midterm 2 Econ 252 ch. 7-10, hw. 5-7
September of 2016 ages 25-54 men not in the labor force
11.4%
What proportion of prime-age working men took pain medication the previous day?
20%
January 1948 ages 25-54 not in the labor force
3.3%
What is the percent of time feeling any pain during their waking hours for prime-age working men?
30%
What proportion of prime working age men who are not in the labor force report having pain that prevents them from taking jobs they are qualified for
40%
What proportion of prime working-age men who are not in the labor force took pain medication the previous day?
44%
what is the percent of time feeling any pain during their waking hours for prime working age men who are not in the labor force
52%
Rule of 70
70/g(average annual growth rate)
what percentage of jobs run the risk of being automated in the coming decades
80%
According to the UN DESA's Development Policy and Analysis Division, why is it that these calculations seem unrealistic?
Artificial intelligence and other innovations are generally designed to excel at a very specific set of tasks, New technologies not only destroy, but also create jobs. Economic, legal, regulatory and socio-political factors will prevent many occupations from disappearing.
fundamental causes of Burondos lack of prosperity are
the government is an extractive political institution, the farmers have limited incentive to bring their produce to market, the geography is not favorable
Factors that help households decide whether to consume or save their income are
the interest rate, the expectations of future income growth, expectations about taxes
East and West Germany likely had different growth rates because
East Germany's economic institutions mandated central planning
During the financial crisis of 2007-2008, the federal government decided to bail out the big banks, but not any of the households that had lost money because of their investments or house purchases. Which of the following justifies this type of government federal policy?
The government can easily impose restriction on the transactions of banks but it is difficult for the government to monitor finances of individuals
Which of the following are examples of a technological change?
Firm A introduces a new product after incorporating feedback from its customers and the research and development team, Firm A increased production after discovering that some of its new employees can operate an old-fashioned machine which was sitting idle
What is the empirical relationship between urbanization in 1500 and GDP per capita
GDP per capita increases in 1500 and decreases in 2010
the main reason why unemployment went up in January
the month long government shutdown
According to the article, which important labor markets' disruptions are created by new technologies?
Increase disparities within the work force in many countries, and increases in inequalities between countries.
households begin to fear that the recovery from the 2007-2009 recession will not last and become more pessimistic about the economy
both supply and demand curves move to the left
Is a high saving rate always good for the economy?
No, a high savings rate cannot lead to sustained economic growth because there is a maximum amount of aggregate income that an economy can achieve by increasing saving, since the economy can never exceed a saving rate of 100 percent.
holding all else equal, will increasing the efficiency units of labor lead to sustained growth? why?
Not likely, because each individual has a finite life and there is a limit to the number of years of schooling that an individual can obtain.
A simple method of gauging the change in living standards over time within a country is to compute
Real GDP per capita
North Korea freedom: South korea freedom:
Repressed mostly free
which of the following are examples of humanitarian aid being used to support despotic regimes and compounding misery
Rwanda, Zaire, Ethiopia
Proximate causes of Burondo's lack of prosperity are
School enrollment is low, the workforce is not skilled
An example of catch-up growth is
South Korea, which by 1970 had become poorer relative to the US but over the last 40 years grew faster than the US closing the gap that had opened up previously
Which factor is the most important contributor to the growth in the US
Technology (A)
How are the proximate causes of prosperity different from the fundamental causes of prosperity?
The fundamental causes of prosperity are the factors that explain the levels of the proximate causes of prosperity
what is the VALUE of marginal product of labor
The marginal value of labor is simply the marginal product of labor multiplied by the value of the items produced.
How is the rate of inflation related to the nominal interest rate that credit card companies charge, and why would lenders need to increase the nominal interest rate when the inflation rate increases?
The nominal rate of interest is the real rate of interest plus the rate of inflation; lenders need to raise the nominal rate when inflation increases to maintain their desired real return.
maturity transformation
The transfer of short-term liabilities like demand deposits into long-term investments
Which of the following can produce a movement along the credit supply curve
a change in the real interest rate
Household savings decisions impact investment in the economy by having
a direct impact on investment as saving is correlated with investment
a shift in the credit supply curve can be caused by
a heightened desire on the part of firms to internally fund their future activities, an aging population that is ill-prepared for retirement, an elevated perception on the part of households that the future may hold many rainy days
The decrease depreciation rate results in
a higher steady-state level of physical capital (K) and a higher steady-state level of output
The credit demand curve slopes downward because
a lower real interest rate raises a a borrowing firm's profit and hence its willingness to borrow
the fundamental difference between those who are unemployed and those classified as not being in labor force is that the latter are not
actively searching for work
a bank run is
an extraordinarily large volume of withdrawal driven by a concern that a bank will run of of liquids assets which pay withdrawals
which of the following is likely to be true of a household's balance sheet
assets and liabilities will not necessarily be equal because many households face large debts and their liabilities are greater than their assets
Why would credit card companies move to states without usury laws during a period of high inflation, like the 1970s?
because usury law ceilings may limit the real return lenders can earn during inflationary periods, lenders have an incentive to move to states without such laws
the most liquid assets for a household are
cash and checking accounts
What are the assets
cash equivalents, reserves, long-term investment
which of the following assets is an average household likely to hold
cash, retirement accounts, and equities
marginal product of labor=
change in output/change in labor hours
a shift in the credit demand curve can be caused by
changes in perceived business opportunities for firms, changes in government policy, changes in household preferences or expectations
what factors are restraining competition in the labor market
consolidation of local businesses and contract restrictions such as non compete clauses and no-poaching agreements
The exponential nature of technological knowledge ensures that innovation productive capacity in GDP by a
constant percentage
what is the natural resource curse
countries that have an abundance of wealth from natural resources like oil or diamonds tend to be more unequal less developed and more impoverished
suppose that households feel less pressure to save
credit shortage causing the real rate to increase, when the equilibrium is restore in the credit market, the flow of credit will be lower
The culture hypothesis states
cultural beliefs are responsible for differences in prosperity
if the economy experiences an unexpectedly high rate of inflation, the group that would tend to benefit is
debtors ( people or businesses who owe money)
the onset of a recession would be expected to ________ this ratio of employment to population
decrease
if each applicant is capable of boosting deliveries by 30 per week what would happen if all 3 were hired
deliveries would increase by less than 90 per week since there will be diminishing marginal product of labor
what are liabilities and stockholders equity
demand deposits, stockholders equity, short-term borrowing
A country with a very low per capita GDP can have a very high growth rate because mathematically when the _______ denominator is ___________ , even a small difference in the _________ will result in a large growth rate.
denominator, lower, numerator
Suppose that a deep and prolonged recession induces some job seekers to discontinue their job search efforts due to the belief that no jobs are available for them. These individuals are known as _______________. and increase in their numbers will cause the unemployment rates to ______________
discouraged workers; decrease
When employed individuals become unemployed the civilian labor force
does not change
Improvements in tech
don't necessarily run into diminishing marginal product. this is why advances in tech can explain major differences in income per capita across countries
structural unemployment can be caused by
efficiency wages and collective bargaining rights of workers
Labor force=
employed + unemployed
show the impact of an increase in human capital on aggregate output, aggregate saving, and the steady-state equilibrium
equilibrium is decrease in price and increase in human capital
Why does the data suggest that foreign aid designed to help poor countries usually does not work
even as the levels of foreign aid into Africa soared through the 1980s and 1990s, African economies were doing worse than ever
given the change in cyclical unemployment over a two year period it can be concluded that the economy has
expanded
Would Zimbabwe be considered to have extractive or inclusive institutions?
extractive institutions because it does not protect property rights
given that the unemployment levle of men exceeds the unemployment of women.. it follows that the unemployment rate for men will be higher than the unemployment rate for woman
false
How would the failure of a systemically important financial institution (SIFI) affect the economy?
financial intermediation would likely be impaired, with negative consequences for the econony's performance
which is the one of the effects of foreign aid in poor countires
foreign aid weakens the relationship between a government and its people
The saving rate in an economy is defined as the
fraction of total income that households save.
What factors have made it easier for businesses to find cheaper alternatives to paying their workers more money
globalization, automation and advanced tech
the credit supply curve slopes upward because a
higher real interest rate encourages more saving, discourages current consumption
Which factors explain economic growth in the US over the past few decades?
human capital (H), Technology (A), physical capital (K)
which of the following is true regarding the natural rate of unemployment
includes both frictional and structural unemployment, calculate by averaging the unemployment rate over an extended period of time, does not include cyclical unemployment
when there is an increase in the wage rate paid to workers, the supply of labor will
increase and move up along the curve
when there is an increase in population the supply of labor will
increase and shift to the right
To say that private property rights are well-enforced in an economy means that
individuals can securely hold assets
what is true of inequality?
inequality is likely to increase in an economy if the jobs lost due to technological improvements are low-skilled jobs
when the value of a bank's assets is less than its liabilities, the bank is said to be
insolvent
Physical capital accumulation is driven by
investment
households play a role in physical capital accumulation because
it is households that determine their level of consumption and therefore the rate of saving.
Frictional unemployment can result when
it takes time for firms to find applicants with the right skills and experience, firms and workers have imperfect information about the state of the economy, firms and workers have imperfect information about each other
What might explain why so few Ugandan primary schools benefited from foreign aid?
it was stolen by government officials for their own use
given that securitas bank is a large bank, the government may consider it too big to fail since
its failure may harm the wider financial system and potentially the entire economy
Per capita GDP in North Korea is ______ per capita GDP in South Korea
lower than
the impact of the minimum wage on the labor market as a whole is _______, since around_________ of workers earn the minimum wage rate
modest; 1 percent
How are pain and pain medication consumption related to labor force participation?
negatively correlated
How to find economic growth rate
new-original/original*100
Does an increase in GDP per capita of a nation imply that all citizens have become richer
no, because the average income per capita of a nation is not the same as the income of each individual in that nation
he author argues that "the connection between chronic joblessness and painkiller dependency is hard to quantify". It is hard to identify this causal relationship because of problems with:
not possible to run a controlled experiment, omitted variables, reverse causality
The return-to- entrepreneurship curve shows the
number of entrepreneurs with at least a particular level of returns
Some types of aid have been beneficial
offering vaccinations, developing cheap and effective drugs to treat malaria
According to the latest UN DESA data what would the world working age population be by 2050
over 6 billion
Economic freedom and GDP per capita appear to be
positively related
what are some factors that explain why people save for the future
predictable large expenses, children, retirement
Sustained growth is the
process where GDP per capita grows at a positive and relatively steady rate for long periods of time.
unlike extractive economic institutions, inclusive economic institutions
promote open markets
Private property rights foster economic development by
providing incentives to invest
economic growth refers to the increase in _________ GDP per capita of an economy
real
In the context of this chapter, what is meant by an instituition
regulations
what steps do bank regulators take to prevent SIFIs from failing or to minimize the effect of such failers
require banks to take on less risk, to establish "living wills" or procedures for their treatment in the event they become insolvent, mandate that banks hold more stockholders' equity
the shock to labor demand has a more detrimental impact on employment when the wage rate is
rigid downward
what would be the impact of labor demand if there is an increase in the price of televisons
shift to the left
When the value of a US bank's assets become less than its liabilities, the government, through the FDIC,
shuts the bank down and makes payouts to its depositors, searches for a healthy bank to take over its operations
Parts of the world that were relatively more prosperous 500 years ago have experienced a reversal of fortune and are relatively poorer today. What are the factors that can explain?
the establishment in those previously prosperous places of extractive institutions by European colonialists, the establishment of inclusive institutions by European colonialists in areas previously not well developed
A reason that an economy experiences economic growth with a simultaneous increase in unemployment
technological improvements, resulting in capital substituting for labor
which of the following reasons would explain an increase in productivity and GDP at a given level of employment
technological improvments
An example of sustained growth is
the US which demonstrated sustained growth between 1820 and 2007
on a household's annual balance sheet, a one time- loan made to a relative would be included on _______ and purchasing a car with cash would _______
the asset side, decrease the cash available to the buyer on the assets side
who bears the risk that a bank faces when stockholders equity is greater than zero
the banks stockholders
what is stockholders equity
the difference between a bank's total assets and total liabilities
Catch-up growth
the process by which relatively poorer nations increase their incomes by taking of the knowledge and technologies already invented in other technologically advanced nations.
What is the difference between nominal and real interest rates?
the real interest rate is the nominal interest rate adjusted for inflation, nominal interest rate is the rate you pay on a loan
Which of the following is one of the three important elements that define institutions?
they determine incentives
the recorded level of employment only includes persons employed full-time or employed part-time by choice
this claim is false
Suppose that a 10 percent increase in the physical capital stock increases GDP by 10 percent. Now consider an additional 10 percent increase in the physical capital stock
this increase in the physical capital stock will increase GCP by less than 10 percent
Why is the intersection of the aggregate saving curve and depreciated capital line the steady-state equilibrium?
this is where the level of investment equals the depreciated value of physical capital, keeping the value of accumulated physical capital constant
Suppose that schools that receive the aid tend to be those in richer areas that have more resources to start with and better connections is likely
to contribute to greater inequality of resources
Why would a government undertake policies that would adversely affect the lives of its citizens?
to maintain its power
which of the following are functions banks perform as financial intermediaries in the economy
transform short-term liabilities into long-term assets, manage risk through diversification strategies, identify profitable lending opportunities
labor supply curve
upward sloping; as wages increase the opportunity cost of leisure increases leading people to work more hours
The cost of entrepreneurship curve differs from the one drawn in the chapter because it is
upward-sloping, indicating the opportunity cost of entrepreneurship increases with the number of entrepreneurs
firms should hire workers until the
value of the marginal product of labor is at least as great as the wage paid
the opportunity cost of entrepreneurship is the
value to a potential entrepreneur of her best alternative activity
the labor demand curve shows the quantity of labor demanded will increase as_________, this results in a labor demand curve that is _______
wages decrease; down-ward sloping
the labor supply curve shows that the quantity of labor supplied will increase as
wages increase
why foreign aid designed to help poor countries usually does not work
wealth from foreign aid can be a corrupting influence on weak governments