Exam 2 Study Set
A. Legendary American labor leader John L. Lewis, head of the United Mine Workers from 1920 to 1960, was enormously successful in winning higher pay for his union's members. An economist called him ____ B. because ____.
A. "the greatest oil salesman" B. the resulting higher price of coal and disruptions of its production due to strikes caused many users to switch to oil.
Identify each of the following either as investment or saving from the macroeconomics point of view. A. Tom purchases a bond issued by Star-Kist. B. Jerry purchases stock issued by IBM. C. Alice builds a new restaurant. D. Nancy buys new machinery for her factory.
A. Savings B. Savings C. Investment D. Investment
In the real business cycle model (the one with a vertical LRAS), a positive shock to aggregate demand (an increase in aggregate demand) will lead to ____ rate of real GDP growth. A technological innovation such as the Internet or cheap fusion power shift the LRAS curve to the
the same; right
A. When the government borrows to finance its budget deficit: B. The interest rate ____ while the amount of loans made ____. C. Given the change in the interest rate above, private consumption and investment: D. This phenomenon is called:
A. they demand more loanable funds B. rises; increases. C. decrease. D. crowding out.
A. At the time of the airing of the show, the gas prices: B. The media reports gas prices: C. if it adjusted, there would be no news.
A. were not all-time high after adjusted for inflation. B. without adjusting them for inflation C. if it adjusted, there would be no news.
Determine which curve (AD or LRAS) shifts which way. Choose all that apply. A series of investment banks like Lehman Brothers and Bear Stearns go bankrupt.
AD shifts left. LRAS shifts left.
According to the life cycle theory of savings, you borrow ____ you save ____ and you dissave ____to ____.
while attending college; during the prime working years; after retirement; smooth out consumption.
Increasing the money supply is like a tax. It is a tax on whom? Choose the best answer.
Money holders
The financial return from owning houses is lower than the average. The average wage of musicians, actors, radio personalities, painters, athletes, etc. is lower than the average. What is the common factor?
More fun means lower returns.
Is it better to invest in a mutual fund that has performed well for five years in a row or one that has performed poorly for five years in a row?
Neither. Past performance won't tell us anything about their future performance.
Mary-Helen has been out of work for a full year. She would take a job if it was offered, but no local companies are hiring. She is not actively looking for work.
Not in the labor force
For every buyer, there is a seller. What does this tell you about investing in the stock market?
On average, you can't beat the market consistently.
Which has a higher return on average, active investing or passive investing?
Passive
Who pays an inflation tax? Choose all that apply.
People who hold currency and coins in their wallet, purse, or at home People or businesses who keep deposits in a checking account that pays zero interest Businesses that hold currency and coins in their cash registers
What will happen to the market for loanable funds if an investment tax credit is removed?
The demand for loanable funds will decrease.
What will happen to the market for loanable funds if people become less patient?
The supply of loanable funds will decrease.
What will happen to the market for loanable funds if people expect to have longer life expectancy?
The supply of loanable funds will increase.
In the real business cycle model, if a failure of the OPEC countries to agree upon their respective oil production quotas leads to an increase in the supply of oil, inflation will and real GDP growth will
fall; increase
A list of all-time box office hits you see in the media ____ adjusted for inflation because ____.
is not; if it was, the list would not change and they wouldn't be able to grab your attention..
Even though 1949 - the year before a series of minimum wage escalations began - was a recession year, black teenage male unemployment was ____ it was to be at any time during the later boom years of the 1960s. The usual explanations of high unemployment among black teenagers such as inexperience, less education, lack of skills, and racism ____ explain the above because: ____.
lower than; cannot; those conditions were worse in the year when their unemployment rate was lower.
Minimum wage laws were once advocated explicitly to ________________ particular minorities (e.g., Japanese in Canada and blacks in the U.S. and South Africa in the 1920s.)
reduce or eliminate the competition of
If the money supply growth rate is increased, the aggregate demand curve shifts to the If the growth rate of velocity falls, the aggregate demand curve shifts to the
right; left
Other things equal, a bond with a higher interest rate is ____. Since people don't want to buy riskier bonds, ____.
riskier; the supply of loanable funds is lower.
In the diagram below, where the origin = (0%, 0%), what is the spending growth rate? When the inflation rate is 8%, what is the real GDP growth rate?
spending growth rate: 12% real gdp growth rate: 4%
Suppose the growth rate of money is 3% and the growth of the velocity of money is -4%. If the inflation rate is -1%, what is the rate of real GDP growth?
0
Assuming that the velocity is stable, if the inflation rate is 3% while the GDP growth rate is -1%, what is the money growth rate?
2
Using the inflation data in the table above, assume that all loan contracts matured after one year, and that they all had fixed nominal interest rates of 11%. In which of the years did lenders lose relative to borrowers? Choose all that apply.
2002; 2004
Suppose the growth rate of money is 5% and the velocity of money is stable (not changing). If the inflation rate is 2%, what is the rate of real GDP growth?
3
Use the figure below to answer the following questions. What is the inflation rate when the economy is at point A or C? What is the expected inflation rate of SRAS2? When the economy is at point B, which is greater, actual inflation or expected inflation? When the economy is at point C, which is greater, actual inflation or expected inflation? When the economy is at point D, which is greater, actual inflation or expected inflation? The AD curve with a spending growth rate of 11% goes through point: The AD curve with a spending growth rate of 14% goes through point: The AD curve with a spending growth rate of 16% goes through point:
5% 3% Actual inflation Actual inflation They are equal A C B
Suppose that the nominal interest rate is currently 11%. If the inflation rate is 6%, what is the real interest rate (actual rate of return)? The anticipated inflation rises to 9% for the coming year. What nominal interest rate would you charge to keep the actual rate of return?
5; 14
Assuming that the velocity growth rate is 2%, if the inflation rate is 11% while real GDP falls by 3%, what must be the growth rate of the money supply?
6
Suppose in Economy A the rate of inflation is 4% while in Economy B the rate of inflation is 10%. Banks in Economy A offer a nominal interest rate of 10% while banks in Economy B offer a 16% nominal interest rate. What are the real interest rates in both economies in the absence of taxes on interest income? If there is a 20% tax on interest income in both economies, what will be the real rates of interest after tax in Economy A and Economy B? Do not round your answers.
6,6; 4, 2.8
If nominal GDP is $4,200 billion and there is $600 billion of money in the economy, what is the velocity of money?
7
Suppose, in your country, there are 36 million people are employed while 3 million are unemployed. What is the unemployment rate in your country?
7.7%
Suppose Freedonia wants to keep inflation at 3%. Assuming that the velocity is stable, if real GDP grows by 5%, what should be the growth rate of the money supply?
8
Assume each dollar held for transactions purposes is spent, on average, 7 times per year to buy final goods and services. If nominal GDP is $5,600 billion, what is the money supply?
800
A. More generous unemployment insurance ____ the unemployment rate. B. In Denmark, the government used to offer laid-off workers ____ of unemployment benefits and laid-off Danes found their jobs after about ____. C. According to the survey introduced in the video, ____ found work immediately when their unemployment benefits ran out.
A increases B. 5; 5. C. 1/3
When are workers more likely to get a job: six weeks before their unemployment benefits run out, or a week before their unemployment benefits run out?
A week before
Jan. 2015 = 233.707 Jan. 2016 = 236.916 Jan. 2017 = 242.839 Jan. 2018 = 247.867 Given the values of the CPI above, compute the inflation rates between the following years A. Jan. 2015 and Jan. 2016 B. Jan. 2016 and Jan. 2017 C. Jan. 2017 and Jan. 2018.
A. 1.4% B. 2.5% C. 2.1%
Suppose you paid $800 for a zero-coupon bond with a face value of $900. A. If you held that bond until maturity, what would be the rate (percentage) of return? B. If another zero-coupon bond with the same face value and maturity sells for $850, what is the interest rate on this bond? C. Which bond would you rather buy?
A. 12.5% B. 5.9% C. It depends on whether you prefer the high-return, high-risk bond (the first one) or the low-return, low-risk bond (the second one).
Suppose the money supply in Freedonia is $400 billion, Nominal GDP is $800 billion, and real GDP is $500 billion. A. What is the velocity of money? B. What is the price level?
A. 2 B. 1.6
In July 2018, the adult population was 257.84 million, the number of the employed was 155.965 million, and the labor force was 162.245 million. A. What is the unemployment rate in July 2018? B. What is the labor force participation rate?
A. 3.9% B. 62.9%
A. Suppose we only have ten people in the labor force. Of which, seven are employed and three are unemployed. What's the unemployment rate? B. Suppose one of the unemployed people gets discouraged and quits looking for work. What is the unemployment rate now?
A. 30% B. 22.2%
A. The development of online job searches has (increased/decreased) ____ unemployment. B. The aging workforce has (increased/decreased) ____ unemployment.
A. decreased; frictional. B. decreased; frictional.
A. The labor unions losing their power has (increased/decreased ____ unemployment. B. The unemployment insurance being available for longer periods has (increased/decreased) ____ unemployment.
A. decreased; structural. B. increased; structural.
Who are most affected by minimum wage laws?
The young, less experienced/skilled, and/or less educated.
In theory, is it possible for a monkey to invest in the stock market as well as some of the mutual fund managers who are praised in the financial magazines?
Yes, given enough number of monkeys, a few of them would get lucky and pick companies that well.
Patient people tend to go to college ____ because the benefit (e.g., higher income) is ____ while the cost (e.g., the time and money spent for college education) is ____.
more; delayed; immediate.
Use the figure below, where the origin = (0%, 0%), to answer the following questions. What is the spending growth rate of the AD curve? What is the inflation rate when the real GDP growth rate is 5%? What is the inflation rate when the real GDP growth rate is 7%? What is the real GDP growth rate when the inflation rate is 7%? What is the real GDP growth rate when the inflation rate is 0%? Suppose the economy is at point X. If new technology is developed, where will the economy move to? Suppose the economy is at point X. If the price of oil rises, where will the economy move to?
10% 5% 3% 3% 10% Point W Point Y
Suppose there is a 20% capital gains tax. You buy an $800 asset. Several years later, the prices of all goods and services double. You decide to sell your asset for $1,600. You don't gain anything in real terms from this transaction, but you still need to pay a capital gains tax on your nominal gain. What is the amount of the capital gains tax you need to pay? Do not attach any symbols such as "$". Just type the number.
160
A. According to the documentary of economist Walter Williams, ___% of black children who look for jobs cannot find them in ghettos like the one he grew up in. B. According to Walter Williams, at one time in the 1940s, the black teenage unemployment rate was ____ the white teenage unemployment rate because ____. C. According to Walter Williams, people have a misguided notion that the minimum wage is an anti-poverty tool although it doesn't even pass the smell test. He states that if the minimum wage low could eliminate poverty, you could raise the minimum wage in ____ and solve their poverty. D. According to him, people are poor mostly because they have ____. E. According to Walter Williams, in the days of Apartheid in South Africa, white racist unions that would never have a black as a member were ____ of minimum wage laws for ____. F. Their stated purpose was to ____.
A. 70% B. lower than; the minimum wage were much lower in the 1940s. C. All of the above. D. low skills E. the major supporters; blacks. F. protect white workers from having to compete with low-skilled low-wage black workers
Suppose the money supply in Aquilonia is $300 billion and Nominal GDP is $2,700 billion. A. What is the velocity of money? B. Assuming that the velocity is increasing by 3%, if the money supply grows by 20% and the real GDP increases by 4%, what will be the inflation rate?
A. 9 B. 19
A. In the first half of the 20th century, which industry had large unions? B. By the end of the century, who had the largest and most rapidly growing union?
A. All of the above. B. Government employees
A. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson bailed out Bear Stearns because they thought that: B. Credit default swap is: C. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson did not bail out Lehman Brothers because they thought that: D. Which of the following was NOT bailed out by the government?
A. Bear Stearns bankruptcy would lead to many other banks going bankrupt. B. insurance against a loan (e.g., bond) default. C. bailing out one bank would lead to other banks taking more risks in the future. D. All of the above were bailed out.
Every few years there is a well-publicized battle in Congress over whether the minimum wage should be raised. A. Why do these heated legislative debates recur so regularly? B. On average, has the real minimum wage risen or fallen since 1970? C. Why doesn't Congress index the minimum wage to the CPI?
A. Because the minimum wage is not adjusted for inflation (e.g., not indexed to the CPI). B. It has fallen. C. Some politicians prefer to hold publicized debates for votes.
A. Elizabeth has worked for 10 hours as a computer programmer for the National Video Company and attended night classes at the local college. She would prefer a full-time job. B. Roger lost his job at the R-gone Manufacturing Company two weeks ago. Since then he has been trying to find a job at other local factories.
A. Employed B. Unemployed
A. George Lewis is 16 years old, and he has no job from which he receives any pay or profit. However, George does help with the regular chores around his father's farm about 20 hours a week. B. Marcus Green was laid off from the Houston Motor Company when the firm began retooling to produce a new model car. Marcus knows he will be called back to work as soon as the model changeover is completed. So, he is available for work, but he is not seeking a job.
A. Employed B. Unemployed
A. What types of unemployment are included in the natural unemployment rate? B. Jasmine has recently moved to Florida because she loves the warm climate there. Because she is new to the area, she will need to spend a few weeks looking for a new job. What type of unemployment is this?
A. Frictional and Structural B. Frictional
A. John Stossel threw darts at Wall Street Journal to pick stocks. He did: ____ professionally managed funds. B. True or False: According to economist Burton Malkiel, in recessionary years, actively managed funds outperform index funds. C. Burton Malkiel states, "This is a game where you get what you don't pay for." What does it mean? Choose the best answer. D. According to one study in the Journal of Economics and Portfolio Strategy that is introduced in the video, between 1990 and 2009, among 452 managed funds, ____ did better than the market average. E. There are always some people who beat the market and there will be Warren Buffets in the future. According to Burton Malkiel, what is the problem of trying to be a Warren Buffet or to invest in his/her mutual funds?
A. better than B. False C. Index funds have, on average, higher returns because you don't have pay extra fees. D. 13 E. Nobody knows who he/she is and you are more likely to lose by trying it
A. In Chapter 10 or 23 only, "investment" means: B. In macroeconomics, "investment" means:
A. buying assets such as stocks, bonds, real estate, etc. B. Human Capital, Physical Capital, Technological Knowledge
Between 1984 and 2001, the U.S. government made it much easier to get disability payments. Most of the people who try to qualify for disability payments have a tough time finding jobs, and spend a lot of time "out of work and searching for work." Once they start receiving disability payments, they rarely work again and exit the labor force. A. What happened to the number of "disabled" people? B. What happened to the labor force? C. What happened to the number of those who were unemployment? D. What happened to the unemployment rate?
A. It increased B. It decreased C. It decreased D. It decreased
A. According to the author, if you get a hot stock tip, are you likely to beat the stock market on average? B. At 11:39 Eastern Standard Time on January 28th, 1986, the space shuttle Challenger exploded in a great tragedy, killing everyone on board. Eight minutes later, that news hit the Dow Jones wire service. The stock prices of all the major contractors who had helped to build the shuttle, such as Morton Thiokol, Lockheed, Martin Marietta, and Rockwell International, all fell immediately. On that day, the stock price of ____ fell the most. C. Six months after the disaster, a commission was set up to investigate the cause, which turned out to be the failed O-rings made by
A. No, it is highly doubtful because new information gets reflected in the stock prices very quickly. B. Morton Thiokol C. Morton Thiokol
A. Joan Howard has filed applications for summer jobs. However, it's only April and she doesn't wish to start working until at least June 15, because she is attending school. B. Lisa Fox spends most of her time taking care of her home and children, but, all day Friday and Saturday, she helps in her husband's computer software store.
A. Not in the labor force B. Employed
A. Linda is a homemaker. Last week she was occupied with her normal household chores. She neither held a job nor looked for a job. B. Scott has a Ph.D. He has been working full-time but doesn't like his job as a dishwasher. He has applied for jobs with three companies and five universities. As soon as he gets an offer, he'll quit his current job.
A. Not in the labor force B. Employed
A. According to John Stossel,what is the biggest predictor of success in life? B. In the marshmallow experiment, the children who could successfully wait for more marshmallow later: C. Let's apply the lesson we learned from the video. Students who wait until the last minute to study for an exam might be like the children who ____ because the gratification (e.g., a better exam score) comes ____ while the cost (e.g., studying) comes ____. D. This video is shown in Chapter 9/29 because:
A. Patience B. all of the above. C. could not wait for more marshmallow later; later; immediately. D. saving and investment that are important for economic growth require the ability to delay gratification .
In each of the following cases, which makes people save LESS? A. Automatic enrollment in a retirement savings plan or requiring employees to request a retirement savings plan B. The default savings of a retirement plan: 4 percent or 2 percent
A. Requiring employees to request a retirement savings plan B. 2 percent
A. What does the STOCK Act stand for? B. Who could trade in the stock market using non-public information before the STOCK Act? C. If a law that allows government-funded insurance to become an option for the public is about to get killed, members of Congress can gain by ____ insurance companies' stocks. D. Suppose a credit card legislation that hurts the credit card companies is about to be rejected. If members of Congress could receive shares of a credit card company stock in an IPO (Initial Public Offering), the stock price of the company is likely to ____ after the legislation is officially killed and the members of Congress would ____. E. Initially, how many co-sponsors did the STOCK Act get? F. After the initial airing of 60 Minutes, what happened next?
A. Stop Trading On Congressional Knowledge B. Members of Congress C. buying D. rise substantially; gain a lot of money. E. 6 F. The STOCK Act was passed.
In a babysitting circle called the Capital Hill Babysitting Cooperative, members of the congressional staff babysat for one another. Each member initially received 40 pieces of scrip and each script bought 30 minutes of babysitting (i.e., each member could buy 20 hours of babysitting from other members). Since everybody wanted to build up more pieces of script for the future, nobody wanted to go out by using the scripts. In essence, it was a babysitting recession. The co-op was run largely by lawyers and their solution was to mandate everyone to go out every six months. It did not work. Later, the co-op decided to print extra 20 pieces of script. Many of the members started going out by paying the script. A. According to economists, why did increasing the pieces of script succeed? B. According to economists, why was there a babysitting recession in the first place? C. The co-op eventually started printing too many pieces of script. As a result:.
A. The price of babysitting stayed the same. B. The price of babysitting stayed the same. C. Nobody wanted to babysit.
A. Some researchers surveyed employers, asking about their employment before and after a minimum wage increase. They concluded that the change in unemployment was minimal. What does this survey method ignore? B. If this survey method was used, you would have to conclude that Russian roulette is a safe activity. Why?
A. a and b B. You could only interview those who survived.
For each of the following, identify which type of unemployment increases. A. The economy gets worse, so General Motors shuts down a factory for four months, laying off workers. B. General Motors lays off 5,000 workers and replaces them with robots. The workers start looking for jobs outside the auto industry. C. About 10 workers per month at a General Motors plant quit their jobs because they want to live in another town. They start searching for work in the new town.
A. cyclical B. structural C. frictional
A. To be future oriented, you need to be able to trust that when you make a decision about the future, it's going to carry out. This is similar to emphasizing the importance of: B. The closer you are to the equator, the more ____ oriented you are. C. Protestant countries are more ____ oriented and have ____ gross national product than Catholic countries. D. North Italy tends to be more ____ oriented than South Italy and has ____ income.
A. institutions for economic growth. B. present C. future; higher. D. future; higher.
A. Political pressure on Japan led to "voluntary" limits of its exports to the U.S. in the 1980s. Japanese automakers moved to the U.S. and were producing as many cars as were being exported to the U.S. by the 1990s. Many of the transplanted Japanese car companies had ____. B. By the early twenty-first century, the Detroit automakers were ____ workers by the thousands, while Toyota was ____ American workers by the thousands.
A. non-unionized B. laying off; hiring.
A. Which comes first, interest payments on bonds or dividends from stocks? B. Which has, on average, higher returns, bonds or stocks? C. Which is riskier, bonds or stocks?
A. payments on bonds B. stocks C. stocks
A. Who gets helped by a surprise inflation: people who owe money or people who lend money? B. Who is more likely to lobby the government for fast money growth: people who have mortgages or people who own banks that lent money for those mortgages? C. Who gets hurt by unexpectedly low inflation: banks or mortgage holders?
A. people who owe money B. people who have mortgages C. mortgage holders
A. Minimum wages are higher. B. Unemployment benefits are much more generous. C. European unions are much more powerful. D. They have rigid and generous laws for vacation days and layoffs.
A. structural B. structural C. structural D. structural
A. The young man in the video, in essence, is stating ____ in the market for internship. B. The young woman in the video, in essence, is stating ____ in the market for internship. C. According to the economic concepts/principles above, requiring firms to pay all interns ____ the number of interns hired, which ____ the students without prestige, experience, or money.
A. the law of supply. B. the law of demand. C. decreases; hurts.
The following are events that caused the Great Depression. Determine which curve (AD or LRAS) shifts left. The stock market crashed in 1929. In the early 1930s, the U.S. money supply fell by about a third. From 1930 to 1932, there were four waves of banking panics and 40% of the banks failed. The Smoot-Hawley Tariff of 1930 raised tariffs on tens of thousands of imported goods. The retaliation by the other countries (tariffs imposed on U.S. goods). A severe drought and decades of ecologically unsustainable farming practices created dust storms.
AD AD Both AD and LRAS LRAS AD LRAS
Determine which curve (AD or LRAS) shifts which way: Foreigners watch more U.S.-made movies Fear on the part of consumers New inventions occur at a slower pace A smaller money growth rate
AD shifts right. AD shifts left. LRAS shifts left. AD shifts left.
What will happen to AD and LRAS curves if a nation's scientists invent many new Internet search tools, raising current productivity and making investors optimistic about future inventions as well? Choose all that apply.
AD shifts right. LRAS shifts right.
True or False: One of the costs of inflation for society as a whole is that buyers have to pay higher prices for goods and services. Explain
False. When buyers pay more, the sellers receive more. It's not a loss for the economy as a whole.
Why is the average pay of musicians, actors, radio personalities, painters, athletes, etc. lower than the average wage of the workers?
It is a lot of fun to be those and the supply of those jobs is higher.
Determine which curve (AD or LRAS) shifts which way: A rise in the price of oil A fall in consumer optimism A hurricane that destroys factories in Florida Good weather that creates a bumper crop of California oranges A fall in sales taxes
LRAS shifts left. AD shifts left. LRAS shifts left. LRAS shifts right. AD shifts right.
Determine which curve (AD or LRAS) shifts which way: Steel workers go on a strike. Businesses read about the glories of the Internet, so demand for high-tech investment purchases increases. U.S. senators read about the glories of the Internet, so demand for high-tech government purchases increases. Around 2000, the glories of the Internet fade a bit so innovations increase at a somewhat slower rate for a few years.
LRAS shifts left. AD shifts right. AD shifts right. LRAS shifts left.
Payday loans are usually between $300 and $400 where low-income people wait until the next paydays to repay their loans. For a two-week loan, payday lenders typically charge $15 for every $100 lent, which amounts to about 390% annual interest rate. Suppose the government imposes an interest ceiling at 36% annual rate. What are the possible consequences for low-income households?
More expensive overdraft fees. Late fees on credit cards. Not being able to pay off debt.
If you have public information that a company is doing well (or is going to do well), should you buy the company's stock?
No, the information is public and has already been reflected in the current stock price of the company. There is no reason to believe that it will continue to rise (or fall) in the future.
A Nobel prize-winning economist flew in to New York City for a conference. He got into a cab, and started talking with the cab driver. The cab driver said, "Oh, you're an economist? Let me tell you, this economy is terrible. I'm an unemployed architect." What would the economist say?
No, you are an employed cab driver.
American Heritage magazine reported that John D. Rockefeller was the richest American of all time. Considering that he couldn't have TV, video games, the Internet, air conditioners, cars, airplanes, telephones, antibiotics, etc., you may still not want to be him today. What does this tell you about the rate of inflation and economic growth measured by the CPI and real GDP, respectively?
The CPI has been overstated while real GDP has been understated.
What will happen to the market for loanable funds if the government imposes a ceiling on interest rates?
The amount of loans made will decrease as people want to lend less.
What will happen to the market for loanable funds if the economy is expected to experience a recession?
The demand for loanable funds will decrease.
What will happen to the market for loanable funds if entrepreneurs expect fewer regulations in the future?
The interest rate and the amount of loans made will increase. (demand increases)
What will happen to the market for loanable funds if the government increases its borrowing to finance the federal deficit?
The interest rate and the amount of loans made will increase. (demand increases)
What will happen to the market for loanable funds if the government reduces the tax on investment returns?
The interest rate and the amount of loans made will increase. (demand increases)
What will happen to the market for loanable funds if savers feel safer putting their money in banks or buying bonds?
The interest rate will fall while the amount of loans made will increase. (supply increases)
What will happen to the market for loanable funds if Americans all go to see the classic Robin Williams/Ethan Hawke film Dead Poet Society and decide to carpe diem (enjoy the moment), or if they read the quotes of a famous Mediterranean preacher who said, "Take therefore no thought for the morrow," or if they watch the appalling 1970s sitcom One Day at a Time?
The interest rate will rise while the amount of loans made will decrease. (supply decreases)
What will happen to the market for loanable funds if Congress abolishes the law that allows businesses to automatically enroll you in a savings plan that puts 5 percent of your salary in a retirement fund?
The interest rate will rise while the amount of loans made will decrease. (supply decreases)
What will happen to the market for loanable funds if the government starts taxing interest earnings?
The interest rate will rise while the amount of loans made will decrease. (supply decreases)
According to the Fisher effect, if everyone expects inflation to rise by 10 percent over the next few years, what is likely to happen, other things equal?
The nominal interest is likely to rise.
The minimum wage would ____ unemployment. It is a question of how much, not whether it would. Because if it didn't, we could easily solve the problem of poverty by ____.
increase; raising the minimum wage to, say, $1,000 (or more) per hour.
Patient people tend to commit ____ because the benefit (e.g., acquiring stolen goods) is ____ while the cost (e.g., getting caught) is ____.
fewer; immediate; delayed.
Suppose the returns from investment in housing were the same as (or higher than) those of other financial investments (such as buying stocks). Then, ____ housing would ____ since people get to live in the houses. It would ____. The same ____ price today means the rate of financial returns would be ____ contradicting the original supposition. To summarize, if the owner of an asset can derive joy from simply owning it (e.g., houses, paintings, etc.), the financial return of the asset tends to be: ____ that of the other assets, on average.
the demand; increase; raise; higher; lower; lower than.
