ECON 1A Midterm 2 Review

According to the CPI, since 1950 the average US inflation rate has been

3.3%

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

8.33%

An increase in unemployment benefits tends to:A)lower the incentive to search for a job and raise structural unemployment.B)lower the incentive to search for a job and lower structural unemployment.C)raise the incentive to search for a job and raise structural unemployment.D)raise the incentive to search for a job and lower structural unemployment.

A

If V= 4%, P = 3%, and Y = 2%, then M must equal A)1%.B)2%.C)6%.D)7%.

A

If stock prices go up and people feel richer, aggregate demand will:A)increase.B)decrease.C)stay the same because there have been no changes to the underlying assets.D)be unpredictable.

A

If the suuply of loanable funds decrease ceteris paribus, interest rates will A) increase B) decrease C) remain the same D) change indeterminately

A

In the AD-AS model, Y represents the: A)growth rate of real GDP.B)level of real GDP.C)reference year.D)growth rate of the money supply.

A

Nominal wage confusion occurs when:A)workers respond to their nominal wage instead of to their real wage.B)workers respond to their real wage instead of to their nominal wage.C)nominal wage is much greater than the real wage.D)real wage is much greater than the nominal wage.

A

The price of savings is A) interest rate B) investment rate C) savings rate D) rate of time preference

A

The savings supply curve is A) upward sloping B) downward sloping C) horizontal D) vertical

A

What does the term crowding out mean A) government borrowing causes private investments and consumption to decrease B) too many private lenders make it difficult for the government to borrow C) too many private savers compete for higher rates of return D) the government gives tax breaks to many segments of the economy at one time

A

An increase in spending growth will cause the aggregate demand curve to:A)shift inward.B)shift outward.C)not shift at all.D)shift randomly.

B

As the baby boomers retire, the United States labor force participation rate will:A)increase.B)decrease.C)remain the same.D)fluctuate unpredictably.

B

Frictional unemployment is best defined as:A)long-term unemployment caused by changing features of an economy.B)short-term unemployment caused by difficulties of matching employees to employers.C)unemployment caused by cyclical conditions of an economy.D)a normal level of unemployment caused by high wages.

B

If the interest rates rise from 5% to 9% the number of new businesses will A) increase B) decrease C) remain the same D) sharply increase, then level off

B

The loanable funds market is the market where: A) government brings buyers and sellers together to finance capital expenditures B) equilibrium interest rates are determined by actions of borrowers and lenders C) stocks are bought and sold D) overall investment rates in the economy are determined

B

Which of the following would shift the long-run aggregate supply curve to the right?A)a decrease in the rate of inflationB)the invention of a new computer chip that makes assembly production twice as fastC)a severe drought that decreases crop production and as a result raises pricesD)an increase in the growth rate of spending

B

Why is the demand for the loanable funds market downward sloping A) people save less when the interest rate is low B) more people borrow C) savings rate D) rate of time preference

B

A discouraged worker is a:A)person working for fewer hours than he or she prefers.B)worker being discouraged by his or her employer when asking for a promotion.C)person who has given up looking for work but would still like a job if one is available.D)unemployed person who has temporary part-time employment.

C

An increase in inflation will cause the long-run aggregate supply curve to:A)shift inward.B)shift outward.C)not shift at all.D)shift randomly.

C

An increase in spending growth causes:A)an upward movement along the AD curve.B)a downward movement along the AD curve.C)a rightward shift of the AD curve.D)a leftward shift of the AD curve.

C

If spending growth is 3% and real GDP growth is 2%, what is the inflation rate?A)3%B)5%C)1%D)2%

C

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is:A)200 million.B)190 million.C)110 million.D)100 million.

C

Oil shocks, the shift from manufacturing to service jobs, and the use of new technologies are reasons for _____ unemployment.A)frictionalB)cyclicalC)structuralD)permanent

C

The "Solow" growth rate is the rate of economic growth that occurs when:A)inflation is moderate.B)prices and wages are sticky.C)prices and wages are flexible.D)the money supply is growing.

C

The Great Depression was due primarily to the:A)excessive amount of money supply.B)extensive underutilization of resources.C)great fall in aggregate demand.D)rising labor unions.

C

The long-run aggregate supply curve is:A)upward sloping.B)downward sloping.C)a vertical line.D)a horizontal line.

C

The term "business fluctuations" refers to:A)the different stages of a product cycle.B)changes in the prices of goods and services over time.C)movement in real GDP around its long-term trend.D)the trend in real GDP over a long period of time.

C

The unemployment rate is expected to _____ during a recession.A)decreaseB)remain the sameC)increaseD)change indeterminately

C

Which of the following is a case of cyclical unemployment?A)Glenn quit his job to move to another state.B)Grace is an accountant temporarily unemployed since tax season has ended.C)Garrett lost his job after the company closed during last year's recession.D)Gwyneth is still seeking a job that will use her skills in statistics.

C

The average price for a basket of goods bought by a typical US consumer is measured by the

CPI

An unemployed person is one who: A)stays at home and is not looking for work. B)works for a job that pays less than he or she expected. C)is not willing to work even though he or she is able to. D)does not have a job but is actively looking for one.

D

Countries in Western Europe have:A)higher minimum wages than the United States.B)higher median wages than the United States.C)higher unemployment rates than the United States.D)higher minimum wages, higher median wages, and higher unemployment than the United States.

D

If the bond prices fall, what happens to interest rates A) they fall B) they remain stable C) they initially fall, and then return to their initial level D) they will rise

D

In economics the investment refers to A) savings B) dissavings C) purchase of consumption goods D) purchase of capital goods

D

Refer to the figure of the loanable funds market. At an interest rate of 6% in this market, there is a ____ of loanable funds of _______ A) shortage, $320 B) surplus, $250 C) shortage, $250 D) surplus, $320

D

The actual unemployment rate varies around the:A)frictional unemployment rate.B)structural unemployment rate.C)cyclical unemployment rate.D)natural unemployment rate.

D

Which price index measures the average price received by suppliers?

Producer price index

A real price is

a price that has been corrected for inflation

Inflation refers to an increase in the

average level of prices

The quantity theory of money predicts that the price level

increases with the quantity of money in the economy

The quantity theory of money assumes that the velocity of money

is relatively stable

The quantity theory of money describes the relationship between

the velocity of money, money supply, real output, and prices

Hyper inflation refers to the case in which inflation is

very high