Econ 001 16-25

Which of the choices is most directly related to cyclical unemployment? the age distribution of the country an increase in the number of new college graduates looking for work increased use of the Internet for job searches recessions

recessions

Assume that a simple model of the macroeconomy can be given as G−T=(S−I)+(M−X),G−T=(S−I)+(M−X), where G represents government spending, T represents taxes, S represents savings, I represents investment, and M and X represent imports and exports, respectively. Which statement about this model is true about a budget deficit?----Private savings and the trade deficit must be equal. -Private savings, the trade deficit, or both must be positive. -Both private savings and the trade deficit must be positive. Private savings and the trade deficit must be balanced (total to zero).

-Both private savings and the trade deficit must be positive.

This group, consisting of individuals who would like to work but have not looked for work during the past four weeks, is included among the structurally unemployed. marginally attached workers. discouraged workers .minimally attractive workers.

marginally attached

How frequently is the survey that determines unemployment released? -yearly -monthly -quarterly -weekly

monthly

when the preceding term is combined with all of the privately‑held savings from across the country

national savings

Sort the pros and the cons of Employment Insurance (EI).

Pros: smooths income changes reduce the burden of unemployment increases job search efficiency and wage outcome Cons: increase frictional unemployment creates an incentive to delay looking for a job

Which of the statements is true? The real and nominal interest rates are always equal. The difference between the real and nominal interest rate is equal to the change in GDP. The nominal interest rate is typically greater than the real interest rate due to inflation. The nominal interest rate is typically less than the real interest rate due to inflation.

The nominal interest rate is typically greater than the real interest rate due to inflation.

Lenders gain when inflation is higher than expected. When inflation is higher than expected, the real interest rate is negative. Lenders lose when inflation is higher than expected. Loan contracts specify the nominal interest rate. During the late 1970s, the United States had unusually high inflation and unusually high real interest rates.

false (borrowers do) true true false false

The natural rate of unemployment equals structural unemployment minus cyclical unemployment. cyclical unemployment plus structural unemployment. frictional unemployment plus structural unemployment. frictional unemployment plus cyclical unemployment. frictional unemployment plus minimally attractive workers.

frictional unemployment plus structural unemployment.

How do mutual funds reduce risk for the average individual investor? -Each mutual fund guarantees a specific return on investment. -Mutual funds provide ratings for lenders intended to assess risk of default. -Mutual funds reduce risk by being more liquid than traditional stocks. -Mutual funds reduce risk through portfolio diversification. -Mutual funds increase an investor's return on investment, which reduces the risk an investor would have to bear.

-Mutual funds reduce risk through portfolio diversification.

A promise to pay issued by a borrower with annual interest payments and a principal payment at maturity.

Bond

Hanko buys bonds directly from treasury terry buys shares of tesla from tesla dom buys shares from a mutual fund sona takes out a loan from her bank to get a car

Financial market: 1,2 Financial intermediate: 3,4

funds that are kept in a bank that must be relinquished upon the owner's request

bank deposit

the difference between the amount the government collects and how much it spends

budget balance

the result when the government spends more money than it takes in through taxes

budget deficit

a share of ownership in a company

stock

There are two aspects of efficiency that the equilibrium of market for loanable funds exhibits. Select the TWO statements that characterize these two aspects of efficiency. -There is always a small surplus of funds in the market. -Investment projects that are financed have smaller rates of return than projects not receiving financing. -All potential savers lend money. -Investment projects that are financed by savers have larger rates of return than projects that do not receive financing. -Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money. -Savers who lend money are willing to accept a higher minimum interest rate than potential savers who do not lend money.

-Investment projects that are financed by savers have larger rates of return than projects that do not receive financing. -Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money.

Why does funding from national savings and funding obtained from capital inflows differ? -capital inflows come from domestic individuals, whereas national savings come from government sources. -funds from national savings must be repaid, whereas capital inflows do not have to be repaid. -National savings are repaid domestically, whereas capital inflows are repaid to a foreigner. -national saving funds can be used for a wider variety of investments than capital inflows.

-National savings are repaid domestically, whereas capital inflows are repaid to a foreigner.

Indicate whether each scenario is a characteristic or an example of a stock or bond. a. Nichole purchases a financial asset that gives her partial ownership of a company. b. Netflix finances an expansion of its operations by giving investors small ownership stakes in the company. c. Eric lends money to his city. The city issues him a certificate specifying when Eric will be repaid and the interest he will earn. d. Ford Motor Company wants to build a new factory but does not have the cash on hand to pay for it. It finances its new factory through debt financing.

stock stock bonds bonds

Determine whether the statements listed regarding the savings-investment spending identity are true or false. a. The budget balance can be either positive or negative. true b. National budget deficits are NOT included in the calculation of national savings. false c. The national savings are the combined value of all private savings and the budget balance. true d. Outflows of funds can only be generated by countries with a larger gross domestic product (GDP) per capita than the country receiving the funds. false

true false true false (no correlation w/ per capita)

Determine if each statement is true or false. An increase in government transfer payments can crowd out private investment. An improvement in the budget balance increases the demand for financial capital. An increase in private consumption may crowd out private investment. Lower interest rates can lead to the private investment being crowded out. An improvement in the trade balance must come from an increase in national savings. For an open economy, if private savings is equal to private investment, then there is neither a budget surplus nor a budget deficit.

true false true false false false

When the economy is doing well, a significant share of unemployment is frictional. true false

true (people aren't aware of the job opportunity)

Individuals who are involuntarily working part‑time are considered frictionally unemployed. underemployed. structurally unemployed. marginally employed.

underemployed

By excluding the groups identified in the previous questions, the U.S. Bureau of Labor Statistics calculation methods overstate the true level of unemployment. understate the true level of unemployment. accurately reflect the true level of unemployment.

understate

Suppose the civilian noninstitutionalized working-age population is 35.935.9 million in in a hypothetical economy. Of these, 4.44.4 million are working part-time and 13.1913.19 million are working full-time. Assume the Bureau of Labor Statistics (BLS) definitions are used for calculating unemployment data. Among those not working, the most recent job-search activity for 3.403.40 million happened less than two weeks ago, while 1.721.72 million most recently looked for work between two and four weeks ago. An additional 0.860.86 million most recently looked for work five weeks ago, and the remaining 12.3312.33 million who do not have jobs have not looked for work in the past six weeks. Round your answers to two decimal places. What is the size of the total labor force? How many people are unemployed? What is the labor force participation rate? What is the unemployment rate?

22.71 5.12 63.25% 22.5%

Which most accurately characterizes the method used to calculate inflation? -Researchers observe the interest rate at two points in time and infer the rate of inflation from the difference. -Analysts measure the cost of a bundle of goods representative of overall spending at two points in time and compare the difference in cost. -Bureaucrats evaluate changes in the price of a nation's currency in terms of other prominent world currencies. -Economists measure change in the prices of three goods (gasoline, gold, and wheat) thought to be important determinants of the health of the economy. -Government workers poll households to find out how much change there is in the prices that they are paying.

Analysts measure the cost of a bundle of goods representative of overall spending at two points in time and compare the difference in cost.

How does the curve shift? Which one? Collaboration with Congress during the Clinton Administration allowed for an aggressive deficit-cutting plan to pass. As a result, the government was able to reach a balanced budget at the end of the 90's. As a result, private investment should have..?

Demand curve shifts left increased because the cost of borrowing decreased. (interest rates decreased)

The United States federal government, which had almost $15 trillion in debt in 2011 b. Karen, a retired school teacher who relies upon her fixed pension to pay for her expenses c. Third National, a bank that loaned many people money for home purchases d. Joy, who borrowed $40,000 to pay for her college education e. Herb, who keeps his savings in an old coffee can

Winner loser loser winner loser

Which of the following best defines a financial intermediary? -a financial institution that transforms investor funds into financial assets -a claim by a buyer to a future payment by a seller -an asset sold by a company which entitles the buyer to partial ownership -a collection of stocks and bonds issued to investors

a financial institution that transforms investor funds into financial assets

the net amount of funds coming into a country

capital inflow

Which of the terms acts as the "price" in the market for loanable funds? capital demand supply interest rate

interest rates

financial intermediation

is the process of an institution operating between a saver with financial assets to invest and an entity that will receive those assets and pay a rate of return

As interest rate decreases, what happens to the quantity of loanable funds demanded? -Quantity demanded will increase. -There will be no change in quantity demanded. -Quantity demanded will decrease. -Some borrowers will demand more funds whereas others will demand less.

-Quantity demanded will decrease.

Which individual is out of the labor force? -Jacob is working 35 hours per week. -Robert is without a job, and is able to work, but is not actively looking for work. -Abigail is working 3 hours per week. -Judy is without a job, is able to work, and is actively looking for work.

-Robert is without a job, and is able to work, but is not actively looking for work. Bc he is not actively looking for a job

If the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the project, how will the borrowing business act? -The business will not take out the loan. -The business will proceed anyway, knowing that the return is only -an estimate. -The business will take out the loan. -The business will demand more funds to cover the shortfall.

-The business will not take out the loan.

Who reports the official U.S. unemployment rate? -the U.S. Bureau of Labor Statistics -the U.S. Federal Reserve -the U.S. Treasury Department -unemployment collection offices

-the U.S. Bureau of Labor Statistics

Why is a hypothetical basket of goods used to measure inflation? Using multiple goods allows consumers to compare goods to one another. Consumers can see how inflation affects some goods and not others. Consumers can see the general increase in price over time by using a basket of goods. Using a hypothetical basket allows consumers to adjust their pricing expectations.

Consumers can see the general increase in price over time by using a basket of goods.

Fisher Effect-

Graphs stacked on each other, interest rate increases

Select the scenario that is an example of a legal financial intermediation. -Edna giving Sid $10,000 to purchase a used car -Lee borrowing money from the First Bank of Jackson that was deposited there by Lisa -Steve not paying Mary the $50,000 he owed her last Friday, as agreed, resulting in Mary's partners breaking both of Steve's arms -Marilyn encouraging Howard to get financial advice before purchasing a donut shop -Hugh alerting the IRS that Ned is cheating on his taxes

Lee borrowing money from the First Bank of Jackson that was deposited there by Lisa

As interest rate decreases, what happens to the quantity of loanable funds demanded? Quantity demanded will increase. There will be no change in quantity demanded. Quantity demanded will decrease. Some borrowers will demand more funds whereas others will demand less.

Quantity demanded will increase.

What effect will an increase in interest rates have on the quantity of loanable funds supplied? -Some lenders will offer more whereas others offer less. -Quantity supplied will decrease. -There will be no change in quantity supplied. -Quantity supplied will increase.

Quantity supplied will increase.

when the government spends less money than it takes in through taxes

budget surplus

James is an architect who has been laid off owing to a slump in the demand for property. He feels he will have to wait until the economy picks up before he can get a new job. James is facing Eric is an experienced project manager who lost his job at a tech start-up because the company's product failed to become popular. He is confident he can get a new job and has already rejected a number of offers. Eric is facing Craig lost his job several months ago. He is having a hard time finding a job that pays him more than unemployment insurance does. Craig is facing Sarah is a recent economics graduate who is entering a difficult labor market, due to a severe recession. She is continuing to look for work but is having a hard time getting interviews. Sarah is facing Hamid has just graduated as a lawyer from an esteemed law school. He is confident of getting a job and has already refused a few lower‑paying jobs. Hamid is facing

cyclical unemployment. frictional unemployment. structural unemployment. cyclical unemployment frictional unemployment

Select the answer that describes the adjustment in the loanable funds market. (increase of $25.8 billion dollars in the government's budget deficit) -The deficit decreases national savings and shifts the supply curve to the left, increasing the interest rate and crowding out investment spending. -The deficit increases the demand for loanable funds and shifts the demand curve to the right, increasing the interest rate and crowding out investment spending. -The deficit decreases the demand for loanable funds and shifts the demand curve to the left, decreasing the interest rate and crowding out investment spending. -The deficit increases national savings and shifts the supply curve to the right, decreasing the interest rate and crowding out investment spending.

demand shifts right -The deficit increases the demand for loanable funds and shifts the demand curve to the right, increasing the interest rate and crowding out investment spending.

Individuals who want to work, but have given up searching for a job because of limited prospects, are known as -marginally attached workers. -discouraged workers. -frictionally unemployed.

discouraged workers

Which of the factors would decrease the rate of frictional unemployment? an increase in the number of jobs available due to an increase in GDP improvements in technology that make skills that were once valued by employers obsolete the advent of the Internet, which makes finding available jobs easier increased short-term unemployment benefits

frictional is caused by the scarcity of information about a job the advent of the Internet, which makes finding available jobs easier

Anita Job is the new Treasury Secretary, and she is trying to interpret the inflation measures for two consecutive years. In year one, the aggregate price level increased by 11% and, in year two, the aggregate price level increased by 5% Which term describes the change in the price level from year one to year two? deflation disinflation hyperinflation conflation

hyperinflation

Identify whether the actions or scenarios would likely increase or decrease the natural rate of unemployment. i. Increasing the minimum wage ii. Reducing workers' collective bargaining rights iii. Extra financial benefits for the unemployed iv. A large number of young people entering the labor force v. More funding for government worker training programs vi. An increase in union membership vii. An increase in information about job opportunities

increase decrease increase increase decrease increase decrease

Select the statement that describes the fundamental relationship between savings and investment spending. -Savings will decrease as investment spending increases. -Savings will increase as investment spending decreases. -Investment spending and savings are always equal. -Investment spending promises higher financial returns than savings.

investment spending and savings are always equal.

an agreement between a lender and a borrower

loan

Consider the components of the national savings and investment identity, categorized below. Each scenario will affect one component of the identity. Classify each scenario according to the component it will affect. A worker's contribution to a retirement fund is A farmer buying a new tractor is A decrease in automobile exports is A domestic company building a factory is The government building a bridge affects Mitchell quitting his job to go back to school affects An increase in French wine imports is A family cutting down on expenses affects private domestic savings.

private domestic savings private domestic savings an inflow of foreign capital private domestic investment government budget deficit. private domestic savings. an inflow of foreign capital. private domestic savings.

Determine which type of financial asset is described in each scenario. a. Caleb has developed a prototype garlic-peeling device that he hopes to sell to the public. He is having his startup issue securities that offer buyers the promise to pay a specified amount of interest each year plus the principal in five years. Caleb is b. Audrey wants to buy a new car but does not have enough cash. She gets funding from her local bank with the promise that she will make monthly payments for the next three years to repay the original amount lent to her plus 66% interest. Audrey is c. Lyle and Shane start a business selling pencil sharpeners to elementary schools. Their company becomes an instant success, and they decide to allow people to start buying small shares of their company. This gives individuals who buy shares the right to vote in company decisions and a small percentage of the profits. Lyle and Shane are d. Rand Capital, a financial industry conglomerate, pools together several hundred home mortgages and sells shares in them to groups of investors. However, many investors decide against this option because of the risk involved and the difficulty of assessing the quality of such a large number of individual mortgages. Rand Capital is e. Jack decides to build a chateau in the mountains of Colorado and operate it as a ski resort. He secures funding from a local commercial bank after discussing his business plan with the bank. He promises to pay back the principal plus interest over the next 2020 years. Jack is

selling bonds loan selling stock floating a loan-backed security loan

Please decide whether each of the scenarios related to the loanable funds market will result in a shift in supply or a shift in demand. a. China decides to reduce its capital investment in the United States, as it expects low returns due to a weak U.S. economy. b. Calopolis, a college town in Northern California, has for many years banned the presence of fast food restaurants in city limits. As of 2012, however, the city will allow several fast food companies to open franchised locations. c. Due to an increase in revenues after a tax hike, the United States is able to eliminate the deficit and begins to maintain a balanced budget for the first time in several decades. d. As a result of a stock market boom, individuals begin to feel richer and spend more while also saving less.

shift in supply shift in demand shift in demand shift in supply

Inflation can impose significant costs and adversely distort economic systems. Indicate whether the costs and distorting effects exemplify menu costs, shoe leather costs or unit of account costs. discourages people from holding money b. can reduce the quality of economic decisions c. can lead to stores listing prices in more stable currencies d. spending time converting money into something that better holds value e. makes money a less reliable source of measurement f. can cause distortion to the tax system g. causes difficulty in firms and individuals financial planning h. causes costs associated with changing prices in stores

shoe leather costs unit of accounts menu costs shoe leather unit of accounts unit of accounts unit of accounts menu

Match each term with its definition. You are currently in a labeling module. Turn off browse mode or quick nav, Tab to items, Space or Enter to pick up, Tab to move, Space or Enter to drop. -a claim to ownership of part of a firm -a legal obligation to repay a debt at a specified date in the future -failure to repay a debt -a group of investments packaged together and sold as one investment opportunity -profits distributed to a firm's owners stock bond default mutual fund dividend Answer Bank

stock bond default mutual fund dividend

Erik volunteers for 10 hours per week at his children's school and does no other work. He sends his resume to 10 potential employers daily. b. Laura works 20 hours in a paid position for her local animal shelter. c. Pete had a knee replacement two weeks ago and will not be available to work at his job as a mechanic for the next three months. d. Alex just turned 16 and started applying for jobs. He has not found a company that will hire him yet. e. James quit his job to stay at home with his children and has not worked in 15 years, nor has he looked for work.

unemployed not unemployed not unemployed unemployed not unemployed (not actively looking for work)