ECON 3080 Midterm 2

The productivity slowdown that began in the 1970s has been attributed, at least partly, to each of the following except:

a decline in the number of workers in the labor force.

The short run aggregate supply curve is horizontal at:

a fixed price level

In the Solow growth model of an economy with population growth but no technological change, the break even level of investment must do all of the following except:

equal the marginal productivity of capital

To determine whether an economy is operation at its golden rule level of capital stock, a policymaker must determine the steady state saving rate that produces the:

largest consumption per worker.

In the two sector endogenous growth model, the saving rate (s) affects the steady state:

level of income

In the solow growth model of an economy with population growth but no technological change, if population grows at rate n, then capital in the steady state grows at rate _______, and output grows at rate ________ in the steady state.

n; n

Okun's law is the ______ relationship between real GDP and the ______.

negative; unemployment rate

When an economy's capital is below the golden rule level, reaching the golden rule level:

requires initially reducing consumption to increase consumption in the future.

If s is the rate of job separation, f is the rate of job finding, and both rates are constant, then the steady state unemployment rate is approximately:

s / (s + f)

Monetary neutrality, the irrelevance of the money supply in determining values of _______ variables, is generally thought to be a property of the economy in the long run.

real

Economist call the changes in the composition of demand among industries and regions:

sectoral shifts

The type of legal system and the level of corruption in a country have been found to be:

significant determinants of the rate of economic growth in a country.

The unemployment resulting when real wages are held above equilibrium is called ______ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called ______ unemployment.

structural; frictional

According to the solow model, persistently rising living standards can only be explained by:

technological progress

Long run growth in real GDP is determined primarily by ________, while short run movements in real GDP are associated with _______.

technological progress; variations in labor market utilization

If the marginal product of capital net of depreciation equals 10 percent and the rate of population growth equals 2 percent, then this economy will be at the Golden Rule steady state if the rate of technological progress equals _____ percent.

8

Suppose that over the course of a year 100 people are unemployed for 4 weeks each (the short-term unemployed), while 10 people are unemployed for 52 weeks each (the long-term unemployed). Approximately what percentage of the total spells of unemployment were attributable to the long-term unemployed?

9 percent

If Y is output, K is capital, u is the fraction of the labor force in universities, L is labor, and E is the stock of knowledge, and the production Y = F(K,(1 - u) EL) exhibits constant returns to scale, then output (Y) will double if:

K and E are doubled

Which of the following is the best example of structural unemployment?

Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available.

Assume that two economies are identical in every way except that one has a higher saving rate. According to the Solow growth model, in the steady state the country with the higher saving rate will have ______ level of output per person and ______ rate of growth of output per worker compared to the country with the lower saving rate.

a higher; the same

The relationship between the quantity of goods and services supplied and the price level is called:

aggregate supply

Short run fluctuations in output and employment are called:

business cycles

The number of effective workers takes into account the number of workers and the:

efficiency of each worker.

according to the quantity equation, if the velocity of money and the supply of money are fixed, and the price level increases, then the quantity of gods and services purchased:

decreases

The assumption of constant velocity in the quantity equation is the equivalent of the assumption of a constant:

demand for real balances per unit of output.

Suppose an economy is initially in a steady state with capital per worker below the Golden Rule level. If the saving rate increases to a rate consistent with the Golden Rule, the in the transition to the new steady state consumption per worker will:

first fall below and then rise above the initial level.

In the Solow model with technological progress, the steady state growth rate of output per worker is:

g

A 5 percent reduction in the money supply will, according to most economists, reduce prices 5 percent:

in the long run but lead to unemployment in the short run.

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will ________ the number unemployed.

increase

Starting from a steady state situation, if the saving rate increases, capital per worker will:

increase until the new steady state is reached.

By paying efficiency wages, firms contribute to higher unemployment because they:

keep the wage above the equilibrium level.

A higher saving rate leads to a:

larger capital stock and a higher level of output in the long run.

Which of the following statements about minimum wage workers in the united states is not correct

minimum wage workers are more likely to be male.

When insiders have a much greater impact on the wage bargaining process than do outsiders, the negotiated wage is likely to be _________ the equilibrium wage.

much greater than

The formula for the steady state ratio of capital to labor (k*) with population growth at rate n but no technological change, where s is the saving rate, is s:

multiplied by f(k*) divided by the sum of the depreciation rate plus n.

The production function y = f(k) means:

output per worker is a function of capital per worker.

Suppose that an economy is in its steady state and the capital stock is above the golden rule level. Assuming that there are no population growth or technological change, if the saving rate falls:

output, investment, and depreciation will decrease, and consumption will increase and then decrease but finally approach a level above its initial state.

If the long run aggregate supply curve is vertical, then changes in aggregate demand affect:

prices but not level of output.

The rate of labor augmenting technological progress (g) is the growth rate of:

the efficiency of labor

The natural level of output is:

the level of output at which the unemployment rate is at its natural level.

When f(k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the curve denotes:

the marginal product of capital.

Along an aggregate demand curve, which of the following are held constant?

the money supply and velocity

One efficiency-wage theory implies that firms pay high wages because:

the more a firm pays its workers, the greater their incentive to stay with the firm.

When the unemployment rate is at a steady state:

the number of people finding jobs equals the number of people losing jobs.

In the Solow growth model, the assumption of constant returns to scale means that:

the number of workers in an economy does not affect the relationship between output per worker and capital per worker.

In the two sector endogenous growth model, the steady state stock of physical capital is determined by ______, and the growth in the stock of knowledge is determined by ________.

the saving rate; the fraction of labor in universities

Which of the following policies were not adopted by the government in an attempt to reduce the natural rate of unemployment?

unemployment insurance

Leading economic indicators are:

variables that tend to fluctuate in advance of the overall economy.

If two economies are identical (including having the same saving rates, population growth rates, and efficiency of labor), but one economy has a smaller capital stock, then the steady-state level of income per worker in the economy with the smaller capital stock:

will be at the same level as in the steady state of the high capital economy.