Macro Exam 2

What is the employment rate of the country in 2010? (Employed Workers/Adults in Labor Force)

95% ( ___ /___ )

If the interest rate rises from 5% to 9%, the number of new businesses will:

Decrease.

A person who is patient tends to save less.

False

When the unemployment rate is equal to the natural rate, frictional and structural unemployment are zero.

False

Which statement best describes the cross-country evidence on the relationship between a nation's GDP per capita and standard measures of societal well-being?

GDP per capita is positively related to measures of societal well-being.

Incentives are important in determining people's willingness to invest in physical capital, human capital, and technical knowledge.

True

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

cyclical unemployment.

At lower interest rates, the cost of investing _____ and the quantity of funds demanded for investment _____.

decreases; increases

A corporation is planning to construct new offices, but it has limited funds. The corporation is likely to:

demand loanable funds by selling bonds.

If zero-coupon bonds are available with an implied interest rate of 5% and a face value of $30,000, what is the approximate purchase price for those bonds?

$28,571.43

Rate of Return

((FV - Price) / Price) x 100

Growth rate of real GDP per capita

((Yt - Yt-1) / Yt-1) x 100

Rule of 70

70/(percentage growth rate).

Over a 10-year span, the S&P 500 Index fund outperforms about ______ of all active funds.

97%

Consider countries A and B. In country A the minimum wage is 30% of the median wage, and in country B the minimum wage is 60% of the median wage. As a result, the minimum wage will affect more workers in country _____ and create more unemployment in country _____.

B; B

Corruption increases the returns to entrepreneurship by giving new businesses easy access to government officials.

False

Countries with low levels of GDP per capita tend to have lower rates of death caused by contagious disease.

False

Which of the following statements is TRUE? I. For every transaction in the stock market there is a buyer and a seller. II. At any point in time, the price of a stock tends to reflect all available public information about the company's future prospects. III. A revolutionary cancer treatment pill will be released next year. An investor will get rich by buying stock in that company now.

I and II only.

Which of the following is TRUE of frictional unemployment?

It has a short duration.

Which country has the lowest rate of economic growth?

North Korea

In financial investment, a riskier asset typically has:

a higher expected return.

A ceiling on interest rates results in:

a shortage of loanable funds.

What information does the World Bank's "rigidity of employment index" provide?

a summary of firms' costs for hiring, firing, and adjusting employment hours

High fees:

are not likely to generate higher returns in the long run because of the efficient markets hypothesis.

How fast will a $10,000 portfolio double if it is earning 10% annual returns?

every 7 years

The invention of birth control in pill form substantially _____ labor force participation.

increased female

Compared to stocks, art investments have _____ monetary returns because they offer ______ nonpecuniary returns.

lower; higher

Stock market bubbles have real effects in the economy because:

overvalued stocks divert capital to less-productive uses.

Human capital is the:

productive knowledge and skills that workers acquire through education, training, and experience.

Property rights encourage:

saving and investment in both physical and human capital.

GDP per capita over time in different regions of the world. The figure shows that:

significant growth has occurred in some regions only since 1950

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

structurally unemployed.

The larger the fraction of government-owned banks a country has:

the slower its growth rate of GDP per capita.