ECON: Exam 3 Review Pt. 2

If V -->=4%, P-->=3% and YR-->=2%, then M--> must equal:

1%

(Figure: Labor Supply and Demand) Refer to the figure. What is the quantity of labor that is unemployed as a result of the labor union's action to increase its wage demands to $11 an hour?

1,800

In the AD-AS model with a long-run potential growth rate of 2%, a 6 percentage point increase in the money supply growth rate will cause the economy's growth rate to be ___ in the long run.

2%

(Figure: Labor Markets) Refer to the figure. What is the unemployment rate in this market as a result of the implementation of a $10 minimum wage

50%

A country has 50 M people, 30 M of whom are adults. Of the adults, 5 M are not interested in working, another 5 M are interested in working but have given up looking for work, and 5 M are still looking for work. Of those who do have jobs, 5 M are working part time but would like to work full time, and the remaining 10 M are working full time. What is this country's labor force participation rate?

66.7%

If the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between years 1 and 2 will be:

8.33%

The consumer price index measures the prices of:

A basket of goods bought by a typical American consumer

According to the quantity theory of money, if both the growth rate of money supply and the velocity of money are fixed, then a higher inflation rate means:

A lower real growth rate

The cost a business faces when changing prices in response to an economic shock is called:

A menu cost

(Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves. Which of the following is TRUE of Point A?

The actual inflation rate and the expected inflation rate are both 5%

If you earned $10-an-hour in 2005 when the CPI was 100, and you earn $11-an-hour today when the CPI is 120, then your real wage rate has ___ since 2005

decreased

Suppose the money supply equals $100 M, the average price level equals 40, and real GDP equals $50 M. Given this information, the velocity of money equals:

20

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year(s) did the country experience deflation?

2009 only

A country has 50 M people, 30 M of whom are adults. Of the adults, 5 M are not interested in working, another 5 M are interested in working but have given up looking for work, and 5 M are still looking for work. Of those who do have jobs, 5 M are working part time but would like to work full time, and the remaining 10 M are working full time. What is this country's unemployment rate?

25%

(Figure: Three AD Curves) Beginning at Point A in the accompanying diagram, a positive money shock could result in a short-run growth rate of:

3%

If the real growth rate of the money supply in an economy is 5%, the growth rate of output is 2%, and the velocity of money is constant, what will the inflation rate in this economy be?

3%

Jordan loaned Taylor $1,200 on March 15, 2009. Taylor returned $1,260 on March 14, 2010. Inflation was 2% over the 1-year period. What is the real interest rate that Taylor paid?

3%

For an aggregate demand curve with M-->=10% and V-->=0%, if inflation is 6%, then real growth is:

4%

During the internet revolution in the late 1990's, a positive real shock shifted the long-run aggregate supply curve to the right, which led to:

An increase in real growth rate and decrease in the inflation rate

Figure: Three Aggregate Demand Curves) Consider the three aggregate demand curves shown in the graph. Movement from Point A to Point D represents:

An increase in spending growth from 4% to 6%

Which of the following best describes the condition during the Great Depression?

Both real GDP growth and inflation were negative

The primary purpose of the AD-AS model is to explain:

Business fluctuations

Unemployment correlated with the ups and downs of the business cycle is called

Cyclical unemployment

A worker repairing VHS cassette-tape players was laid off because most of his customers have started using DVD players. This worker is now:

Structurally Unemployed

(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to B in the figure?

Development of new technology

The primary reason we think of inflation as bad even when wage rises with it is that it:

Distorts the information delivered by prices

Which of the following correctly represents unexpected disinflation?

Epi > pi

An increase in ____ will shift the SRAS curve

Expected inflation, but not actual inflation

Active labor market policies:

Focus on getting unemployed workers back to work

The short term unemployment caused by the ordinary difficulties of matching employee to employer is called:

Frictional Unemployment

If a national government improves its unemployment benefits, its unemployment rate will most likely:

Increase

If stock prices go up and people feel richer, aggregate demand will:

Increase

If the velocity of money and real GDP are fixed, then the quantity theory of money implies that the price-level will:

Increase at the same rate as the growth in the money supply

In the basic model with an AD and LRAS curve only, if spending growth is 10% and the Solow growth rate falls from 5% to 3%, then inflation will:

Increase from 5% to 7%

Debt monetization means that a government pays off its debt by:

Increasing the money supply

If spending in an economy increases by 3% and real GDP increases by 1%, the result will be:

Inflation

Which of the following combinations would be on an aggregate demand curve with a spending growth rate of 6%?

Inflation rate of 8%, real growth of -2%

Which of the following individuals can be counted as unemployed?

Jean, who left her job to search for a higher-paying position

Wages are sticky when:

Labor unions set wage contracts for a certain period of time

Nobel Prize-winning economist Milton Friedman says, "Inflation is always and everywhere a ____"

Monetary Phenomenon

The term "business fluctuations" refers to:

Movement in GDP around its long-term trend

(Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves. If the economy is initially at Point A and expected inflation rate remains unchanged, the economy can achieve a real GDP growth rate of 9% only by:

Moving along SRAS1 to Point B

(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to C in the figure?

Negative Supply Shock

An increase in consumer pessimism will lead to increased inflation in:

Neither the short run nor the long run

With respect to real output, in the long-run, money is:

Neutral

An increase in inflation will cause the long-run aggregate supply curve to:

Not shift at all

If spending growth is 6% and inflation is also 6%, this means that:

Real GDP did not increase

Oil Shocks, the shift from manufacturing to service jobs, and the use of technologies are reasons for ____ unemployment.

Structural

If the actual rate of inflation turns out to be higher than the expected rate of inflation, what happens to the growth rate of output before expectations are updated?

The growth rate is higher than the Solow growth rate

The presence of discouraged workers causes the measured unemployment rate to be:

Understated

Which of the following does NOT contribute directly to the persistence of structural unemployment?

Work tests

Nominal confusion occurs when:

Workers respond to their nominal wage instead of to their real wage

(Table: Consumer price index) Refer to the CPI values in the table for the years 2005 to 2010. In which year(s) did the country experience disinflation?

both 2007 and 2009

Discouraged workers are workers who have:

given up looking for work but still like a job

The short-run aggregate supply curve shows the ___ relationship between the inflation rate and real growth during the period when prices are wages are ____.

positive, sticky