macro exam 3

if an unemployed person quits looking for work, then, eventually the unemployment rate

and the labor-force participation rate both decrease

when the fed decreases the discount rate, banks will

borrow more from the fed and lend more to the public. the money supply increases

since the 1940's US union membership has

fallen. this decline should have reduced structural unemployment

people who hold well-diversified portfolios of stocks have greatly reduced or eliminated

firm-specific risk, but still they have reason to worry about their wealth decreasing as a result of recessions

providing training for unemployed individuals is primarily intended to reduce

frictional unemployment

a decrease in the money supply might indicate that the fed had

sold bonds in an attempt to increase the federal funds rate

according to the efficient market hypothesis, which of the following statements is not corrected?

stock market prices tend to rise today if the rose yesterday

cyclical unemployment refers to

year-to-year fluctuations of the unemployment around its natural rate

which of the following statements regarding the federal open market committee is correct?

all regional fed presidents attend the meetings, but only five get to vote

the problem of moral hazard arises because

after people buy insurance, they have less incentive to be careful about their risky behavior

figure 27-1 the properties exhibited by this utility fluctuation help to explain various things we observe in the economy, including

all of the above are correct

which of the following games might a risk-averse-person play?

all of the above are correct

suppose the interest rate is 10 percent. which of the following payments has the largest present value?

all of these payments have the same present value to the nearest cent

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 10 percent, how much is the bank holding in excess reserves?

$15 million

what is the present value of a payment of $2000 to be received two years from today if the interest rate is 5%?

$1814.06

Table 29-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. Assets Liabilities Reserves $750 Deposits $10,000 Loans 9,250 Refer to Table 29-2. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by

$2,000.00

suppose you put $500 into a bank account today. interest is paid annually and the annual interest rate is 8 percent. the future value of the $500 after 2 years is

$583.20

what is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

$95.24

figure 28-3 if the government imposes a minimum wage of $4, how many workers will be unemployed?

0

the largest reduction in a portfolio's risk is achieved when the number of stocks in the portfolio is increased from

1 to 10

based on the quantity equation, if M=150, V=4, and Y=300, then P=

2

table 28-1 how many in the sample are unemployed

3

if reserve ratio is 2.5 percent, then the money multiplier is

40

the bureau of labor statistics reported in 2005 that there were 28.19 million people over age 25 who had no high school degree or its equivalent. 11.73 million of whom were employed and 1.04 million of whom were unemployed. what were the labor-force participation rate and the unemployment rate for this group?

45.3% and 8.1%

suppose a bank holds reserves equal to $1200 loans equal to $8000 securities equal to $800 deposits equal to $9000 and debt equal to $800. this banks leverage ratio is

50

according to the rule of 70, if a person's saving doubles in 10 years, what interest rate were they earning?

7

at which interest rate is the present value of $145.80 two years from today equal to to $125 today?

8 percent

if the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?

8 percent

table 29-6 if the bank of spingfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?

8.00 percent

suppose that the adult population is 6 million, the number of employed is 3.8 million, and is the labor-force participation rate is 70%. what is the unemployment rate?

9.5%

John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available.

John is frictionally unemployed, and Curtis is structurally unemployed

which of the following actions best illustrates adverse selection?

a person who has narrowly avoided many accidents applies for automobile insurance

wages in excess of their equilibrium level help explain

both structural unemployment and the natural rate of unemployment

An economist claims that changes in information technology and unemployment insurance have reduced unemployment. Which of these changes affect frictional unemployment?

both the changes in information technology and unemployment insurance

according to the quantity theory of money, a 3 percent increase in the money supply

causes the price level to rise by 3 percent

if an economy used gold as money, its money would be

commodity money but not fiat money

diversifying

decreases the standard deviation of the value of a portfolio indication its risk has decreased

the classical dichotomy refers to the idea that the supply of money

determines nominal variables, but not real variables

the designation "natural" implies that the natural rate of unemployment

does not go away on its own even in the long run

the primary cause of inflation is

growth in the quantity of money

the efficient markets hypothesis says that beating the market consistently is

impossible. many studies find that beating the market is, at best, extremely difficult

if a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

increase by $100 while wealth does not change

satchel loses his job and immediately begins looking for another. other things the same, the unemployment rate

increases and the labor force participation is unaffected

in a fractional-reserve banking system, a decrease in reserve requirements

increases both the money multiplier and the money supply

which of the following is correct?

index funds typically have a higher rate of return than managed funds. this tends to support the efficient market hypothesis

the concept of present value helps explain why

investment decreases when the interest rate, and it also helps explain why the quantity of loanable funds demanded decreases when the interest rate increases

the risk of a portfolio

is positively related to the average return of the portfolio

People hold $400 million of bank deposits but no currency. Banks have $20 million dollars of reserves and do not plan to change the reserve ratio. there is an open market sale bonds equal to $10 million by the fed to banks. what is the eventual (post multiplier) effect on the money supply?

it falls by $200 million

which of the following does the federal reserve not do?

it makes loans to any qualified business that requests one

which of the following is not an explanation for the existence of structural unemployment?

job search

Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his savings account. as a result of this transfer by itself

m1 decreases by $2,100 and m2 stays the same

given the following information, what are the values of m1 and m2?

m1= $980 billion, m2= $4370 billion

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

more reserves, so the reserve ratio will rise

when we measure and record economic value, we use money as the

not of account

the federal deposit insurance corporation

protects depositors in the event of bank failures

according to the classical dichotomy, which of the following is influenced by monetary factors?

real GDP, unemployment

people who are unemployed because wages are for some reason set above the level that brings labor supply and demand into equilibrium are best classified as

structurally unemployed

the fed has the power to increase or decrease the number of dollars in the economy through the decisions of

the FOMC

suppose the monetary neutrality and the fisher effect both hold. an increase in the money supply growth rate increases

the inflation rate, but not real interest rates

figure 27-1 for the person to whom this utility function applies

the more wealth she has, the less utility she gets from an additional dollar of wealth

money is

the most liquid asset but an imperfect store of value

as asset market is said to experience a speculative bubble when

the price of the asset rises above what appears to be its fundamental value

hyperinflation can be explained by

the quantity theory of money