 8.1 million Total unemployed plus all marginally attached workers plus total employed part-time for economic reasons: 9.2 million Refer to Table 28-3. What is the U-3 measure of labor underutilization? A. 10.9% B. 6.2% C. 4.7% D. 7.0%

B. 6.2%

Which of the following is correct? A. the ranking of countries by income changes little over time B. Even though Japan had a higher growth rate of real GDP per person than the US over the last 120 years, its level of real GDP per person is less than that of the US. C. Most countries have had little fluctuation around their average growth rates during the past 120 years D. Countries with the highest growth rates over the last 120 years are the ones that the highest level of real GDP 120 years ago

B. Even though Japan had a higher growth rate of real GDP per person than the US over the last 120 years, its level of real GDP per person is less than that of the US

Which of the following is a source of market risk? A. When a paper producer has declining sales its likely that so will other paper producers B. Real GDP varies over time & sales & profits move w real GDP C. If stockholders become aggravated with the way a CEO runs a company, the price of that company's stock might fall in the stock market D. Holding stocks in many companies carriers the risk of a reduced average return

B. Real GDP varies over time & sales & profits move w real GDP

Which of the following is correct? A. Individuals have more power over their wages than a group of individuals in a union B. Union membership in the US peaked in the 1940s & 1950s C. Unions pay a larger role in the US than in European countries such as Belgium, France, & Germany D. BC of the popularity of unions, most workers in the US discuss their wages, benefits & working conditions with their employers as a group

B. Union membership in the US peaked in the 1940s & 1950s

Which of the following actions best illustrates moral hazard? A. a person is unwilling to buy a stock when she believes its price has an equal chance of rising/falling $10 B. a person purchases homeowners insurance & then checks his smoke detector batteries less frequently C. A person who has narrowly avoided many accident applies for automobile insurance. D. a person adds risky stock to his portfolio

B. a person purchases homeowners insurance & then checks his smoke detector batteries less frequently

The traditional view of the production process is that capital is subject to A. a diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries B. diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries C. increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries D. increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries

B. diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries

If an American-based firm opens & operates a new clothing factory in Honduras, then it is engaging in A. foreign financial investment B. foreign direct investment C. indirect foreign investment D. foreign portfolio investment

B. foreign direct investment

Most economists are____that natural resources will eventually limit economic growth. As evidence they note that the prices of most natural resources, adjusted for overall inflation have tended to ____over time. A. concerned, rise B. not concerned, fall C. not concerned, rise D. concerned, fall

B. not concerned, fall

Shelia is on a temporary layoff from her automobile factory job but has not looked for work in the last four weeks. The Bureau of Labor Statistics counts Sheila as A. employed & in the labor force B. unemployed & not in the labor force C. unemployed & in the labor force D. employed & not in the labor force

C. unemployed & in the labor force

If an unemployed person quits looking for work, then, eventually the unemployment rate A. & the labor force participation rate both decrease B. is unaffected, & the labor-force participation rate decreases C. decreases, & the labor force participation rate is unaffected D. & the labor-force participation rate are both unaffected

A. & the labor-force participation rate both decrease

Civilian labor force: 100 million Persons unemployed 15 weeks/longer: 1.6 million Job losers & persons who have completed temporary jobs (excludes job leavers): 3.1 million Total unemployed: 6.2 million Total unemployed plus discouraged workers: 7.0 million Total unemployed plus all marginally attached workers: 8.1 workers Total unemployed plus all marginally attached workers plus total employed part-time for economic reasons: 9.2 million Refer to Table 28-3. What is the U-1 measure of labor underutilization? A. 1.6% B. 3.1% C. 6.2% D. 7.0%

A. 1.6%

Compared to a portfolio composed entirely of stock, a portfolio that is 50% government bonds & 50% stock will have a A. higher return & a lower level of risk B. higher return & a higher level of risk C. lower return & a higher level of risk D. lower return & a lower level of risk

D. lower return & a lower level of risk

In 2002 mortgage rates fell & mortgage lending increased. Which of the following could explain both of these changes? A. the supply of loanable funds shifted rightward B. the demand for loanable funds shifted rightward C. the supply of loanable funds shifted leftward D. the demand for loanable funds shifted leftward

A. the supply of loanable funds shifted rightward

Allen: unpaid stay at home dad. Has not looked for a job in several years Ben: college president Allision: Part-time welder. Actively looking for a full-time work Brittnay: self employed full-time wedding singer Cathy: Full-time physician's assistant Calvin: Retired finance professor. Last applied for work 10 weeks ago Diane: Laid off fork lift operator expecting to be recalled David: works for a bicycle store. Age 70 Evelyn: Manager of health of food store Eli: Museum guard. Was not at work last week due to illness Flora: has never been employed. Looked for a job last week. Frank: fired from job as an investment banker. Last looked for work 3 weeks ago. Refer to Table 28-1. How many in the sample are in the labor force? A. 10 B. 11 C. 9 D. 8

A. 10

Over the past century, real GDP per person in the US has grown about ____percent per year. A. 2 B. 4 C. 6 D. 8

A. 2

Which of the following includes everyone in the adult population that the Bureau of Labor Statistics counts as "unemployed?" A. anyone who is not employed, is available for work, has looked for work in the past 4 weeks, & anyone who is waiting to be recalled from a job from which they have been laid off w for work for the past 2 week C. Anyone who is not currently employed D. Anyone who is employed part time & has searched for full time employment in the past 4 weeks

A. Anyone who is not employed, is available for work, has looked for work in the past 4 weeks, & anyone who is waiting to be recalled from a job from which they have been laid off

Which of the following statements accurately describes catch-up growth? A. 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 B. 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 C. In one generation, Zimbabwe will be the world richest country, since Zimbabwe's per person GDP grew 9% in the last couple of decades 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

A. 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

The natural rate of unemployment includes A. both frictional & structural unemployment B. structural but not frictional unemployment C. frictional but not structural unemployment D. neither frictional nor structural unemployment

A. both frictional & structural unemployment

Public Policy... A. can reduce both frictional unemployment & the natural rate of unemployment B. cannot reduce frictional unemployment, but it can reduce the natural rate of unemployment C. cannot reduce either frictional unemployment/the natural rate of unemployment D. can reduce frictional unemployment, but it cannot reduce the natural rate of unemployment

A. can reduce both frictional unemployment & the natural rate of unemployment

In recent decades, Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in A. foreign portfolio investment B. foreign direct investment C. indirect domestic investment D. foreign indirect investment

A. foreign portfolio investment

Loanable funds market for a closed economy. Refer to Figure 26-4. Starting at point A, the enactment of a investment tax credit would likely cause the quantity of loanable funds trades to A. increase tp $160 & the interest rate to rise to 7% (pt C) B. decrease to $80 & the interest rate to rise to 7% (pt E) C. decrease to $80 and the interest rate to fall to 4% (pt B) D. increase to $160 & the interest rate to fall to 4% (pt D)

A. increase to $160 & the interest rate to rise to 7% (pt C)

Increases in the amount of human capital in the economy tend to _____real incomes because the____of labor. A. increase, productivity B. increase, bargaining power C. decrease, bargaining power D. decrease, productivity

A. increase, productivity

According to the efficient markets hypothesis, worse-than-expected news about a corporation will A. lower the price of the stock B. have no effect on its stock price C. raise the price of the stock D. change the price of the stock in a different direction

A. lower the price of the stock

The one variable that stands out as the most significant explanation of large variations in living standards around the world is A. productivity B. prices C. population D. preferences

A. productivity

Thomas Robert Malthus believed that population growth would A. put stress on the economy's ability to produce food, dooming humans to remain in poverty B. spread the capital stock too thinly across the labor force, lowering each worker's productivity C. eventually decline to sustainable levels, as birth control improved & people had smaller families

A. put stress on the economy's ability to produce food, dooming humans to remain in poverty

If the efficient markets hypothesis is true, then A. stocks tend to be overvalued B. the stock market is informationally efficient so stock prices should follow a random walk C. fundamental analysis is a valuable tool for increasing one's stock returns D. an index fund is a poor investment E. all of the above is true

B. the stock market is informationally efficient so stock prices should follow a random walk

Info for imaginary closed economy. GDP; $100,000 Taxes: $22,000 Government Purchases: $25,000 National Saving: $15,000 Refer to Scenario 26-1. For this economy, private saving amounts to A. $15,000 B. $22,000 C. $18,000 D. $37,000

C. $18,000

Over the past century, _____ has experienced particularly strong growth, & ______ has experienced particularly weak growth. A. Japan, Canada B. Canada, Japan C. Japan, UK D. UK, Canada

C. Japan, UK

Carly wants to buy and operate an ice-cream truck but doesn't have the financial resources to start the business. She borrows $20,000 from her friend Freddie, to whom she promises an interest rate of 7 percent, and gets another $30,000 from her friend Sam, to whom she promises a third of her profits. What best describes this situation? A. Freddie is a stockholder, & Carly is a bondholder B. Sam is a stockholder, & Carly is a bondholder C. Sam is the stockholder & Freddie is a bondholder D. Freddie is a stockholder, & Sam is a bondholder

C. Sam is the stockholder & Freddie is a bondholder

A bond that never matures is known as A. intermediary bond B. a junk bond C. a perpetuity D. an indexed bond

C. a perpetuity

In the 1990s Ireland made unemployment benefits less generous. This change would likely have reduced A. frictional unemployment but not the natural rate of unemployment B. both structural unemployment & the natural rate of unemployment C. both frictional unemployment & the natural rate of unemployment D. structural unemployment but not the natural rate of unemployment

C. both frictional unemployment & the natural rate of unemployment

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

C. frictional unemployment

Because capital is subject to diminishing returns, higher saving & investment do not led to higher. A. growth in the short run B. income in the long run C. growth in the long run D. income in the short run

C. growth in the long run

Which of the following does not help reduce the risk that people face? A. buying insurance B. diversifying their portfolio C. increasing the rate of return within their portfolio D. All of the above help reduce risk

C. increasing the rate of return within their portfolio

Suppose that garbage collectors & landscaping workers have no unions. Now suppose that garbage collectors form unions. Which does this do to the labor supply & wages of landscaping workers? A. labor supply decreases, & wage increase B. both labor supply & wages increase C. labor supply increases & wages decrease D. Both labor supply & wages decrease

C. labor supply increase, & wages decrease

Cyclical unemployment refers to A. the portion of unemployment created by wages set above the equilibrium level B. changes in unemployment due to changes in the natural rate of unemployment C. short-run fluctuations around the natural rate of unemployment D. the portion of unemployment created by job search

C. short-run fluctuations around the natural rate of unemployment

Suppose the city of Des Moines has a high credit rating, & so when Des Moines borrows funds by selling bonds, the city's high credit rating A. contributes to a higher interest rate than would otherwise apply, while the tax status of municipal bonds contributes to a lower interest rate than would otherwise apply B. contributes to a lower interest rate than would otherwise apply, while the tax status of municipal bonds contributes to a higher interest rate than would otherwise apply C. & the tax status of municipal bonds contributes to a higher interest rate than would otherwise apply D. & the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply

D. & the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply

The world's rich countries, such as the US & Germany, have income per person that is about _____ times income per person in the world's poor countries, such as Pakistan & India. A. 2 B. 4 C. 30 D. 10

D. 10

Last year real GDP in the imaginary nation of Oceania was 561.0 billion & the population was 2.2 million. The year before, real GDP was 500.0 billion & the population was 2.0 million. What was the growth rate of the real GDP per person. during the year? A. 12% B. 10% C. 4% D. 2%

D. 2%

Allen: unpaid stay at home dad. Has not looked for a job in several years Ben: College president Allision: Part-time welder. Actively looking for full-time work Brittany: Self-employed full-time wedding singer Cathy: Full-time physician's assistant Calvin: Retired finance professor. Last applied for work 10 weeks ago. Diane: Laid-off forklift operator expecting to be recalled David: works for a bicycle store. Age 70 Evelyn: Manager of health food store Eli: Museum guard. Was not at work last week due to illness Flora: Has never been employed. Looked for a job last week. Frank: Fired from job as an investment banker. Last looked for work 3 weeks ago Refer to Table 28-1. How many in the sample are unemployed? A. 4 B. 5 C. 2 D. 3

D. 3

In 2018 the Bureau of Labor Statistics reported that there were 57.4 million people over age 25 who highest level of education was some college/an associate degree. Of these, 36.3 million were employed & 1.2 million were unemployed. What were the labor-force participation rate & the unemployment rate for this group? A. 63.2% & 3.2% B. 63.2% & 2.1% C. 65.3% & 2.1% D. 65.3% & 3.2%

D. 65/3% & 3.2%

Which of the following statements about the term of a bond is correct? A. the term of the bond is determined entirely by its credit risk B. the term of a bond is determined entirely by how much sales commission the buyer of the bond pays when he/she purchases the bond C. Term refers to the various characteristics of a bond, including its interest rate & tax treatment D. Interest rates on long-term bonds are usually higher than interest rates on short-term bonds

D. Interest rates on long term bonds are usually higher than interest rates on short term bonds

Who of the following is not included in the Bureau of Labor Statistics "employed" category? A. those who were temporarily absent from work because of vacation B. those who worked as unpaid workers in a family member's business C. those who worked in their own business D. those waiting to be recalled to a job which they had been laid off

D. Those waiting to be recalled to a job from which they had been laid off

In an economy where net exports are zero, if saving rises in some period, then in that period A. consumption rises & investment falls B. consumption rises & investment falls C. consumption & investment fall D. consumption falls & investment rises

D. consumption falls & investment rises

If the natural rate of unemployment is 5.2% & the actual rate of unemployment is 5.7% then by definition there is A. structural unemployment amounting to 0.5% B. frictional unemployment amounting to 0.5% of the labor force C. search unemployment amounting to 0.5% of the labor force D. cyclical unemployment amounting to 0.5% of the labor force

D. cyclical unemployment amounting to 0.5% of the labor force

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

D. deficit makes interest rates rise

Info for an imaginary closed economy... GDP: $100,000 Taxes: $22,000 Government Purchases: $25,000 National Saving: $15,000 Refer to Scenario 26-1. This economy's government is running a budget A. surplus of $12,000 B. surplus of $3,000 C. deficit of $12,000 D. deficit of $3,000

D. deficit of 3,000

Over the past several decades, the difference between the labor force participation rates of men & women in the US has A. remained constant B. been eliminated C. gradually increased D. gradually decreased

D. gradually decreased

Malthus predicted that the power of population growth was A. less than the power of the earth to produce subsistence. His forceast was on the mark B. greater than the power of the earth to produce subsistence. His forecast was on the mark C. less than the power of the earth to produce subsistence. His forecast was off the mark D. greater than the power of the earth to produce subsistence. His forecast was off the mark.

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

A bond tends to pay a high interest rate if it is A. issued by the federal government rather than a corporation B. a short term bond rather than a long term bond C. a municipal bond exempt from federal taxation D. issued by a corporation of dubious credit quality

D. issued by a corporation of dubious credit quality

Minimum wages creates unemployment in markets where they create a A. shortage of labor. Unemployment of this type is called structural B. shortage of labor. Unemployment of this type is called frictional C. surplus of labor. Unemployment of this type is called frictional D. surplus of labor. Unemployment of this type is called structural

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

A bond promises to pay $500 in one year & $10,500 in 2 years. What is the correct way to find the present value of this bond? A.$500(1+r) +$10,500/(1+r)^2 B.$500(1+r) +$10,500(1+r)^2 C.$11,000/(1+r)^2 D.$500/(1+r)+$10,500/(1+r)^2

D.$500/(1+r)+$10,500/(1+r)^2