Econ 311 Exam 2

The efficiency of labor:

includes the knowledge, health and skills of labor

Economists call the changes in the composition of demand among industries and regions:

sectoral shifts

Endogenous growth theory rejects the assumption of exogenous:

technological change

Discouraged workers are individuals who:

want a job but have given up looking for one

In the Solow growth model, an economy in the steady state with a population growth rate of n but no technological growth will exhibit a growth rate of output per worker at rate:

0

In the Solow growth model, an economy in the steady state with a population of n but no technological growth will exhibit a growth rate of output per worker at rate:

0

In the Solow model with technological progress, the steady-state growth rate of capital per effective worker is:

0

If the fraction of employed workers who lose their job each month (the rate of job separations) is 0.01 and the fraction of the unemployed who find a job each month is 0.09 ( the rate of job findings), then the natural rate of unemployment is :

10 percent

If the unemployment rate is 6%, and the number of employed is 188 million. then the labor force equals ___ million.

200

Consider the money demand function that takes the form (M/P)^d = Y/4i, where M is the quantity of money, P is the price level, Y is real output, and i is the nominal interest rate. What is the average velocity of money in this economy?

4i

If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity ___ times per year

5

the formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is

c*=f(k*) - depreciation x K*

In the basic endogenous growth model, income can grow forever - even without exogenous technological progress - because:

capital does not exhibit diminishing returns

In an economy with no population growth and no technological change, steady-state consumption is at its greatest possible level when the marginal product of:

capital equals the depreciation rate

An increase in the rate of population growth with no change in the savings rate:

decreases the steady state level of capital per worker

an increase in the rate of population growth with no change in savings rate:

decreases the steady-state level of capital per worker

In the Solow growth model with population growth and technological change, the break-even level of investment must cover:

depreciating capital, capital for new workers, and capital for new effective workers

in the solow growth model with no population growth and technological change, the break-even level of investment must cover:

depreciating capital, capital for new workers, and capital for new effective workers

In the steady state with no population growth or technological change, the capital stock does not change because investment equals:

depreciation

In the steady state with no population growth or technological change the capital stock does not change because investment equals:

depreciations

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:

do not have a job, but have looked for work in the past 4 weeks

If the national savings rate increases, the

economy will grow at a faster rate until a new, higher, steady state capital- labor ratio is reached

in the nation savings rate increases, the :

economy will grow at a faster rate until a new, higher, steady-state capital-labor ratio is reached

The "ex ante" real interest rate is based on ___ inflation, while the "ex post" real interest rate is based on ___ inflation.

expected; actual

In the solow model with technological progress, the steady state growth rate of output per (actual) worker is:

g

The Solow growth model describes

how saving, population growth, and technological change affects output over time

The solow growth model describes:

how savings, population growth and technological change affect output overtime

According to the classical theory of money, inflation does not make workers poorer because wages increase

in proportion to the increase in the overall price level

the efficiency of labor:

includes the knowledge, health, and skills of labor

if an economy with no population growth or technological change has a steady state MPK of 0.125, a depreciation rate of 0.1, and a saving rate of 0.225, then the steady state capital stock:

is less than the golden rule level

One reason for unemployment is that:

it takes time to match workers and jobs

In the Solow growth model with no population growth and no technological progress, the higher the steady capital-per-worker ratio, the higher the steady-state

level of output per worker

In the solow model with technological process, the steady state growth rate of total output is:

n+g

Schumpeter's thesis of "creative destruction" is an explanation of economic progress resulting from:

new products producers driving incumbent producers out of business

The rate of inflation is the:

percentage change in the level of prices

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker ___ increases

productivity

When there is structural unemployment, the real wage is:

rigid at a level above the market clearing level

When there is structural unemployment, the real wage is:

rigid at a level above the market-clearing level

The Solow model shows that a key determinant of the steady-state ratio of capital to labor is the:

savings rate

the Solow model shows that a key determinant of the stead-state raio of capital to labor is the

savings rate

Economists call the changes in composition of demand among industries and regions:

sectoral shifts

The natural rate of unemployment is:

the average rate of unemployment which the economy fluctuates

One efficiency-wage theory implies that firms pay high wages because:

the more a firm pays its workers, the greater their incentive to stay with the firm

In the classical model, according to the quantity theory and the Fisher equation, an increase in money growth increases:

the nominal interest rate

In a steady state:

the number of people finding jobs equals the number of people losing jobs

the ex post real interest rate is based on

Actual inflation

Inflation ___ the variability in allocative efficiency

Decreases

the ex ante real interest rate is based on

Expected inflation

If the real interest rate declines by 1% and the inflation rate increases by 2%, the nominal interest rate must:

Increase by 1%

inflation ___ the variability in relative prices

Increases

Inflation ___ the variability of relative prices and ___ allocative efficiency

Increases; Decreases

In the Solow growth model with no population growth, no technological progress, the higher the steady state capital - per worker ratio, the higher the steady state:

Level of output per worker

Quantity Equation

MV = PT

The natural rate of unemployment is:

The average rate of unemployment around which the economy fluctuates

A policy that decreases the job separation rate ___ the natural rate of employment

Will Decrease

If a war destroys a large portion of a countries captial stock but the savings rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach:

the same level of output per person as before

If a way destroys a large portion of a country's capital stock but the savings rate is unchanged, the Solow model predicts that output will grow and that the new steady state will approach:

the same level of output per person as before

Frictional unemployment is unemployment caused by:

the time it takes workers to search for a job

frictional unemployment is the unemployment caused by:

the time it takes workers to search for a job

Quantity theory of money

theory which proposes a positive relationship between changes in money supply and the long term price of goods. It states that an increasing amount of money in the economy will eventually lead to an equal percentage rise in the prices of products and services.

A variable rate of inflation is undesirable because

variable inflation leads to greater uncertainty & risk as compared to constant inflation

A variable rate of inflation is undesirable because:

variable inflation leads to greater uncertainty and risk as compared to constant inflation

A policy that decreases the job separation rate ___ the natural rate of unemployment.

will decrease