Econ Exam 2

Providing training for unemployed individuals is primarily intended to reduce

frictional unemployment

If the Federal Reserve increases the interest rate on bank reserves at the Fed, banks will want to hold

more reserves, so the reserve ratio will rise.

Which of the following is an example of barter?

A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

which of the following is an example of an efficiency wage?

An above-equilibrium wage offered by a firm to attract a more talented pool of job applicants

Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?

Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate

Which list ranks assets from most to least liquid?

Currency, stocks, houses

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?

Labor supply increases, and wages decrease.

Meredith is looking for work as a computer programmer. Her prospects are good but so far she has not taken a job. Jenna is looking for work in a steel mill. Every time Jenna shows up for an interview, there are more people looking for work than there are openings. She realizes that it has been that way for a long time.

Meredith is frictionally unemployed, and Jenna is structurally unemployed.

Given that Sarah's income exceeds her expenditures, Sarah is best described as a

Saver or a supplier of funds

which of the following best represents fiat money?

The euro

which of the following statements is correct?

The expected future profitability of a corporation influences the demand for that corporation's stock.

What would happen, all else equal, in the market for loanable funds if the government were to decrease the tax rate on interest income?

There would be an increase in the equilibrium quantity of loanable funds.

Suppose that a large number of people who used to work or seek work no longer do either. Other things the same, this makes

both the number of people unemployed and in the labor force fall.

which of the following does the Federal Reserve not do?

conduct fiscal policy

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate

corporate bond, U.S. government bond, municipal bond

If the Federal Open Market Committee decides to increase the money supply, it

created dollars and uses them to purchase government bonds from the public. sells government bonds from its portfolio to the public.

Other things the same, if reserve requirements are decreased, the reserve ratiodecreases, the money multiplier increases, and the money supply increases.

decreases, the money multiplier increases, and the money supply increases.

The unemployment rate is computed as the number of unemployed

divided by the labor force, all times 100.

Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of openings but has not yet been offered one that best suits her tastes and skills. Sandy is

frictionally unemployed. Frictional unemployment can exist even in the long run.

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

interest rates rise and the equilibrium quantity of loanable funds fall.

You receive money as payment for mowing your neighbor's lawn. Which function of money does this best illustrate?

medium of exchange

Other things the same, when the interest rate rises, people would want to lend

more, making the quantity of loanable funds supplied increase.

In a closed economy, what does the difference between the tax revenue and government purchases, (T − G), represent?

public saving

Long-term bonds are

riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

Which of the following is not included in M1?

savings deposit

if the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, there is a

shortage and the interest rate is below the equilibrium level.

A problem that the Fed faces when it attempts to control the money supply is that

the Fed does not control the amount of money that households choose to hold as deposits in banks.

Cole, a financial advisor, has told his clients the following things. Which of his statements is not correct?

"U.S. government bonds generally pay a higher rate of interest than corporate bonds."