Macroeconomic SMU - test 2

D. increases, and the labor-force participation rate decreases.

Matilda loses her job and decides to sit on the beach rather than look for work during the next few months. Other things the same, the unemployment rate A. and the labor-force participation rate both increase. B. is unaffected, and the labor-force participation rate decreases. C. is unaffected, and the labor-force participation rate increases. D. increases, and the labor-force participation rate decreases.

A. highly-educated workers.

Minimum-wage laws are least likely to affect the wages paid to A. highly-educated workers. B. teenagers. C. low-skilled workers. D. inexperienced workers

A. a perpetuity.

A bond that never matures is known as A. a perpetuity. B. an intermediary bond. C. an indexed bond. D. a junk bond.

D. is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of both stocks and bonds.

A mutual fund A. is a financial market where small firms mutually agree to sell stocks and bonds to raise funds. B. is funds set aside by local governments to lend to small firms who want to invest in projects that are mutually beneficial to the firm and community. C. sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. D. is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of both stocks and bonds.

C. increases in the capital stock increase output by ever smaller amounts.

All else equal, if there are diminishing returns, then A. capital produces fewer goods as it ages. B. old ideas are not as useful as new ones. C. increases in the capital stock increase output by ever smaller amounts. D. increases in the capital stock eventually decrease output.

C. increases structural unemployment.

An increase in the minimum wage above the equilibrium wage A. reduces structural unemployment. B. reduces frictional unemployment, C. increases structural unemployment. D. increases frictional unemployment.

A. World Bank.

An organization that tries to encourage the flow of investment from advanced countries to poor countries is the A. World Bank. B. Organization of Less Developed Countries. C. Alliance of Developing Countries. D. International Development Alliance.

C. private goods and proprietary knowledge.

Apple founder Steve Jobs received patents on many of his ideas. While the patents existed, his ideas were A. public goods and proprietary knowledge. B. public goods but not proprietary knowledge. C. private goods and proprietary knowledge. D. private goods but not proprietary knowledge.

A. borrowing directly.

As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is A. borrowing directly. B. borrowing indirectly. C. lending directly. D. lending indirectly.

D. savers to borrowers.

At the broadest level, the financial system moves the economy's scarce resources from A. the rich to the poor. B. financial institutions to business firms and government. C. households to financial institutions. D. savers to borrowers.

A. True

Because the consumer price index reflects the goods and services bought by consumers better than the GDP deflator does, it is the more common gauge of inflation. A. True B. False

C. is accomplished when firms sell shares of stock.

By definition, equity finance A. is accomplished when units of government sell bonds. B. is accomplished when firms sell bonds. C. is accomplished when firms sell shares of stock. D. involves 'fair' interest rates or dividend yields.

A. True

By keeping the basket of goods and services the same when computing the CPI, the Bureau of Labor Statistics isolates the effects of price changes from the effect of any quantity changes that might be occurring at the same time. A. True B. False

B. False

Core CPI is a price index that only looks at the prices of food and energy and ignores the prices of all other goods and services. A. True B. False

A. deficit makes interest rates rise.

Crowding out occurs when investment declines because a budget A. deficit makes interest rates rise. B. deficit makes interest rates fall. C. surplus makes interest rates rise. D. surplus makes interest rates fall.

B. year-to-year fluctuations in unemployment around its natural rate.

Cyclical unemployment refers to A. the relationship between the probability of unemployment and a worker's experience level. B. year-to-year fluctuations in unemployment around its natural rate. C. changes in unemployment due to changes in the natural rate of unemployment. D. the difference between the structural and frictional unemployment rates.

A. lend support to the invisible hand by maintaining property rights and political stability.

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should A. lend support to the invisible hand by maintaining property rights and political stability. B. limit foreign investment to industries that don't already exist in the country. C. impose trade restrictions to protect the interests of domestic producers and consumers. D. subsidize key industries.

A. produce a return to society from education that is greater than the return to the individual.

Educated people may generate ideas that increase production. These ideas A. produce a return to society from education that is greater than the return to the individual. B. never justify government subsides for education. C. are the source of personal benefits of education. D. are generally irrelevant for economic growth.

B. increase productivity but increase unemployment.

Efficiency wages A. increase productivity and reduce unemployment. B. increase productivity but increase unemployment. C. decrease productivity but reduce unemployment. D. decrease productivity and increase unemployment.

C. short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment.

Frictional unemployment is thought to explain relatively A. short spells of unemployment, as is structural unemployment. B. long spells of unemployment, as is structural unemployment. C. short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment. D. long spells of unemployment, while structural unemployment is thought to explain relatively short spells of unemployment.

C. short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment. D. long spells of

Frictional unemployment is thought to explain relatively A. short spells of unemployment, as is structural unemployment. B. long spells of unemployment, as is structural unemployment. C. short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment. D. long spells of unemployment, while structural unemployment is thought to explain relatively short spells of unemployment.

B. rises but real GDP per person falls.

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity A. and real GDP per person rise. B. rises but real GDP per person falls. C.falls and real GDP per person rises. D. and real GDP per person fall.

D. 11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3.

If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy experienced A. 10 percent inflation between Years 1 and 2, and 5 percent inflation between Years 2 and 3. B. 10 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3. C. 11.1 percent inflation between Years 1 and 2, and 5 percent inflation between Years 2 and 3. D. 11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3.

C. the United Kingdom.

In 1870, the richest country in the world was A. Germany. B. Japan. C. the United Kingdom. D. the United States.

A. the amount of income that households have left after paying for their taxes and consumption.

In a closed economy, private saving is A. the amount of income that households have left after paying for their taxes and consumption. B. the amount of income that businesses have left after paying for the factors of production. C. the amount of tax revenue that the government has left after paying for its spending. D. always equal to investment.

C. both nations and individuals.

In determining living standards, productivity plays a key role for A. individuals, but not for nations. B. nations, but not for individuals. C. both nations and individuals. D. neither nations nor individuals.

A. high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory.

In the early 1900s, Henry Ford introduced a A. high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory. B. high-wage policy, and this policy produced none of the effects predicted by efficiency-wage theory. C. low-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory. D. low-wage policy, and this policy produced none of the effects predicted by efficiency-wage theory.

A. True

Inflation can be measured using either the GDP deflator or the consumer price index. A. True B. False

B. The unemployed who were laid off because their previous employers no longer needed their skills

Of the following groups, who is eligible for unemployment insurance benefits? A. The unemployed quit their jobs B. The unemployed who were laid off because their previous employers no longer needed their skills C. The unemployed who were fired for cause D. The unemployed who just entered the labor force

A. A junk bond

On which of these bonds is the prospect of default most likely? A. A junk bond B. A municipal bond C. A U.S. government bond D. A corporate bond issued by Proctor & Gamble Corporation

A. productivity.

One variable responsible for most significant explanation of variations in living standards around the world is A. productivity. B. population. C. preferences. D. prices.

A. A bond issued by a state with a very good credit rating

Other things the same, which bond would you expect to pay the lowest interest rate? A. A bond issued by a state with a very good credit rating B. A bond issued by the U.S. government C. A bond issued by a fairly new company doing genetic research D. A bond issued by Nabisco

A. An increase in either human or physical capital

Other things the same, which of the following would increase productivity? A. An increase in either human or physical capital B. An increase in human capital but not an increase in physical capital C. An increase in physical capital but not an increase in human capital D. Neither an increase in human capital nor an increase in physical capital

A. The level of real GDP

Out of the following economic statistics, which is the best measure of economic prosperity? A. The level of real GDP B. The growth rate of real GDP C. The level of nominal GDP D. The price level

C. gradually decreased.

Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has A. gradually increased. B. remained constant. C. gradually decreased. D. been eliminated.

D. produced for each hour of a worker's time. It is linked to a nation's economic policies.

Productivity is the amount of goods and services A. an economy produces. It is not linked to a nation's economic policies. B. an economy produces. It is linked to a nation's economic policies. C. produced for each hour of a worker's time. It is not linked to a nation's economic policies. D. produced for each hour of a worker's time. It is linked to a nation's economic policies.

A. frictional unemployment.

Providing training for unemployed individuals is primarily intended to reduce A. frictional unemployment. B. seasonal unemployment. C. structural unemployment. D. cyclical unemployment.

B. give workers in a unionized firm the right to choose whether to join the union.

Right-to-work laws A. guarantee workers the right to form unions. B. give workers in a unionized firm the right to choose whether to join the union. C. prevent employers from hiring permanent replacements for workers who are on strike. D. prevent workers from being fired because of increases in wages brought about by collective bargaining.

B. The poor country has a health epidemic such as the Zika virus.

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor country to catch up? A. The poor country uses a lot of resources to promote free trade policies. B. The poor country has a health epidemic such as the Zika virus. C. The poor country wasted resources fighting corruption. D. The poor country heavily invests in education.

B. Labor supply increases, and wages decrease.

Suppose that garbage collectors and landscaping workers have no unions. Now suppose that garbage collectors form unions. What does this do to the labor supply and wages of landscaping workers? A. Both labor supply and wages increase. B. Labor supply increases, and wages decrease. C. Labor supply decreases, and wages increase. D. Both labor supply and wages decrease.

A. higher unemployment rate. If a larger portion of the adult population were teenagers, the natural rate of unemployment would be higher.

Teenagers have more frequent unemployment spells and spend more time searching for jobs. Other thing the same, this means that teenagers have a A. higher unemployment rate. If a larger portion of the adult population were teenagers, the natural rate of unemployment would be higher. B. higher unemployment rate. The portion of the adult population that is teenagers does not affect the natural rate of unemployment. C. lower unemployment rate. If a larger portion of the adult population were teenagers, the natural rate of unemployment would be lower. D. lower unemployment rate. The portion of the adult population that is teenagers does not affect the natural rate of unemployment

A. True

The Bureau of Labor Statistics is part of the U.S. Department of Labor. A. True B. False

C. increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.

The CPI differs from the GDP deflator in that A. the CPI is a price index, while the GDP deflator is an inflation index. B. substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator. C. increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator. D. increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.

A. True

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer. A. True B. False

B. False

The CPI is always 1 in the base year. A. True B. False

A. The tables and chairs in the restaurant

The Karmic Deed Restaurant uses all of the following to produce vegetarian meals. Which of them is an example of physical capital? A. The tables and chairs in the restaurant B. The fresh fruits, vegetables, and grains the restaurant uses to prepare its meals C. The owner's knowledge of how to prepare vegetarian entrees D. The money in the owner's account at the bank from which she borrowed money

B. False

The consumer price index is used to monitor changes in an economy's production of goods and services over time. A. True B. False

B. the bond market and the stock market.

The economy's two most important financial markets are A. the investment market and the saving market. B. the bond market and the stock market. C. banks and the stock market. D. financial markets and financial institutions.

B. False

The inflation rate is the absolute change in the price level from the previous period. A. True B. False

A. the amount of goods and services produced from each hour of a worker's time.

The key determinant of the standard of living in a country is A. the amount of goods and services produced from each hour of a worker's time. B. the total amount of goods and services produced within the country. C. the total amount of its physical capital. D. its growth rate of real GDP.

A. varies less than the measured unemployment rate.

The natural rate of unemployment A. varies less than the measured unemployment rate. B. varies as much as the cyclical rate of unemployment. C. varies little over time but substantially across countries. D. varies substantially over time but little across countries.

A. how fast the number of dollars in your bank account rises over time.

The nominal interest rate tells you A. how fast the number of dollars in your bank account rises over time. B. how fast the purchasing power of your bank account rises over time. C. the number of dollars in your bank account today. D. the purchasing power of your bank account today.

C. "Diversify. "

The old adage, "Don't put all your eggs in one basket, " is very similar to a modern bit of advice concerning financial matters: A. "Buy low-risk bonds. " B. "Use a medium of exchange. " C. "Diversify. " D. "Intermediate. "

A. 5.7 percent

The price index was 105 in Year 1 and 111 in Year 2. What was the inflation rate? A. 5.7 percent B. 0.057 percent C. -5.7 percent D. 105.7 percent

A. True

The real interest rate tells you how fast the purchasing power of your bank account rises over time. A. True B. False

B. negative relation between the real interest rate and investment.

The slope of the demand for loanable funds curve represents the A. positive relation between the real interest rate and investment. B. negative relation between the real interest rate and investment. C. positive relation between the real interest rate and saving. D. negative relation between the real interest rate and saving.

A. divided by the labor force, all times 100.

The unemployment rate is computed as the number of unemployed A. divided by the labor force, all times 100. B. divided by the number of employed, all times 100. C. divided by the adult population, all times 100. D. times the labor-force participation rate, all times 100.

D. does not have to be working for pay if they are working for a family business and does not have to be working full time.

To be counted as "employed" in the U.S. labor force statistics, a person A. must be working for pay and be working full time. B. must be working for pay but does not have to be working full time. C. does not have to be working for pay if they are working for a family business but must be employed full time. D. does not have to be working for pay if they are working for a family business and does not have to be working full time.

C. the GDP deflator and the consumer price index.

Two common measures of the overall level of prices are A. the inflation rate and the consumer price index. B. the inflation rate and the GDP deflator. C. the GDP deflator and the consumer price index. D. the cost of living index and nominal GDP.

B. the natural rate of unemployment but not frictional unemployment.

Unions contribute to A. frictional unemployment but not the natural rate of unemployment. B. the natural rate of unemployment but not frictional unemployment. C. both frictional unemployment and the natural rate of unemployment. D. neither frictional unemployment nor the natural rate of unemployment.

A. the bond market, and we associate the term equity finance with the stock market.

We associate the term debt finance with A. the bond market, and we associate the term equity finance with the stock market. B. the stock market, and we associate the term equity finance with the bond market. C. financial intermediaries, and we associate the term equity finance with financial markets. D. financial markets, and we associate the term equity finance with financial intermediaries.

B. The goods and services that are typically bought by consumers as determined by government surveys

What basket of goods and services is used to construct the CPI? A. A random sample of all goods and services produced in the economy B. The goods and services that are typically bought by consumers as determined by government surveys C. Only food, clothing, transportation, entertainment, and education D. The least expensive and the most expensive goods and services in each major category of consumer expenditures

C. a surplus of labor and a shortage of jobs.

When a minimum-wage law forces the wage to remain above the equilibrium level, the result is A. both a shortage of labor and a shortage of jobs. B. a shortage of labor and a surplus of jobs. C. a surplus of labor and a shortage of jobs. D. both surplus of labor and a surplus of jobs.

D. Survey sellers to determine what the typical consumer buys.

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following? A. Try to include all the goods and services that the typical consumer buys. B. Try to weight the goods and services that the typical consumer buys according to how much consumers buy of each item. C. Survey consumers to determine what the typical consumer buys. D. Survey sellers to determine what the typical consumer buys.

A. True

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living. A. True B. False

B. False

When the consumer price index is computed, the base year is always the first year among the years being considered. A. True B. False

C. more and public savings falls.

When the government's budget deficit increases the government is borrowing A. less and public savings falls. B. less and public savings increases. C. more and public savings falls. D. more and public savings increases.

C. A long term and a high credit risk

Which of the following bonds has the highest interest rate? A. A high credit risk and a short term B. A low credit risk and a short term C. A long term and a high credit risk D. A long term and a low credit risk

A. Germany

Which of the following countries has had the greatest growth rate of real GDP per person within the last 10 years? A. Germany B. Bangladesh C. Argentina D. India

C. For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen

Which of the following demonstrates human capital and physical capital in that order? A. For a brick layer: her bricks and her tools B. For a gas station: the pumps and the cash register C. For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen D. For a medical office: the building and the doctors' knowledge of medicine

C. Bonds but not stocks

Which of the following is a certificate of indebtedness? A. Both stocks and bonds B. Stocks but not bonds C. Bonds but not stocks D. Neither stocks nor bonds

C. The things you have learned this semester

Which of the following is an example of human capital? A. The comfortable chair in your dorm room where you read economics texts B. The amount you get paid each week to work at the library C. The things you have learned this semester D. Any capital goods that require a human to be present to operate

B. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers.

Which of the following is correct? A. The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. B. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. C. The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. D. The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

A. Human capital per worker is a determinant of productivity.

Which of the following statements is correct? A. Human capital per worker is a determinant of productivity. B. A nation cannot be highly productive in producing goods and services without abundant quantities of natural resources. C. Human capital and technological knowledge are the same thing. D. All technological knowledge is proprietary.

A. The expected future profitability of a corporation influences the demand for its stock.

Which of the following statements is correct? A. The expected future profitability of a corporation influences the demand for its stock. B. When a corporation sells stock as a means of raising funds it is engaging in debt finance. C. The owners of bonds sold by the Microsoft Corporation are part owners of that corporation. D. A corporation is paid every time its shares of stock are traded organized stock exchanges.

C. Those waiting to be recalled to a job from which they had been laid off

Who of the following is not included in the Bureau of Labor Statistics' "employed" category? A. Those who worked in their own business B. Those who worked as unpaid workers in a family member's business C. Those waiting to be recalled to a job from which they had been laid off D. Those who were temporarily absent from work because of vacation