Econ test part 2

"Those borrowers who most desperately want loans are the ones who are least able to repay the loans," is an example of:

adverse selection.

Money is created by

banks making loans

When cyclical unemployment is zero,

the unemployment rate equals the natural unemployment rate.

An increase in the working-age population results in a

rightward shift of the supply of labor curve and an increase in potential GDP.

Greater optimism about the expected profits from investment projects

shifts the demand for loanable funds curve rightward.

If new capital or technology increases labor productivity, the supply of labor ________ and the demand for labor ________.

stays the same; increases

During periods of inflation, which function of money is most severely affected?

store of value

When you keep money in a change jar to be used later, what function is it fulfilling?

store of value

For a commercial bank, the term "reserves" refers to

the cash in its vaults and its deposits at the Federal Reserve.

If a rich country grows at a faster rate than a poor one, then

the gap in their standard of living will widen over time.

Other things remaining the same, the greater the expected profit,

the greater the amount of investment.

An increase in ________ will shift the supply of loanable funds curve ________.

wealth; leftward

The term "capital," as used in macroeconomics, refers to

the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.

According to the law of diminishing returns, an additional unit of

labor produces less output than the previous unit.

Using the Rule of 70, if the country of Flowerdom's current growth rate of real GDP per person was 7 percent a year, how long would it take the country's real GDP per person to double?

10 years

If the nominal interest rate is 8 percent and the current inflation rate is 3 percent, approximately what is the real interest rate?

5%

The Federal Open Market Committee (FOMC) is composed of

Presidents of 5 Federal Reserve regional banks and the Board of Governors.

Which of the following is consistent with classical growth theory?

Real GDP per person will never permanently increase.

On the Fed's balance sheet, assets include

U.S. government securities and loans to depository institutions (discount loans).

The view that population growth occurs when real GDP per person exceeds the amount necessary to sustain life is part of the ________.

classical growth theory

Monetary base =

currency in circulation plus bank reserves.

The decreasing slope of a production function reflects

diminishing returns.

When banks borrow money from the Federal Reserve, these funds are called

discount loans. or last resort loans

U6 measure of unemployment is approximately _______ the U3 measure of unemployment.

double

The demand for loanable funds curve is

downward sloping when plotted against the real interest rate.

Contactionary monetary policy:

fights inflation.

Borrowers like (per class notes)

high risk. locking up money on long-term loans. borrowing large amounts of loans.

The ________ the expected profit, the greater is the ________.

higher; investment demand

Workers who pursue an education directly increase their

human capital

In our loanable funds model, households will choose to save more if

income is expected to decrease in the future and current disposable income increases.

Your instructor holds the view that the too big to fail risk:

is true for all answers

The functions of money are

medium of exchange, unit of account, store of value, and standard of deferred value.

The sum of currency in circulation and bank reserves is the ________.

monetary base

"Being careless with fire because you have fire insurance," is an example of:

moral hazard.

Human capital is

people's knowledge and skills.

Factors that influence labor productivity include ________.

physical capital, human capital, and technology

Labor growth depends mainly on ________ and labor productivity growth depends mainly on ________.

population growth; technological advances

Labor growth depends mainly on ________ and labor productivity growth depends on ________.

population growth; technological advances

In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment.

raises; increases