ECONOMICS TEST 3

People smooth their consumption over their lifetime by:

both borrowing and saving

Individual saving contributes to

the supply of loanable funds

If the price level in 2018 is 150 and it rises to 165 in 2019, what is the rate of inflation between 2018 and 2019?

10% 165-150/150*100

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force participation rate is:

110/200*100 55%

Table(CPI): What was the approximate inflation rate over the period 2007 to 2008?

2008-2007/2007*100 3.86%

if a zero-coupon bond with a face value of $1,000 costs $800, then the rate of return if held to maturity would be:

25% 1,000-800/800*100

In a small economy, the quantity of money circulating in the economy is $2.5 million. Real GDP for the current year is $5 million, and the average price level is 2. What is the velocity of money?

4

(figure: Labor Market) 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 $10 minimum wage?

60,40

Refer to the table. What is the labor force participation rate of this country in 2009?

77%

If the adult population of a country is 200 million, 100 million are unemployed, this country's unemployment rate is:

9.1% 10/110*100

Which would decrease national output?

A natural disaster that destroys some capital

(figure: the solow model) if the production function shifts from Y1 to Y2 in the accompanying graph of the Solow model, then:

Both catching-up and cutting-edge growth will occur.

Which statement is not an explanation for why Germany and Japan both grew faster than the United States following WWII?

Both countries were experiencing cutting-edge growth at the time

What effect will an investment tax credit have on interest rates and the quantity of savings?

Both interest rates and the quantity of savings will increase

Which measure of the average price level most closely corresponds to a student's daily economic activities?

Consumer price index

(figure: loanable funds contraction) which of the following reasons could cause the supply curve for loanable funds to shift to the left from S1Lf to Slf in the figure?

Consumers become less patient

A leverage ratio is the ratio of

Debt to equity

What problem do employment protection laws create?

Employers are reluctant to hire new workers

Which doctrine indicates that an employee may quit and an employer may fire an employee at any time for any reason?

Employment-at-will

Someone who recently moved to Florida because of its warmer climate will need to spend some time looking for a new job. This is an example of:

Frictional unemployment

In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause total output to

Increase, but by less that one unit.

The quantity theory of money predicts that the price level:

Increases with the quantity of money in the economy

Which of the following is NOT a role of commercial banks?

Issue government bonds

In the solow model production function, Y=F(A,K,eL), L stands for

Labor

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.

According to the Bureau of Labor Statistics, which of the following would be counted as unemployed?

New graduates who are looking for their first job

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

Real GDP and the velocity of money

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

Securitization

Crowding-out is:

The decrease in private consumption and investment that occurs when government borrows more.

Why could very high rates of inflation cause velocity to increase?

The more money loses its value, the faster people try to spend it

The production function is a mathematical function that shows:

The relationship between output and the factors of production

A real price is:

a price that has been corrected for inflation

According to the quantity theory of money, money growth in the long run:

affects inflation only

The consumer price index measures the:

average price of a basket of goods and services bought by a typical customer

If you earned $10-an-hour in 2005 when the CPI was 100, and you earn $11-an-hour today when the CPI is 120, then your real wage rate has __________ since 2005.

decreased

When individuals become more willing to save because their incomes have increased, the interest rate ___________ and the quantity of borrowing and lending _________.

decreases, increases

An increase in life expectancy should cause saving in the US to

increase

Capital growth is the difference between:

investment and depreciation

Inflation hurts the economy because:

it affects the ability of market prices to send signals about the value of resources.

Which of the following is NOT a reason the unemployment rate is considered to be an incomplete indicator of the overall health of the labor market?

it does not correctly define the adult population

When bond princes increases, interest rates:

must decrease

In a steady state, the capital stock:

neither increases or decreases

The quantity theory of money implies that the money supply times the velocity of money equals:

nominal GDP

Which of the following is NOT considered saving?

paying tuition of for a college education

When the expected rate of inflation is higher than the actual rate of inflation, wealth is

redistributed from borrowers to lenders

When workers lose their jobs and become officially unemployed, the number of people in the labor force:

remains constant

The shift toward more of a service economy and less of a manufacturing economy in the united States has caused an increase in:

structural unemployment

Diminishing returns to capital implies that _______ diminishes as more capital is added.

the marginal product of capital

Which of the following is NOT a reason for people to borrow?

to equalize income and spending period by period.

Cyclical unemployment is:

unemployment correlated with the business cycle