Econ 202 - Unit 2 Quiz Questions

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

B. both frictional and structural unemployment.

Suppose that some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were employed? A. 31.74 million B. 2.76 million C. 42.32 million D. 34.5 million

A. 31.74 Million

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

A. financial institutions through which savers can indirectly provide funds to borrowers.

Right-to-work laws A. give workers in a unionized firm the right to choose whether to join the union. B. prevent employers from hiring permanent replacements for workers who are on strike. C. prevent workers from being fired because of increases in wages brought about by collective bargaining. D. guarantee workers the right to form unions.

A. give workers in a unionized firm the right to choose whether to join the union.

Government corruption A. impedes the coordinating power of markets and discourages investment. B. impedes the coordinating power of markets but does not discourage investment. C. does not impede the coordinating power of markets, but does discourage investment. D. can neither impede the coordinating power of markets nor discourage investment.

A. impedes the coordinating power of markets and discourages investment.

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. The increase in the rate of interest should A. make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher. B. not influence the decision to build the factory because The Eye of Horus doesn't have to borrow any money. C. make it more likely that The Eye of Horus will build the factory because a higher interest rate will make the factory more valuable. D. not influence the decision to build the factory because its stockholders are expecting a new factory.

A. make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.

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

A. productivity

What would happen in the market for loanable funds if the government were to increase the tax on interest income? A. Interest rates would be unaffected. B. Interest rates would rise. C. The effect on the interest rate is uncertain. D. Interest rates would fall.

B. Interest rates would rise.

After adjusting for inflation, over time the prices of most natural resources have been A. steady or falling, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling. B. steady or falling, meaning that their supplies are dwindling more rapidly than our ability to conserve them is growing. C. rising, meaning that their supplies are dwindling more rapidly than our ability to conserve them is growing. D. rising, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling.

A. steady or falling, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling.

Minimum-wage laws are most likely to affect the wages paid to A. teenagers. B. union members. C. people who are self-employed. D. people with advanced technical training.

A. teenagers.

A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth? A. the first but not the second B. the second but not the first C. neither the first nor the second D. both the first and the second

A. the first but not the second

***Sheila 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. unemployed and in the labor force. B. employed and not in the labor force. C. employed and in the labor force. D. unemployed and not in the labor force.

A. unemployed and in the labor force.

In one day Madison Laundry washed 4,000 pounds of laundry with 5 workers who each worked 8 hours. What was its productivity? A. 4000 pounds of laundry B. 100 pounds of laundry per hour C. 500 pounds of laundry per hour D. None of the above is correct.

B. 100 pounds of laundry per hour

Which of the following is a financial-market transaction? A. A saver deposits money into a credit union. B. A saver buys a bond a corporation has just issued so it can purchase capital. C. A saver buys shares in a mutual fund. D. None of the above is correct.

B. A saver buys a bond a corporation has just issued so it can purchase capital.

Wanda quit her job because she was unhappy at work. Arnold was fired from his landscaping job because his company was downsizing. Who is eligible for unemployment insurance benefits? A. neither Wanda nor Arnold B. Arnold but not Wanda C. both Wanda and Arnold D. Wanda but not Arnold

B. Arnold but not Wanda

Bob is looking for work after school, but everywhere he fills out an application, the managers say they always have a lot more applications than open positions. Tom has a law degree. Several firms have made him offers, but he thinks he might be able to find a firm where his talents could be put to better use. A. Bob and Tom are both structurally unemployed. B. Bob is structurally unemployed, and Tom is frictionally unemployed. C. Bob and Tom are both frictionally unemployed. D. Bob is frictionally unemployed, and Tom is structurally unemployed.

B. Bob is structurally unemployed, and Tom is frictionally unemployed.

Which of the following bond buyers did not buy the bond that best met his or her objective? A. Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk. B. Cecilia held long-term bonds rather than short-term bonds to avoid risk. C. Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond. D. Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond.

B. Cecilia held long-term bonds rather than short-term bonds to avoid risk.

Which of the following lists contains, in this order, natural resources, human capital, and physical capital? A. For a restaurant: the land the restaurant was built on, the money it borrowed to buy supplies, the freezers where the chops and steaks are kept. B. For a furniture company: wood, the skills and knowledge of its workers, saws. C. For a railroad: fuel, railroad engines, railroad tracks. D. None of the above is correct.

B. For a furniture company: wood, the skills and knowledge of its workers, saws.

Some individuals would like to have a job, but they have given up looking for a job after an unsuccessful search. These individuals are called A. detached workers, and they are classified by the Bureau of Labor Statistics as unemployed. B. discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed. C. detached workers, and they are not classified by the Bureau of Labor Statistics as unemployed. D. discouraged workers, and they are classified by the Bureau of Labor Statistics as unemployed.

B. discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed.

Suppose that an anti-smoking campaign in Moscow, Russia, is successful so that Muscovites smoke less and chew gum more. Tobacco companies lay off workers, while chewing gum manufacturers employ more workers. This is an example of A. structural unemployment created by sectoral shifts. B. frictional unemployment created by sectoral shifts. C. structural unemployment created by efficiency wages. D. frictional unemployment created by efficiency wages.

B. frictional unemployment created by sectoral shifts.

***Other things the same, if a country increased its saving rate, in 40 years or so it would likely have A. the same productivity and growth of real GDP it began with. B. higher productivity, but not a higher growth rate of real GDP. C. higher productivity, and a higher growth rate of real GDP. D. None of the above is correct.

B. higher productivity, but not a higher growth rate of real GDP.

The effects of unionization on wages in the sectors of the economy that are unionized causes the supply of labor in other sectors of the economy to A. decrease, reducing wages in industries that are not unionized. B. increase, reducing wages in industries that are not unionized. C. decrease, raising wages in industries that are not unionized. D. increase, raising wages in industries that are not unionized.

B. increase, reducing wages in industries that are not unionized.

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should A. impose trade restrictions to protect the interests of domestic producers and consumers. B. lend support to the invisible hand by maintaining property rights and political stability. C. limit foreign investment to industries that don't already exist in the country. D. subsidize key industries.

B. lend support to the invisible hand by maintaining property rights and political stability.

Inventors often obtain patents on new products and processes, thereby turning new ideas into A. public goods but decreasing the incentive to engage in research. B. private goods and increasing the incentive to engage in research. C. private goods but decreasing the incentive to engage in research. D. public goods and increasing the incentive to engage in research.

B. private goods and increasing the incentive to engage in research.

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. We would expect that this would A. decrease the demand for existing shares of the stock, causing the price to fall. B. raise the demand for existing shares of the stock, causing the price to rise. C. raise the supply of the existing shares of stock, causing the price to fall. D. raise the supply of the existing shares of stock, causing the price to rise.

B. raise the demand for existing shares of the stock, causing the price to rise.

Over the last ten years productivity grew faster in Mapoli than in Romeria while the population and total hours worked remained the same in both countries. It follows that A. real GDP per person must be higher in Mapoli than in Romeria. B. real GDP per person grew faster in Mapoli than in Romeria. C. the standard of living must be higher in Mapoli than in Romeria. D. All of the above are correct.

B. real GDP per person grew faster in Mapoli than in Romeria.

A bond buyer is a A. borrower. Bond buyers must hold their bonds until maturity. B. saver. Bond buyers may sell their bonds prior to maturity. C. borrower. Bond buyers may sell their bonds prior to maturity. D. saver. Bond buyers must hold their bonds until maturity.

B. saver. Bond buyers may sell their bonds prior to maturity.

The key determinant of the standard of living in a country is A. the total amount of goods and services produced within the country. B. the amount of goods and services produced from each hour of a worker's time. C. the total amount of its physical capital. D. its growth rate of real GDP.

B. the amount of goods and services produced from each hour of a worker's time.

Which of the following is not an explanation for the existence of unemployment in the long run? A. it takes time for workers to search for the jobs that are best suited for them B. the business cycle C. minimum-wage laws D. unions

B. the business cycle

The Karmic Deed Restaurant uses all of the following to produce vegetarian meals. Which of them is an example of physical capital? A. the money in the owner's account at the bank from which she borrowed money B. the tables and chairs in the restaurant C. the fresh fruits, vegetables, and grains the restaurant uses to prepare its meals D. the owner's knowledge of how to prepare vegetarian entrees

B. the tables and chairs in the restaurant

The supply of loanable funds slopes A. downward because an increase in the interest rate induces people to save less. B. upward because an increase in the interest rate induces people to save more. C. upward because an increase in the interest rate induces people to invest more. D. downward because an increase in the interest rate induces people to invest less.

B. upward because an increase in the interest rate induces people to save more.

According to the traditional view of the production function, which of the following values of the additions to output per worker would be consistent with moving from 5 to 6, and then from 6 to 7, and then from 7 to 8 units of capital per worker in that order? A. 40, 43, 48 B. 40, 40, 40 C. 40, 34, 32 D. 40, 35, 38

C. 40, 34, 32

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that A. the credit risk associated with Bond A is lower than the credit risk associated with Bond B. B. Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation. C. Bond A has a term of 20 years and Bond B has a term of 2 years. D. All of the above are correct.

C. Bond A has a term of 20 years and Bond B has a term of 2 years.

Who of the following would be included in the Bureau of Labor Statistics' "unemployed" category? A. Marisa, who neither has a job nor is looking for one B. Reta, who worked only 15 hours last week C. Miguel, who is on temporary layoff D. None of the above is correct.

C. Miguel, who is on temporary layoff

Buddy is the owner of a firm that bottles beer in St. Louis, Missouri. There are many other such firms in the area. Buddy decides that if he pays his workers a wage higher than the going market wage, his profits will increase. Which of the following is a likely explanation for his decision? A. The higher the wage, the lower will be the costs of obtaining needed supplies. B. The higher the wage, the more he will have to monitor his workers for shirking. C. The higher the wage, the less often his workers will choose to leave his firm. D. The higher the wage, the more he can charge for his beer

C. The higher the wage, the less often his workers will choose to leave his firm.

The natural rate of unemployment is the A. difference between the long-run and short-run unemployment rates. B. unemployment rate that would prevail with zero inflation. C. amount of unemployment that the economy normally experiences. D. rate associated with the highest possible level of GDP.

C. amount of unemployment that the economy normally experiences.

***If the demand for loanable funds shifts to the left, then the equilibrium interest rate A. and quantity of loanable funds rises. B. rises and the quantity of loanable funds falls. C. and quantity of loanable funds falls. D. falls and the quantity of loanable funds rises.

C. and quantity of loanable funds falls.

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

C. and the growth rate of real GDP per person vary widely across countries.

The primary economic function of the financial system is to A. keep interest rates low. B. match one person's consumption expenditures with another person's capital expenditures. C. match one person's saving with another person's investment. D. provide expert advice to savers and investors.

C. match one person's saving with another person's investment.

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. unemployed but not in the labor force. B. in the labor force but not unemployed. C. neither in the labor force nor unemployed. D. unemployed and in the labor force.

C. neither in the labor force nor unemployed.

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. workers in countries with low incomes will work more hours than workers in countries with high incomes. C. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. D. None of the above is correct.

C. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital.

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch. It requires that society A. recycle resources so that future generations can produce goods and services with the accumulated capital. B. conserve resources for future generations. C. sacrifice consumption goods and services now in order to enjoy more consumption in the future. D. None of the above is correct.

C. sacrifice consumption goods and services now in order to enjoy more consumption in the future.

All else equal, if there are diminishing returns, then if a country raised its capital by 100 units last year and by 100 units this year, A. the increase in output was greater for this year than last year. B. the increase in output is the same in both years. C. the increase in output was greater last year than this year. D. None of the above is necessarily correct.

C. the increase in output was greater last year than this year.

Access to which of the following explains the lower growth rate for the American economy in the 21st century compared to the previous 250 years? A. Social Security disability payments B. Pell grants C. food stamps D. All of the above are correct.

D. All of the above are correct.

Cyclical unemployment A. is closely associated with short-run ups and downs of economic activity. B. refers to the year-to-year fluctuation in unemployment around an economy's natural rate of unemployment. C. has a different explanation than does the natural rate of unemployment. D. All of the above are correct.

D. All of the above are correct.

Efficiency wages A. may improve worker health. B. may increase productivity. C. will increase unemployment. D. All of the above are correct.

D. All of the above are correct.

Investment from abroad A. is viewed by economists as a way to increase growth. B. is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries. C. often requires removing restrictions that governments have imposed on foreign ownership of domestic capital. D. All of the above are correct.

D. All of the above are correct.

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that A. Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the state of New York. B. Bond A has a term of 20 years and Bond B has a term of 1 year. C. Bond A was issued by a financially weak corporation and Bond B was issued by a financially strong corporation. D. All of the above are correct.

D. All of the above are correct.

Which of the following is not a nonsensical headline? A. Disney issues new bonds with term of 7 percent. B. British perpetuities about to mature. C. Standard and Poor's judges new junk bond to have very low credit risk. D. Corporate bonds currently pay higher interest rates than government bonds.

D. Corporate bonds currently pay higher interest rates than government bonds.

***Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds? A. The interest rate would rise and investment would fall. B. The interest rate and investment would rise. C. The interest rate and investment would fall. D. None of the above is necessarily correct.

D. None of the above is necessarily correct.

***Suppose private saving in a closed economy is $12b and investment is $10b. A. The government budget surplus must equal $2b. B. National saving must equal $12b. C. Public saving must equal $2b. D. The government budget deficit must equal $2b

D. The government budget deficit must equal $2b

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

D. both frictional unemployment and the natural rate of unemployment. -Frictional unemployment is part of the natural rate of unemployment.

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will A. not be affected unless widespread civil disorder or civil war results. B. fall temporarily, but will return to where it was when the new owners learn how to farm. C. increase because the total amount of human capital in the country will increase as the new owners learn how to farm. D. fall and remain lower for a long time.

D. fall and remain lower for a long time.

In a closed economy, what does (T - G) represent? A. national saving B. investment C. private saving D. public saving

D. public saving

***Other things the same, a government budget deficit A. reduces national saving, but not public saving. B. reduces public saving, but not national saving. C. reduces neither public saving nor national saving. D. reduces both public and national saving.

D. reduces both public and national saving.

If the budget deficit increases then A. saving rises and the interest rate falls B. saving and the interest rate falls C. saving and the interest rate rise D. saving falls and the interest rate rises

D. saving falls and the interest rate rises

***For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently, A. the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise. B. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise. C. the market for loanable funds is in equilibrium. D. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.ee

D. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.


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