Midterm 2

Which of the following is a flow?

Saving

Where Y is GDP, C is consumption, I is investment, G is government spending, T is net taxes, and there is no international trade, private saving equals:

Y - T - C.

In order to promote growth, the poorest countries-in contrast to the middle-level and rich countries-need most to:

improve their legal and political environments.

Holding other factors constant, a higher relative price of a firm's output will:

increase investment.

An increase in net taxes (taxes paid by the private sector to the government less transfer payments and interest payments made by the government to the private sector) will:

increase public saving.

The introduction of a new technology that increases the productivity of labor will:

increase the demand for labor.

If the existence of alternative opportunities makes people become less willing to work in poultry processing plants, then the real wage of unskilled workers in poultry processing plants is predicted to ________ and the employment of unskilled workers in poultry processing plants is predicted to ________.

increase; decrease

Holding other factors constant, if Congress passes a 5% investment tax credit under which a firm receives $5 in tax refunds from the government for every $100 it spends on new capital equipment, then the real interest rate will ________ and the equilibrium quantity of national saving and investment will ________.

increase; increase

The benefits of economic growth are ________, while the costs of economic growth are ________.

increased output per person; the consumption sacrificed in exchange for capital formation

An increase in the size of the working-age population:

increases labor supply.

An increase in the government's budget deficit ________ the real interest rate and ________ the equilibrium quantity of national saving.

increases; decreases

As the real wage decreases, the quantity of labor demanded ________ and the quantity of labor supplied ________.

increases; decreases

High rates of saving and investing in the private sector promote economic growth by:

increasing physical capital.

The investment demand curve indicates that there is a(n):

inverse relationship between the real interest rates and the level of investment spending, all other things equal.

Structural unemployment is increased when the wage is kept above the market-clearing wage by:

labor unions.

Structural unemployment is:

long-term and chronic unemployment that exists even when the economy is producing at a normal rate.

Liabilities are:

the debts one owes.

Firms will invest in new equipment whenever:

the expected cost of the equipment is less than the expected benefit.

The principle of diminishing returns to capital states that if the amount of labor and other inputs employed is held constant, then the greater the amount of capital in use the:

the less an additional unit of capital adds to production.

Human capital is:

the talents, training, and education of workers.

The expected benefit of investment equals:

the value of the marginal product of capital.

Public saving is negative when:

there is a government budget deficit.

Real GDP per person equals average labor productivity:

times the share of population employed.

A person 16 years or older who does not work, but is actively looking for work, is officially classified as:

unemployed.

Empirical studies indicate that the maximum amount of air pollution occurs ________ levels of real GDP per person.

at "middle-income"

Long-run increases in living standards, as measured by real GDP per person, are primarily the result of increases in:

average labor productivity.

Saving done for the purpose of leaving an inheritance is called ________ saving.

bequest

To the extent that households are target savers who save to reach a specific goal, an increase in the interest rate ________ household saving and a decrease in the interest rate ________ household saving.

decreases; increases

If household saving decreases by $4 million, business saving increases by $4 million, and the government budget deficit decreases by $4 million, then private saving ________ and public saving ________.

does not change; increases

Susan Suarez would like to work forty hours per week, but can only find twenty hours per week of work. In the official employment statistics, Susan is classified as:

employed.

Defenders of limits on economic growth are concerned that continued economic growth will eventually:

exhaust natural resources.

An example of a government policy to enhance technological progress is:

government support for basic research.

If you left $2,500 on deposit with a bank promising to pay you a 6 percent compound annual rate of interest, then after 50 years your deposit would be worth approximately:

$46,050

Chris earns $1,500 per week and spends $1,000 per week on living expenses, puts $200 in a savings account, and buys $300 worth of shares in a stock mutual fund. Chris's saving is ________, and Chris's saving rate is ________.

$500; 33.3%

If real GDP per person in a country equals $40,000 and 60 percent of the population is employed, then average labor productivity equals:

$66,667.

In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers. The remaining people did not have jobs, but wanted jobs. What is the unemployment rate in this town?

13.7 %

Based on the table below and the principle of diminishing returns to capital, then total packages wrapped when a fourth machine is installed must be less than ________ packages. Number of (Identical) Machines 1 2 3 Total Packages Wrapped 5,000 9,000 12,000

15,000

Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are employed in this economy?

282 million

High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour. Number of Workers 0 1 2 3 4 5 Chairs Produced Per Hour 0 10 18 24 28 30 How many workers will be hired if the hourly wage for workers is $30?

4

Suppose the following information describes the economy: Consumption 8,000 Investment 1,000 Government purchases 1,000 Net exports 0 Gov. transfers/interest payments 500 Gov. tax collections 1,700 Private saving equals ________; public saving equals ________; national saving equals ________.

800; 200; 1,000 National income = consumption + investment + government purchases Private saving = national income - consumption - net taxes Public saving = net taxes - government spending National saving = private saving + public saving

Which of the following is an example of an investment in physical capital?

A firm purchases new equipment for a manufacturing process.

Who from among the following would be classified as out of the labor force?

Amanda Pie, a full-time homemaker.

Which of the following is an example of the precautionary motive for saving?

Jordan sets aside $200 per month in case she has to pay for a new roof for her house.

Which of the following events would increase the unemployment rate, if nothing else changed?

Employed workers leave the labor force.

Which of the following is an example of frictional unemployment?

Hector looked for a job for five weeks after finishing college. He turned down several jobs that didn't fit his skills, but now has a job that requires the expertise he gained in college.

A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ________ and employment in Omega will ________.

decrease; decrease

Holding other factors constant, if a larger proportion of the population enters the labor force as a result of a growing social acceptance of women working, then the real wages of workers will ________ and employment of workers will ________,

decrease; increase

Because of diminishing returns to capital, there is a limit to the increases in average labor productivity that can be gained from additional or improved ________.

physical capital

Globalization ________ the wages of workers in the exporting industries and ________ the wages of workers in the import-competing industries.

raises; lowers

Business managers are people who:

run businesses on a day-to-day basis.