ECON 3

What is most likely to happen when a government repeatedly boosts the economy by printing more money?

People come to expect the increases so they prepare for higher prices.

Which of the following contribute to why wages are considered sticky?

People get upset when wages fall, particularly if they think their employer is causing the wage cut, which negatively impacts workplace morale. If wages were easily cut, workers might respond by working less or disrupting their work, thus negatively affecting productivity. Minimum wage requirements make it difficult to lower wages quickly or often.

Which job is least likely to be negatively affected by increases in global markets and technology?

Plumber

An economy's potential growth rate is also known as what?

Solow growth rate.

According to the video, hyperinflations have occurred in all of the following countries except:

South Africa

Which of the following natural shocks hit the United States early-on in the Great Depression, contributing to the length and slow recovery?

The Dust Bowl drought.

During the Great Depression, when banks failed, people lost their money and had less to spend, leading to a negative AD shock. Which of the following describes how bank failures also resulted in a negative real shock to the economy?

The bridge between saving and investing collapsed, making the economy less efficient.

Using both a long-run aggregate supply curve and a short-run aggregate supply curve can help demonstrate what effects in a real economy?

The effects of sticky prices and wages.

Female labor force participation rates started to increase dramatically in

The mid 1960s

The implicit tax rate on working captures both the actual taxes on earnings, as well as which of the following:

The monetary value of lost retirement benefits.

One of the biggest costs of inflation is:

The negative economic effects of reducing inflation.

The real interest rate is equal to:

The nominal interest rate minus the inflation rate.

Which of the following situations is an example of inflation occurring in a two-good economy?

The price of apples and the price of pears both increased by about 2% in the last five years.

How does inflation redistribute wealth when the rate is higher than expected?

Unexpected inflation reduces the real return on a loan, so wealth moves from the lender to the borrower.

Which of the following individuals are counted as unemployed?

b. An adult who is out of work, wants a job, and applied to a job 2 weeks ago but not since then.

Which of the following is a major cause of structural unemployment?

b. Large and long-lasting shocks to the economy.

In 2014, there were _______ as many bachelor degrees conferred in information technology than in psychology.

half

The phenomenon of sticky wages usually leads to _______________ unemployment during a recession.

higher

The phrase that "money is neutral in the long run," means:

if the money supply triples, prices will triple.

A positive shock to the AD curve will cause inflation to __________ in the short run and growth to ___________ in the short run.

increase/increase

The growth rate in prices is also called:

inflation

If inflation is 6% and you receive a 1% raise in your nominal wage, by how much did your real wage change?

-5%.

If inflation is 1% and you receive a 1% raise in your nominal wage, by how much did your real wage change?

0%.

The effect of uncertainty about future inflation rates and the real rate of return on loans is problematic for the economy overall because:

As long-term lending become more costly and less common, the economy invests less.

True or false. It would be very beneficial for the US economy if we could greatly reduce or eliminate frictional unemployment.

False

True or false: A business fluctuation is a type of recession.

False.

The natural rate of unemployment is defined as:

Frictional plus structural unemployment.

Which type of inflation is described as worrisome and costly?

High and volatile.

Complete the following equation: Unemployment Rate = (Unemployed/ ______________)*100

Labor Force

According to research by Claudia Goldin and Lawrence Katz (2006), states that legalized oral contraceptives earlier also experienced

Larger increases in female labor force participation rates.

If we include discouraged workers as unemployed when calculating the unemployment rate, the unemployment rate

Less than doubles.

A significant increase in which variable in the quantity theory of money is most likely to cause large and sustained changes in prices?

M, the money supply.

The decline in which industry since the 1950s has caused a reduction in low-skill, low-education, male labor force participation rates?

Manufacturing

All of the following factors are fundamental to an economy's potential growth rate except for:

Money supply

Both sides of the quantity theory of money identity represent ____________.

Nominal GDP

The Fisher effect states that:

Nominal interest rates will rise with expected inflation rates.

The inflation rate is measured as the percentage change in the index over a time period. What variable should be plugged in for the denominator? P2−P1/?×100

P1

An increase in spending growth will shift the AD curve ______________, while a decrease in spending growth will shift the AD curve ___________

outward or right; inward or left

Recessions are declines in

real GDP and employment.

Inflation occurs when more money chases the same amount of goods and services. If _________ increases, we can expect a corresponding decrease in inflation, because more money will be chasing more goods.

real growth

In countries with high costs of hiring and firing, firms have a more difficult time ___________ labor resources during economic fluctuations, making structural unemployment more prevalent.

reallocating

If the news reported that 100,000 "new" jobs were created and there were 1,000,000 job separations in the United States in July 2016, how many new hires occurred in the US that month?

1,100,000

If the news reported that 100,000 "new" jobs were created and there were 1,000,000 job separations in the United States in July 2016, how many jobs are created for every job destroyed?

1.1

Calculate the unemployment rate with the following data: Unemployed: 10 million, US Population: 200 million, Employed: 90 million

10%

In 2006, prices in Zimbabwe were rising at roughly

1000% per year

If the inflation rate is expected to be 7% over the next year, and Bank of Bigbucks aims to secure a real return on loans of 6%, what will the bank set interest rates at for borrowers?

13%

According to the Cyclical Unemployment video and graph, in what year might monetary and fiscal policy be effective tools to smooth the unemployment rate?

2009

What percent of jobs in the US require some form of occupational licensing?

25%

Over the last 60 years, the US' real GDP has grown at an average rate of

3%.

Discouraged workers are unemployed individuals who say they want a job, but although they haven't looked for work in the past ________ , they have looked in the past ________.

4 weeks, year

If the CPI is 93 in 2014 and 97 in 2015, calculate the rate of inflation from 2014 to 2015.

4.3%

According to the graph in the video, "Women Working: What's the Pill Got to Do With It?," by 1995 just over ______ of graduate students pursuing law degrees were women.

40%

According to the video, the average unemployment rate between 1950 and 2015 was approximately

6%

Given M→+V→= pi +Yr , if the aggregate demand curve has M→=8,V→=0, and real growth (Yr) is 2%, what is inflation?

6%

Given M→+V→=pi + Yr , if the aggregate demand curve has M→=8, V→=0, and real growth (Yr) is 0%, what is inflation?

8%

Which of the following is an example of a negative real shock to an economy?

A drought stifles crop growth for the season.

In the short run, attempting to reduce inflation can lead to what effect until the prices "catch up" to the smaller money supply?

A reduction in real GDP. A recession or slower economy. Higher unemployment.

Which of the following would increase the velocity of money?

A war leads to more government spending.

All of the following have had an effect on structural unemployment EXCEPT:

Active duty military population

Which of the following is an important demographic factor that can influence the labor force participation rate?

Age

Inflation increases:

All prices, including wages.

The official unemployment rate definition is

An adult who is out of work and has been looking for work in the past 4 weeks.

While money is neutral in the long run, an increase in the money supply can lead to which event in the short run?

An increase in real output (GDP).

"Money illusion" is the phrase used to describe when people mistake:

Changes in nominal prices with changes in real prices.

If the velocity of money increases, then the growth rate of which of the following must also change?

Consumption Investment Government spending

What would we expect to happen to the labor force participation rate if the U.S. government began diminishing retirement benefits to senior citizens who chose to stay in the workforce past the age of 65?

Decrease, due to more aging people having a higher incentive to retire.

The Labor Force Participation rate = (+)÷ Adult Population

Employed & unemployed

Those who are most likely to oppose moving from having 'just-cause' employment laws to 'at-will' employment laws are

Employed workers.

What would we expect to happen to the labor force participation rate if the U.S. government raised the age at which senior citizens could begin collecting retirement benefits from 62 to 67?

Increase, due to more senior citizens postponing retirement.

What happens in the short run when spending increases?

Increased spending doesn't immediately cause full inflation, so there is short run growth.

Inflation interferes with the price system in which costly way?

Inflation distorts price signals, making it difficult for consumers to tell if the price increase is due to scarcity or inflation, and react appropriately.

How does inflation affect the long-run real growth?

Inflation does not have an effect on long run real growth.

Suppose in the next few years, a very large increase in college graduates opt to pursue PhD programs full-time instead of accepting offers for financial analyst and consultant positions. All else equal, what is likely to happen to the labor force participation rate in those coming few years?

It will decrease, due to more adults in their working prime opting out of jobs.

Since 1950, in which year was the unemployment rate 0%?

It's never been 0%

In the graph from the Taxing Work video, which country has the highest tax incentive for adult males to retire?

Italy

Cyclical unemployment is defined as:

Unemployment correlated with business fluctuations.

What were the intentions of the Smoot-Hawley Tariff, and what was the actual outcome of the policy?

The tariff taxed foreign goods intending on increasing demand for domestic goods, but it backfired when other nations also imposed tariffs and trade fell.

In the quantity theory of money, V represents:

The velocity of a dollar.

Tariffs, like the Smoot-Hawley Tariff of 1930, make which of the following less efficient?

Trade

Which of the following gives the highest definition of unemployment?

U-6

Which of the following is an example of structural unemployment?

Yellow Cab lays off 6,000 taxi drivers and replaces them with automated self-driving cars. The taxi drivers look for work in another industry.

Hyperinflation occurs when

a country's prices are increasing at a very high rate.

Hyperinflation can occur when

a. The government prints money to fund itself.

In the quantity theory of money, P and Y represent the price and quantity of:

all finished goods and services sold in an economy.

Nominal GDP in terms of _______ is represented by how much money there is and how many times it is spent, while Nominal GDP in terms of ________ is represented by all goods and services and their prices (hint: think of the Quantity Theory of Money).

buyers & sellers

In the short run, a decrease in consumption would lead to a(n) _________ in GDP growth and a(n)_________ in inflation.

decrease/decrease

A negative real shock to the economy shifts the LRAS curve to the left, causing a(n) ____________ in growth and a(n) ____________ in inflation.

decrease/increase

In the 1930s, instead of ________ the money supply, the Federal Reserve ________ the money supply, which prolonged the Great Depression.

expanding / contracted

In theory, inflation in an economy should ___________________ the sticky-wage phenomenon.

lessen

Under some conditions, the government can reduce cyclical unemployment using __________ and __________ policies.

monetary & fiscal

While a series of negative aggregate demand shocks largely caused the Great Depression, ___________ contributed and led to a slow recovery.

negative real shocks

The Consumer Price Index (CPI) is a weighted average of the prices of:

thousands of goods and services bought by US consumers.

In 2014, the median starting salary for computer science majors was roughly ________ as much as the median starting salary for psychology majors.

twice