Macro Chapters 7, 8, 10 EXAM

The size of the labor force is157,130,000 , and the labor force participation rate is62.7% .

.

1. This occurs when a person or firm purchases new capital. 2. This occurs when a person's income exceeds his consumption.

1 - Investment 2 - Saving

1. Paying workers to administer government programs - 2. Building roads 3. Buying medical equipment 4. Building bridges

1. Consumption 2. Investment 3. Investment 4. Investment

1. An auto company goes bankrupt and lays off its workers, who immediately start looking for new jobs. 2. After an unsuccessful search, some laid-off workers quit looking for new jobs. 3. Numerous students graduate from college and immediately begin new jobs. 4. A stock market boom induces newly enriched 60-year-old workers to take early retirement.

1. Increases Decreases 2. Decreases Stays the same 3. Decreases Increases 4. Increases Decreases

1. After an unsuccessful job search, Kenji gives up looking and retires. 2.Lucia is on maternity leave and will resume working in two months. 3. Paolo has a birthday, becomes an adult, but has no interest in working. 4. Sharon dies while enjoying retirement.

1. decreases, decreases 2. same, same 3. same, decreases 4. same, increase

unemployment rates per age group

16 to 19 years - 14.0% 20 to 24 years - 7.4% 25 to 54 years - 3.7% 55 to 64 years - 3.1% 65 years and over - 3.6%

Which of the following groups has an unemployment rate lower than the national average unemployment rate? Check all that apply.

25 to 54 years 55 to 64 years 65 years and over

In 2015, the Bureau of Labor Statistics (BLS) announced that of all adult Americans, 148,834,000 were employed, 8,296,000 were unemployed, and 93,671,000 were not in the labor force. What is the adult population?

250,801,000

The following table shows the annual average data on the employment status of the U.S. civilian noninstitutional population by age in 2017. 16 to 19 years 5,074 827 10,853 20 to 24 years 14,132 1,127 6,137 25 to 54 years98,833 3,850 23,014 55 to 64 years 26,064 835 14,792 65 years and over9,234 343 39,964 Total1 53,337 6,982 94,759 What is the national unemployment rate?

4.4%

What is the unemployment rate?

5.3%

Suppose GDP is $9 trillion, taxes are $1.9 trillion, private saving is $0.6 trillion, and public saving is $0.3 trillion. Assuming the economy is closed, complete the following table by calculating consumption, government purchases, national saving, and investment.

Consumption - 6.5 Government Purchases - 1.6 National Saving - 0.9 Investment - 0.9

The International Property Rights Index (IPRI) scores countries based on the legal and political environment and how well property rights are protected. The following table lists the IPRI scores and GDP per person in 2018 for six countries. Norway - 8.5 82,372.4 Singapore - 8.4 61,230.2 United Kingdom - 8.14 2,260.9 Brazil - 5.7 9,126.9 Algeria - 4.1 4,449.8 Bangladesh3.4 1,736.3

Countries with poor property rights enforcement generally have lower income per person than those with better property rights protection

Adam Smith wrote, "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things." True or False: Low taxation would lead to slower economic growth because it encourages citizens and businesses to consume more and invest less.

FALSE

In the 1990s and the first two decades of the 2000s, investors from the Asian economies of Japan and China made significant direct and portfolio investments in the United States. At the time, many Americans were unhappy that this investment was occurring. True or False: It was better for the United States not to receive this foreign investment because it shrank the capital stock.

FALSE

International data show a positive correlation between income per person and the health of the population. True or False: Individuals with lower incomes are in worse health, but this leads to greater productivity because sicker workers have higher medical expenses.

FALSE

Most countries, including the United States, import substantial amounts of goods and services from other countries. True or False: In the long run, a country's production of goods and services and the standard of living of its citizens are independent of each other because countries have the opportunity to import goods and services.

FALSE

True or False: A country may be overinvesting in human capital if each person's education level matches his or her profession.

FALSE

True or False: It's best for Americans that China and Japan, rather than Americans themselves, made the investment because Americans could receive the returns on the investment made by China and Japan.

FALSE

Structural unemployment is sometimes said to result from a mismatch between the job skills that employers want and the job skills that workers have. To explore this idea, consider an economy with two industries: auto manufacturing and aircraft manufacturing. Assume that workers in these two industries require similar amounts of training, and they can choose which industry to train for at the beginning of their careers. True or False: Wages in the auto manufacturing industry would be less than those in the aircraft manufacturing industry.

False

In many developing nations, young women have lower enrollment rates in secondary school than do young men. Which of the following observations are consistent with greater educational opportunities for young women leading to faster economic growth in these countries? Check all that apply.

Increased human capital increases productivity. There are external benefits associated with greater knowledge in a country.

Societies choose what share of their resources to devote to consumption and what share to devote to investment. Some of these decisions involve private spending; others involve government spending. For each form of private spending, indicate whether it represents consumption or investment.

People buying clothes - Consumption People buying houses - Investment People buying automobiles - Consumption Laundromats buying washing machines - Investment

What can the government of a relatively poor country do to promote economic prosperity? Check all that apply.

Promote free trade by reducing or removing tariffs on imports from foreign countries. Give inventors and authors exclusive, temporary rights to market and sell their creations. Minimize corruption among government officials. Establish and enforce strong property rights.

Many workers hold large amounts of stock issued by the firms at which they work. True or False: Companies encourage their employees to hold stock in the company because it gives employees the incentive to work hard.

TRUE

True or False: If the extra output produced from an additional unit of capital falls as the stock of capital rises, the country may be overinvesting in capital.

TRUE

What is the opportunity cost of investing in human capital?

The goods or resources that could be produced if the resources to produce them were not invested in human capital

What is the opportunity cost of investing in capital?

The loss of consumption that results from redirecting resources toward investment

Consider an economy with two labor markets: one for manufacturing workers and one for service workers. Suppose initially that neither is unionized. Which of the following will happen to the manufacturing labor market if manufacturing workers formed a union? Check all that apply

The wage of manufacturing workers will rise. The quantity of manufacturing workers demanded will fall. The quantity of manufacturing workers supplied will rise.

Which of the following describes the effect of the changes in the manufacturing labor market on the market for service workers, which is not unionized? Check all that apply.

The wage of service workers will fall. The supply of service workers will rise. There will be an increase in employment in the service sector.

Which of the following statements are true about groups in society that would benefit from or be hurt by this change? Check all that apply

There might be a transition period in which workers and owners in consumption-goods industries would receive higher incomes.

Between January 2012 and January 2019, U.S. employment increased by 17.3 million workers, but the number of unemployed workers declined by only 6.3 million. True or False: The labor force has increased.

True

Suppose that workers in one industry cannot be quickly retrained for the other. Which of the following accurately describes the effects of the shifts in demand on the equilibrium wages in the two industries? Check all that apply.

Wages in the auto industry would fall in the short run.

Which of the following situations represent saving? Check all that apply.

Your roommate earns $100 and deposits it in his account at a bank. You use your $200 paycheck to buy stock in AT&T.

You would expect a bond issued by the federal government to pay _________ interest rate as compared to a bond issued by New York State.

a higher

You would expect a bond that repays the principal in year 2020 to pay ________ interest rate as compared to a bond that repays the principal in year 2040.

a lower

If for some reason wages fail to adjust to the new equilibrium levels as a result of opening up to international trade, there will be ___________ of workers in the aircraft industry and _________ of workers in the auto industry.

a shortage, a surplus

Which of the following statements is true?

a. Prime-age men and women tend to have similar unemployment rates.

An increase in the budget deficit is

a. a decrease in public saving.

Copper is an example of

a. a nonrenewable natural resource.

A minimum-wage law tends to

a. create more unemployment in low-skill job markets than in high-skill job markets.

Madelyn goes to college and reads many books while at school. Her education increases which of the following factors of production?

a. human capital

If Mazda builds a new plant in Illinois,

a. in the future, U.S. GDP will rise more than U.S. GNP.

According to the Bureau of Labor Statistics, a husband who chooses to stay home and take care of the household is

a. not in the labor force.

Unions might increase efficiency in the case where they

a. offset the market power of a large firm in a "company town."

National saving (or just saving) is equal to

a. private saving + public saving.

An increase in the budget deficit that causes the government to increase its borrowing

a. shifts the supply of loanable funds to the left.

Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage?

a. structural unemployment

If, for any reason, the wage is held above the competitive equilibrium wage,

a. the quantity of labor supplied will exceed the quantity of labor demanded and there will be unemployment.

Use the following table to answer question. Numbers are in millions. total population - 195.4 adult population - 139.7 number of unemployed - 5.7 number of employed - 92.3 The labor force is

b. 98.0 million.

Which of the following describes an increase in technological knowledge?

b. A farmer discovers that it is better to plant in the spring rather than in the fall.

If the public consumes $100 billion less and the government purchases $100 billion more (other things unchanging), which of the following statements is true?

b. Saving is unchanged.

Which of the following expenditures to enhance productivity is most likely to emit a positive externality?

b. Susan pays her college tuition.

If the supply of loanable funds is very inelastic (steep), which policy would likely increase saving and investment the most?

b. a reduction in the budget deficit

If an increase in the budget deficit reduces national saving and investment, we have witnessed a demonstration of

b. crowding out.

Sectoral shifts tend to raise which type of unemployment?

b. frictional unemployment

Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium?

b. frictional unemployment

Which of the following government policies is least likely to increase growth in Africa?

b. increase restrictions on the importing of Japanese automobiles and electronics

Unions tend to increase the disparity in pay between insiders and outsiders by

b. increasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector.

Once a country is wealthy,

b. it may be harder for it to grow quickly because of the diminishing returns to capital.

For a given level of technology, we should expect an increase in labor productivity within a nation when there is an increase in each of the following except

b. labor.

Which of the following sets of government policies is the most growth oriented?

b. lower taxes on the returns to saving, provide investment tax credits, and lower the deficit

To increase growth, governments should do all of the following except

b. nationalize major industries.

Our standard of living is most closely related to

b. our productivity because our income is equal to what we produce.

An increase in the budget deficit will

b. raise the real interest rate and decrease the quantity of loanable funds demanded for investment.

If the government increases investment tax credits and reduces taxes on the return to saving at the same time,

b. the impact on the real interest rate is indeterminate.

The amount of unemployment that the economy normally experiences is known as

b. the natural rate of unemployment.

If unemployment insurance were so generous that it paid laid-off workers 95 percent of their regular salary,

b. the official unemployment rate would probably overstate true unemployment.

If Americans become more thrifty, we would expect

b. the supply of loanable funds to shift to the right and the real interest rate to fall.

If government spending exceeds tax collections,

b. there is a budget deficit.

Which of the following statements is true?

c. Municipal bonds pay less interest than comparable corporate bonds.

Which of the following is an example of foreign portfolio investment?

c. Toyota buys stock in Ford, and Ford uses the proceeds to build a new plant in Michigan.

Which of the following financial market securities would likely pay the highest interest rate?

c. a bond issued by a start-up company

The opportunity cost of growth is

c. a reduction in current consumption.

Thomas Malthus argued that

c. an ever-increasing population is constrained only by the food supply, resulting in chronic famines.

A financial intermediary is a middleperson between

c. borrowers and lenders.

When a nation has very little income per person,

c. it has the potential to grow relatively quickly due to the "catch-up effect."

An accountant with a CPA designation who has been unable to find work for so long that she has stopped looking for work is considered to be

c. not in the labor force.

Credit risk refers to a bond's

c. probability of default.

A reasonable measure of the standard of living in a country is

c. real income per person.

If Americans become less concerned with the future and save less at each real interest rate,

c. real interest rates rise and investment falls.

An increase in the budget surplus

c. shifts the supply of loanable funds to the right and reduces the real interest rate.

Some frictional unemployment is inevitable because

c. there are changes in the demand for labor among different firms.

China, Japan, and Brazil are growing very quickly because

c. they save and invest an unusually high percentage of their real income.

You would expect a bond from a software company you run in your garage and a bond from Coca-Cola to pay different interest rates because of differences in the bonds ______.

credit risks

You would expect a bond of the U.S. government and a bond of an Eastern European government to pay different interest rates because of differences in the bonds _______.

credit risks

Use the following table to answer question. Numbers are in millions. total population - 195.4 adult population - 139.7 number of unemployed - 5.7 number of employed - 92.3 The labor-force participation rate is

d. 70.2 percent.

Which of the following statements regarding the impact of population growth on productivity is true?

d. All of the above are true.

Which of the following statements is true?

d. Countries have great variance in both the level and growth rate of income per person; thus, poor countries can become relatively rich over time.

Which of the following statements about efficiency wage theory is true?

d. Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.

If a production function exhibits constant returns to scale,

d. doubling all of the inputs doubles output.

Which of the following is not a characteristic of minimum-wage workers? They tend to be

d. full-time.

Investment is

d. the purchase of capital equipment and structures.

If real income per person in 2018 is $18,073 and real income per person in 2019 is $18,635, what is the growth rate of real income over this period?

e. 3.1 percent

Use the following table to answer question. Numbers are in millions. total population - 195.4 adult population - 139.7 number of unemployed - 5.7 number of employed - 92.3 The unemployment rate is

e. 5.8 percent.

Which of the following is an example of a reason why firms might pay efficiency wages? a. At equilibrium wages, workers often quit to find better jobs. b. At equilibrium wages, workers sleep when the boss is not looking because workers are not deeply concerned about being fired. c. At equilibrium wages, only minimally qualified workers apply for the job. d. At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy. e. All of the above are true

e. All of the above are true.

Which of the following government policies would fail to lower the unemployment rate?

e. raise the minimum wage

Suppose that one day the economy opens itself to international trade and, as a result, starts importing autos and exporting aircraft. This would cause the demand for labor in the auto manufacturing industry to ______ and the demand for labor in the aircraft manufacturing industry to ______.

fall, rise

A manufacturing worker who loses his job at a plant in an isolated area is more likely to experience_________ unemployment.

long-term

Suppose that society decided to increase consumption and reduce investment. Less investment leads to ______ economic growth in the long run.

slower

Which of the following is an example of equity finance?

stock