econ midterm

The hypothetical data in the table below displays the percentage that unemployment benefits replace take-home pay for workers in different countries. Which country would you expect to have the lowest long-term unemployment rate?

Australia

There were many causes that contributed to the financial crisis of 2007-2008. Which of the choices most accurately describes the role of securitization in contributing to the crisis?

Banks bundled mortgages together and then sold them on the market as a financial asset. However, the risk level of these securitized assets was often much higher than the purchaser thought.

For a firm making decisions about investment or research and development, what is the most important interest rate?

future interest rate

An economy can increase its capital stock by

increasing consumption spending.

The typewriter industry goes bankrupt and lays off all its workers. In sharp contrast, the burgeoning electronic word processing industry hires 10,000 workers that same year. This type of unemployment resulting from the shift in industries would best be catagorized under

structural unemployment.

Which definition best describes real GDP?

the production of goods and services valued at constant prices

Because of diminishing returns, an increase in the savings rate

will have a proportionally smaller impact on productivity in well‑developed economies than in poor economies with very little capital to start with.

According to the efficient market hypothesis, is it better to invest in a mutual fund that has performed well for five years in a row instead of one that has performed poorly for five years in a row?

No, because past performance is not a good guide for future success.

Which statement is accurate?

The nominal interest rate minus the rate of inflation is the real interest rate.

The Japanese car maker Honda owns production facilities in Marysville, Ohio. If the cars made there are sold exclusively in the United States, in which category would the cars be counted?

U.S. GDP

Which of the choices is the best example of creative destruction?

A chemical plant decides to use a new process in their reactions, which after combustion results in large amounts of pink smoke being emitted to the nearby town and consequent fires in the chemical plant.

Select the definition of consumption smoothing.

borrowing in periods of low income and saving in periods of high income to make consumption less variable than income