Econ Exam 2
Assuming a positive interest rate, the present value of a future payment is _____ its future dollar amount. exactly the same as approximately the same as less than more than
less than
The "paradox of thrift" will: Shift supply of loanable funds to the left Shift supply of loanable funds to the right Shift demand for loanable funds to the left Shift demand for loanable funds to the right
Shift supply of loanable funds to the right
The market interest rate in Alpha is 7% and the market interest rate in Beta is 10%, but the inflation rate in Alpha is 3% and inflation rate in Beta is 8%. Which of the following statements is true? The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta. The real interest rate is lower in Alpha, but the nominal interest rate is lower in Beta. Both the real and nominal interest rates are higher in Alpha. Both the real and nominal interest rates are higher in Beta.
The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta
Which of the following is a real quantity? the current wages paid to factory workers the cost of a new car the number of tons of steel produced in 2020 the current price of a barrel of oil
the number of tons of steel produced in 2020
The sources of financing of physical capital include: domestic consumption. foreign borrowing from the home country. foreign investment in the home country. foreign consumption.
foreign investment in the home country
Unemployment that is due to the time workers spend in job search is _____ unemployment. frictional structural cyclical natural
frictional
Unanticipated inflation: helps those on fixed incomes. hurts borrowers and helps lenders. helps borrowers and hurts lenders. causes interest rates to decrease.
helps borrowers and hurts lenders
Because of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will _____ output by _____ a factor of two. decrease; less than increase; less than increase; exactly increase; more than
increase; less than
The sources of funds for investment spending are: savings by households, government, and foreigners. taxes and transfer payments. always equal to U.S. spending on imports. directed to their most productive uses by the U.S. government.
savings by households, government, and foreigners
All else equal, a nation that has a high rate of _____ will have a high rate of _____ and therefore a high growth rate of _____ capital. investment; savings; human savings; investment; natural savings; investment; physical savings; consumption; physical
savings; investment; physical
Cyclical unemployment is the result of: normal job turnover (job searches). discrimination. the business cycle. the minimum wage.
the business cycle
The convergence hypothesis helps explain why: highly educated people converge in high-income countries. high-income individuals marry other high-income individuals. high-income countries continue their high growth rates. the income of high-income and lower-income countries get closer.
the income of high-income and lower-income countries get closer
The price in the loanable funds market is: the rate of return of a project. the price level. the interest rate. the consumer price index.
the interest rate
If a country has a working-age population of 200 million, 126 million people with jobs, and 14 million people unemployed and seeking employment, then its unemployment rate is: 4%. 7%. 10%. 11.1% 63%
10%
You are given the choice of receiving $100 today or $115 one year from today. What annual interest rate will make you indifferent between these two choices? 5% 10% 15% 20%
15%
Data for an economy shows that the unemployment rate is 6%, the participation rate 60 percent, 200 million people 16 years or older are not in the labor force. How many people are unemployed this economy? 6 million 12 million 18 million 20 million
18 million
When the economy is at full employment, _____ is zero. unemployment cyclical unemployment frictional unemployment the natural rate of unemployment
cyclical unemployment
Internet employment agencies have simplified the job search for the applicants. They have also led to a(n) _____ unemployment. increase in frictional increase in cyclical decrease in frictional decrease in structural
decrease in frictional
The sum of the frictional and structural rates of unemployment is the: cyclical rate of unemployment. cyclical rate of employment. natural rate of unemployment. natural rate of employment.
natural rate of unemployment
Menu costs are the: costs of money becoming less reliable. real costs of changing listed prices. increase in the transaction costs caused by inflation. adjustments to the cost of living.
real costs of changing listed prices
If money income remains the same while the average price level doubles: nominal income will fall. real income will fall. interest rates will fall. purchasing power will increase.
real income will fall
The aggregate production function does NOT depend on: the quantity of physical capital per worker. human capital per worker. the state of technology. the amount of natural resources.
the amount of natural resources
Annie works 25 hours a week for an accounting firm. She would like to work full time and expects that she will in the future. Annie is a(n) _____ worker. discouraged unemployed underemployed full-time
underemployed
If workers and employers agree to a three-year wage contract expecting 3% inflation and inflation turns out to be 5%, then: workers gain and employers gain. workers gain and employers lose. workers lose and employers gain. workers lose and employers lose.
workers lose and employers gain
A reason that does NOT explain why average workers in the United States today produce more than their counterparts did a century ago is that the modern worker: is better educated. has more physical capital to work with. has better technology to work with. works longer hours
works longer hours.
You have purchased a new mattress for $2,000, and the store has given you a "12 months, same as cash" deal. One year from now, you will have to give the store the full price of $2,000. If the annual interest rate is 10%, how much money do you need today $1,980 $1,818 $2,200 $20,000
$1,818
Given an annual interest rate of 3%, the present value of a future payment of $2,080 to be paid in one year is: $1,904.76. $2,000.00. $2,019.42. $2,080.00. $2,142.40.
$2,019.42
The substitution bias in the CPI refers to the failure of statisticians to: allow for the possibility that consumers switch from products whose prices are rising. allow for the possibility that consumers switch stores at which they shop. take into account improvements in goods and services. take into account new products purchased by consumers.
allow for the possibility that consumers switch from products whose prices are rising
An increase in capital stock would: shift the production function upward. cause a movement to the left along a stationary production function. shift the production function downward. cause a movement to the right along a stationary production function.
cause a movement to the right along a stationary production function
From the standpoint of economic growth, banks are important to: fight inflation. keep interest rates low. channel savings into investment. channel investment into savings.
channel savings into investment
The slope of the demand for loanable funds is: upward, since it takes a higher rate of return to get more funds. downward, because more potential projects yield 10% than yield 5%. upward, because higher rates of return are necessary to cover higher costs. downward, because demand is higher when the price to borrow money is higher. downward, because the demand is higher when the price to borrow money is lower
downward, because the demand is higher when the price to borrow money is lower
Suppose that Maria wins a $7 million lottery and is trying to decide whether to take $2 million all at once or $7 million over 20 years. One bit of information Maria would need to know is what the prevailing _____ will be over the next 20 years. unemployment rate interest rate deflation rate standard of living
interest rate
Which factor contributes to economic development? low saving and investment rates a command socialist economic system investment in infrastructure complete absence of government involvement
investment in infrastructure
Total factor productivity: is the amount of output produced from a given amount of factor inputs. is not an essential element in long-run growth. is less important than technological progress. cannot be used to explain how contributions of factors of production affect a country's growth.
is the amount of output produced from a given amount of factor inputs
A college graduate in 1972 got a job paying $9,000. The CPI was 41.8 in 1972. A college graduate in 2019 found a job paying $50,000. The CPI was 255.6 in 2019. The 1972 graduate's job paid ____ in nominal terms and ______ in real terms than the 2019 grad. more; less more; more less; more the same; less
less; more
You are a college student and not working or looking for work. You are: unemployed. in the labor force but not employed. not part of the labor force. counted in the labor force as underemployed. counted as employed since you are a full-time student.
not part of the labor force
All of the following are nominal quantities EXCEPT the: price of a new car. wages paid to workers in a restaurant. cost of purchasing a new computer. number of new houses built in one month.
number of new houses built in one month
Jim Brown would like to work, but has not looked for work in the past four weeks because he does not believe any jobs are available. In the official employment statistics, Jim is classified as: employed. unemployed. out of the labor force. underemployed.
out of the labor force
In a closed economy (NX = 0), national savings is the sum of _______ and ______: the budget balance; private consumption. private saving; government tax revenue. private saving; the budget balance. the budget balance; trade surplus.
private saving; the budget balance
Many economists view resource scarcity as a: major obstacle to long-run economic growth. problem resolved fairly well by the market mechanism. primary reason for poor countries' lack of economic growth. problem for wealthy countries but not for poorer countries.
problem resolved fairly well by the market mechanism
Among the factors that are important for economic growth are: property rights. growth accounting. natural resources. convergence
property rights.
Efficiency wages are usually set by employers to: reduce unemployment. increase employment. provide an incentive for better performance. increase employment and provide better incentives for performance.
provide an incentive for better performance
Inflation in the health-care sector apparently is overstated because the CPI does not adequately adjust for _____ changes. price quality volume quantity
quality
The "true" costs of inflation are: higher relative prices. lower relative prices. reduced economic growth and efficiency. a higher overall price level.
reduced economic growth and efficiency
Technological progress is advanced through: research and development. government regulation. consumption. infrastructure.
research and development