Macro quizzes 7-12

The current real interest rate rate in the U.S. is closest to which of the following?

-5.0%

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

20 Million

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

25%

Refer to the figure. What is the unemployment rate in this market as a result of the implementation of a $10 minimum wage?

50%

Refer to the figure. What is the number of people who are employed at the market wage? How many people end up unemployed due to the implementation of a $10 minimum wage?

60:40

The Rule of 70 utilizes what number?

70

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

8.33%

What is Smokey Mountain?

A garbage dump

Which is NOT an institution that leads to sustained long-term economic growth?

A more equal income distribution

Which of the following is the more important factor leading to economic growth and development?

Access to water-borne trade

A soon to be college graduate with lots of student loans should be "rooting" for which of the following?

An increase in inflation

Which of the following countries does the text refer to as a "growth disaster"?

Argentina

Which of the following occurs when an economy is at Full Employment?

Cyclical Unemployment is zero

Which of the following was most involved in "securitizing" mortgage backed securities?

Fannie Mae and Freddie Mac

Which of the following best desribes the earliest urban work force?

Farm Girls

The "Protestant Work Ethic" connects which two things?

Hard work and reward

High Replacement Ratios result in which of the following?

High structural unemployment

The incorrect fundamental assumption that contributed to the financial crisis in 2008 was:

Housing prices would always rise

Demand-Pull inflation results in which of the following?

Increased inflation and decreased unemployment

Cost-Push inflation (stagflation) results in which of the following?

Increased inflation and increased unemployment

Which of the following defines the "rules of the game" that structure economic incentives?

Institutions

Which of the following is NOT true of structural unemployment?

It results from scarcity of information.

When describing the Flying Geese Theory in terms of consumer electronics after WWII, the "lead goose" would be ___________

Japan

Which of the following is considered unemployed?

John, on temporary layoff from his work, awaits recall.

Someone who burns down a factory because it uses new labor-saving technology that destroys jobs is known as a(n):

Luddite

Which of the following would the U.S. Bureau of Labor Statistics define as a discouraged worker?

Mary, who was laid off last year and who was looking for a full-time job until last month

Which of the following is associated with financing government budget deficits by monetizing the debt (printing money)?

Modern Monetary Theory

Extensive growth comes from ________ while intensive growth comes from _______.

More resources; improved technology

Which of the following is a problem associated with using a "market basket" approach to calculate the CPI?

New goods and the quality of the goods change over time

The US currency is "fiat" money. That means it is "backed" by which of the following?

Nothing but people's willingness to accept it as a means of payment

According to the Solow model, what will happen when a country produces at an output level below its steady-state output level?

Output and capital stock will rise until its steady-state output level is reached.

Which of the following is TRUE about the life-cycle theory of savings?

People tend to borrow during the early years of their lifetimes, save during their prime working years, and dissave during their retirement years.

Which statement is correct regarding the relationships of physical capital and human capital to diminishing returns and depreciation?

Physical capital and human capital are subject to diminishing returns and depreciation.

The greatest return to education occurs at which level?

Primary School

Historically, which of the following is the most common way that governments have financed huge budget deficits?

Printing money and causing inflation

From where do investment banks get their funds?

Private investors

Which of the following is the correct answer?

Put it here - the answer is D

Which of the following can be defined as saving, according to economics?

Sandra purchases a certificate of deposit from a bank.

Which country is ranked #1 in economic freedom by the Heritage Foundation?

Singapore

Which of the following is one of the Asian Tigers?

South Korea

Foriegn Direct Investment in lesser developed countries often results in which of the following?

Sweatshops

What was the basic message in the stories about Smokey Mountain?

Sweatshops have been a factor in promoting economic growth

Which of the following is most important in determining the interest earned on a long term bond?

The coupon value of the bond

How does the inclusion of "ideas" in the Solow model change the graph of the model?

The output curve and investment curve both pivot upward.

An economy's growth rate will be higher in which situation?

The output level is significantly below its steady state.

Dependancy Ratios can be used to measure which of the following?

The percentage of the population supporting the economy

What was the fundementally flawed assumption at the heart of the 2006-2008 financial crisis?

The price of U.S. houses would continue to increase (or at least they would not decrease)

When an economy is in a steady state, what is true regarding investment and output from year to year?

There is no change in the annual level of investment and output.

Suppose that the money supply increases and inflation and real GDP do not change. What must have happened?

Velocity decreased

Which would NOT encourage the faster development of new ideas?

a greater depreciation of capital

The highest levels of corruption would be most likely associated with which of the following?

a large government sector in a country

In the long run, better technological ideas will NOT lead to:

a lower depreciation rate.

Economic growth _____ be maintained solely by continually increasing investment in capital because of _____.

cannot; diminishing returns to capital

A country is experiencing _____ growth when its GDP is growing due to increases in its capital stock and putting into use ideas developed earlier.

catch-up

Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes:

consumption and private investment to fall.

A country is experiencing _____ growth when its GDP is growing due to the development and adoption of new ideas that increase productivity.

cutting-edge

Which of the following is equal to zero at Full Employment?

cyclical unemployment

Unemployment correlated with the business cycle is called:

cyclical unemployment.

A leverage ratio is the ratio of:

debt to equity

As the baby boomers retire, the U.S. labor force participation rate will:

decrease

There are _____ returns to physical capital and _____ returns to human capital.

decreasing; decreasing

What slows economic growth as prosperity increases?

diminishing returns to capital

Discouraged workers are:

discouraged

An unemployed person is one who:

does not have a job but is actively looking for one.

Core Inflation excludes which two volitile segments of the economy?

energy and food

Which of the following is NOT a reason for the financial crisis of 2007-2008?

excessive confidence about the stock market

William Jennings Bryant's "Gross of Gold speech was an appeal for the votes of _______ who wanted ________

farmers; inflation

A venture capitalist is someone who:

funds his or her stock market ventures with funds taken from the bond market

Securitization contributing to the Great Recession occurred in which market?

home mortgages

Bond prices and bond interest rates move:

in opposite directions.

During recessions the unemployment rate:

increases

Which of the following would be the most likely to be associated with reduced frictional unemployment?

indeed.com

Economists agree that the most important determinant of economic development is:

insitutions that incentivise and promote economic growth

Capital stock and national output will be larger in the next time period when:

investment is greater than depreciation.

Capital stock and national output will be smaller in the next time period when:

investment is smaller than depreciation.

When a country has a large amount of capital stock, its annual investment in new capital needs to be _____ if it wants to maintain the same level of capital stock because of _____.

larger; depreciation

The buyer of a bond is a:

lender

Long-run economic growth is primarily attributed to:

new, productive ideas.

In the long run, an increase in the money supply will cause ________ in real GDP.

no change

According to the Fisher equation, the nominal interest rate equals the expected inflation rate:

plus the equilibrium real interest rate.

Governments can play a role in supporting the production of new ideas by:

protecting intellectual property.

Minimum wage laws and unions tend to:

raise wages and raise unemployment.

What two components of the quantity theory of money are assumed to be stable over time?

real GDP and the velocity of money

Financial intermediaries:

reduce the costs of moving savings from savers to borrowers and investors.

The process of bundling loans together and selling them on the market as financial assets is called:

securitization.

Frictional unemployment is best defined as:

short-term unemployment caused by difficulties of matching employees to employers.

(Figure: Loanable Funds Market) Refer to the figure of the loanable funds market. At an interest rate of 3% in this market, there is a _____ of loanable funds of _____.

shortage; $320

Money serves each of the following purposes EXCEPT:

standard of living

The persistent, long-term unemployment caused by long-lasting shocks or permanent features of an economy is called:

structural unemployment.

Which is NOT a typical method that governments use to encourage private firms to invest in generating new, productive ideas?

taxing firms for the development of new, productive ideas

Patents provide the developer of a new idea, product, or process with:

temporary monopoly power.

The Industrial Revolution and the "Sisters in Time" are most associated with which industry?

textiles

The fact that the United States has grown steadily on average over the past two centuries is consistent with:

the concept that better ideas result in economic growth in the long run.

Assume that a country's production function changes from 𝑌=2𝐾⎯⎯⎯√Y=2K to 𝑌=3𝐾⎯⎯⎯√Y=3K. Which of the following events could explain the change in this production function?

the development of new technology in production

Inflation tends to benefit:

the government

What is the Fisher effect?

the tendency of nominal interest rates to rise with higher expected inflation rates

The average number of times a dollar is spent on final goods and services during a year is the:

velocity of money

According to modern monetary theory, increased government budget deficits:

will have little or no impact on the economy

A patent provides the developer of a new idea, product, or process with a:

window of time to recover development expenses and profits from the idea, product, or process.

How many years does it take for output to double if the growth rate is 7% per year?

10

Which of the following results when the Fed sells bonds?

Bond prices decrease and interest rates increase