Exam 2: CH 10,11,12,14,15

In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars? $12,130 $16,259 $7,799 $18,865

$18,865

If the interest rate is 6% and the average inflation rate is 3.1%, what is the approximate future value of $75,000 in 20 years? $132,852 $89,743 $240,535 $42,340

$132,852

A new assembly line robot with a price tag of $2.5 million is expected to depreciate by 3% at the end of next year. The real interest rate is 2.5%. What is the user cost of the robot for one year? $137,500 $62,500 $12,500 $75,000

$137,500

What is Uganda's real GDP if its nominal GDP is $27.5 billion (in current US$), and the GDP deflator is 163.4? $16.8 billion $44.9 billion $12.4 billion $27.5 billion

$16.8 billion

Refer to the following statistics. Based on these statistics, the level of business investment is:Inventories: $12 millionHousing: $400 millionEquipment: $500 millionBusiness structures: $350 millionIntellectual property: $700 million $500 million. $1,562 million. $1,050 million. $1,550 million.

$1,550 million.

Suppose you want to realize a future value of $150,000 in 30 years on an investment you make. The average annual rate of return is 8.75%. What will be the present value of your investment? $150,000 $1,857,673 $12,112 $163,125

$12,112

A new assembly line robot costs $1.2 million and is expected to depreciate by 10% at the end of next year. The real interest rate is 4.5%. What is the user cost of the robot for one year? $54,000 $120,000 $174,000 $66,000

$174,000

If the interest rate is 5%, what is the approximate present value of $25,000 received in five years? $31,907 $22,676 $19,588 $23,810

$19,588

The table contains information about Pfizer's stock. How much is Pfizer, as a company, worth? $200.33 billion. $36.22. $36 billion. $35.86.

$200.33 billion.

If the interest rate is 4%, what is the approximate future value of $15,000 in 10 years? $22,204 $10,133 $17,949 $15,900

$22,204

Suppose you want to realize a future value of $30,000 in 30 years on an investment you make. The average annual rate of return is 6%. What will be the present value of your investment? $172,305 $30,000 $5,223 $31,800

$5,223

Suppose you have $5,000 to invest in a Treasury bill for 20 years. The average annual rate of return is 1.5%. What is the real future value of your investment after 20 years? $3,712 $5,075 $6,734 $5,000

$6,734

In 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four-year degree in current dollars? $227 $8,746 $9,422 $1,410

$8,746

You've graduated from college and are now working in an investment firm where you advise clients on investment decisions. Here is the information on a proposed project. Up-front cost: $300,000 Next year's revenue: $15,000 Real interest rate: 8% Depreciation rate: 10% What is the present value of the stream of payments from this project? $83,333 $18,000 $383,333 $315,000

$83,333

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if:(i) human capital increases.(ii) labor productivity falls.(iii) the capital stock in the country depreciates.(iv) the depreciation rate increases. (i), (ii), (iii), and (iv) (i) and (iv) (iii) only (i) only

(i) only

In order to be considered unemployed, a person must:(i) be part of the working-age population.(ii) be actively looking for work.(iii) not have been self-employed.(iv) must be noninstitutionalized. (i), (ii), and (iv) (iii) and (iv) (i) and (ii) (ii) and (iv)

(i), (ii), and (iv)

Which of the following tasks are performed by banks?(i) Print new money.(ii) Provide zero-interest loans.(iii) Create long-term loans from short-term deposits.(iv) Pool savings from many savers. (i) and (iv) (iii) only (iii) and (iv) (i) and (ii)

(iii) and (iv)

You purchase a certificate of deposit that earns an advertised rate of 1.75% interest per year. What is your real rate of return if the actual inflation rate is 1.9%? 1.75% 0.15% 3.65% -0.15%

-0.15%

You purchase a certificate of deposit and expect an inflation rate of 1.5% over the next year. Your nominal rate of interest is 2.25%. What is your expected real rate of return? -0.75% 2.25% 3.75% 0.75%

0.75%

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return? 0.85% -2.1% -0.85% 1.25%

0.85%

Consider the following basket of goods: 50 bottles of milk, 100 avocadoes, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. What is the inflation rate between last year and this year? 8.99% -9.09% -10% 10.13%

10.13%

What is Sri Lanka's GDP deflator if its nominal GDP is $88.9 billion (in current US$) and the real GDP is $59.34 billion? 149.8 66.7 136.5 100

149.8

The aggregate production function is represented as: L = f(Y, H, K). K = f(L, H, Y). H = f(L, Y, K). Y = f(L, H, K).

Y = f(L, H, K).

In May 2019, there were approximately 68,980,000 people in Japan's labor force. About 1,650,000 people were unemployed. What was the unemployment rate? 1.8% 5.0% 2.4% 6.1%

2.4%

Consider the following financial information for The Procter & Gamble Company stock. What is Procter & Gamble's price-to-earnings ratio?Procter & GambleStock price per share: $124.57Earnings per share: $4.32Price-to-book ratio: 6.8649 28.84 18.15 538.14 4.32

28.84

In May 2019, Texas reported a civilian labor force of 14,012,711. The number of employed people was 13,516,387. What was the unemployment rate? 5.3% 96.5% 3.5% 4.9%

3.5%

You are a financial adviser. Your client, Mena, does not like risk and wants Federal Deposit Insurance Corporation (FDIC) insurance. Which of the following instruments should she invest in? Bonds issued by a corporation in financial distress An index fund A bank savings account Treasury bills

A bank savings account

You are a financial adviser. Your client, Archie, wants professional management of his investments but also wants a diversified portfolio. Which of the following investments is right for Archie? Large corporation stocks A mutual fund Corporate bonds Small corporation stocks

A mutual fund

Bond A is a five-year bond issued by a company with a very good credit rating. Bond B is a five-year bond issued by a different company in financial distress. Which of the following is likely? Bond A will have a higher default risk than Bond B. Bond B will have a higher interest rate than Bond A. Bond B will have a higher term risk than Bond A. Bond A will have a higher interest rate than Bond B.

Bond B will have a higher interest rate than Bond A.

Which of the following shows the medium of exchange function of money? Mena saves his money in a certificate of deposit at the bank. Wilma wants to sell her old car, and she values it at $2,400. Darius goes window shopping. Daniela goes to the store and purchases roses with U.S. dollars.

Daniela goes to the store and purchases roses with U.S. dollars.

Which of the following is an investment? Ben's computer depreciates by 15%. Frank buys a used car. Dan purchases $6,800 worth of gold. Fred pays a contractor to add two new rooms to his house.

Fred pays a contractor to add two new rooms to his house.

You have four friends. Which of your friends can be described as "cyclically unemployed"? Martha, who is a full-time stay-at-home parent Regan, who is in a nursing home Keele, who lost her job after her company lost a lot of customers during an economic downturn Arthur, who quit his job to look for a better job

Keele, who lost her job after her company lost a lot of customers during an economic downturn

Which of the following countries enjoyed significant catch-up economic growth in the second half of the twentieth century? Argentina South Korea Spain United States

South Korea

The government passes a new investment tax credit initiative. Which input in the production function changes, and what is the effect on economic growth in the country? Technological advance occurs, but there is no effect on economic growth. The capital stock decreases, and economic growth is negatively affected. Human capital is enhanced, and economic growth is positively affected. The capital stock increases, and economic growth is positively affected.

The capital stock increases, and economic growth is positively affected.

Which of the following is correct about a financial instrument and its future value, keeping all other things constant? The higher the interest rate on the instrument, the higher the future value. The lower the interest rate on the instrument, the higher the future value. The longer the time to maturity of the instrument, the lower the future value. The lower the present value of the instrument, the higher the future value.

The higher the interest rate on the instrument, the higher the future value.

Which of the following is correct about a financial instrument and its future value, keeping all other things constant? The higher the interest rate on the instrument, the lower the future value. The lower the present value of the instrument, the higher the future value. The shorter the time to maturity of the instrument, the lower the future value. The longer the time to maturity of the instrument, the higher the future value.

The longer the time to maturity of the instrument, the higher the future value.

Which of the following would lead to a slowdown in economic growth? the institution of a savings tax credit an increase in capital accumulation coupled with technological advancement a reduction in the birth rate coupled with an increase in the retirement rate of a population an increase in innovation in the economy

a reduction in the birth rate coupled with an increase in the retirement rate of a population

A decreasing returns to scale production function is one where increasing all inputs by a certain proportion leads to output rising by: a smaller proportion. a larger proportion. the same proportion. exactly double the proportion.

a smaller proportion.

The liquidity of an asset is defined as the: risk that if you need to sell the asset quickly, you may not be able to get a good price for it. ability to index the asset's returns to the inflation rate. ability to predict the future cash flow of the asset. ability to quickly and easily convert the asset to cash, with little or no loss in value.

ability to quickly and easily convert the asset to cash, with little or no loss in value.

A minimum wage that is above the equilibrium wage is: a labor union negotiated wage. an unemployment benefit. an example of a price floor. an efficiency wage.

an example of a price floor.

During the Great Recession, the United States Congress increased the length of time that unemployment benefits could be received from 52 weeks to 99 weeks. This change caused: an increase in the costs for the government. an increase in the number of employed people in the economy. a decrease in unemployment. an increase in the labor force participation rate.

an increase in the costs for the government.

Which of the following would lead to a slowdown in economic growth? an increase in the dependency ratio an increase in capital accumulation in the economy reduced inefficiency in production an increase in human capital

an increase in the dependency ratio

The efficient market hypothesis states that: at any point in time, stock prices reflect all publicly available information. market supply and market demand interact to reach equilibrium for the stock price. at any point in time, a firm selling a stock has engaged in efficient production methods. the market price for a stock will always exceed the book value of the stock.

at any point in time, stock prices reflect all publicly available information.

The neutral interest rate occurs when the economy is: at its potential. above its potential. experiencing very high inflation. below its potential.

at its potential.

Stock prices are an important macroeconomic indicator because they: display a random walk. do not have any correlation with the state of the economy. can predict changes in GDP. can predict inflation in the economy.

can predict changes in GDP.

The moral of the story of the Solow growth model is that: capital accumulation is the key to sustained economic growth. human capital growth does not lead to economic growth. technological advance cannot sustain continuous economic growth. capital accumulation alone cannot lead to sustainable economic growth.

capital accumulation alone cannot lead to sustainable economic growth.

If a bakery buys a second oven, hires a second baker, buys double the number of ingredients, doubles the size of the bakery, and then produces double the number of cakes, then the bakery is experiencing: constant returns to scale. technological advancement. increasing returns to scale. an increase in labor productivity.

constant returns to scale.

Property rights refer to: patents owned by a business. the time it takes to start a business venture. control over a tangible or intangible resource. the number of properties owned by an entrepreneur.

control over a tangible or intangible resource.

A bond that is issued by a firm in financial distress is most likely to have: liquidity risk. term risk. default risk. inflation indexation.

default risk.

If the government lowers the corporate tax rate, then the ______ loanable funds shifts to the _______ . demand for; left demand for; right supply of; left supply of; right

demand for; right

Equilibrium in the loanable funds market determines the: equilibrium real interest rate. point where there is excess demand for loanable funds. up-front cost of capital. amount of inventories in an economy.

equilibrium real interest rate.

Hyperinflation is: inflation that occurs when the economy is in a recession. extremely high rates of inflation. very high rates of economic growth. a period of high money growth in an economy.

extremely high rates of inflation.

An initial public offering occurs when a company: first sells stock directly to the public. first opens for business and offers its goods and services for sale to the public. experiences a rise in the price and demand for its stock. first sells stock directly to the government.

first sells stock directly to the public.

The higher the minimum wage, as compared to the equilibrium wage, the: higher the structural unemployment rate. lower the structural unemployment rate. lower the natural rate of unemployment. higher the cyclical unemployment rate.

higher the structural unemployment rate.

Holding everything else equal, the _____ the interest rate on saving, the _____ the future value of that saving. higher; lower higher; greater lower; greater lower; the more negative

higher; greater

The equilibrium unemployment rate is also known as the _____ unemployment rate. cyclical structural long-run frictional

long-run

A bank run occurs when: bank customers expect the bank to open new branches. many bank customers deposit small amounts of money at the bank. a lender makes both long-term and short-term loans. many bank customers try to withdraw their savings at the same time.

many bank customers try to withdraw their savings at the same time.

Menu costs are the: marginal costs of adjusting prices. variety of costs that cause producers to change their prices. costs of producing restaurant meals. total costs of producing goods and services.

marginal costs of adjusting prices.

Which of the following lists the functions of money? medium of exchange, store of value, and unit of account carrier of exchange, unit of account, and measure of inflation medium of exchange, measure of inflation, and benchmark of quality store of value, store of interest, and buffer against inflation

medium of exchange, store of value, and unit of account

The real interest rate is the: nominal interest rate plus the rate of inflation. percentage of the nominal interest that is inflation. economic growth rate adjusted for the effects of inflation. nominal interest rate minus the rate of inflation.

nominal interest rate minus the rate of inflation.

If you see that the consumer price index this year is lower than the consumer price index last year, this means that: the consumer price index is lower than the producer price index. economic growth also decreased. the prices of each and every good and service went down. on average, prices went down across the economy.

on average, prices went down across the economy.

If you see that inflation between last year and this year is 3%, this means that: economic growth is also 3%. the prices of each and every good and service went up by 3%. the consumer price index rose by 3% more than the producer price index. on average, prices went up across the economy by 3%.

on average, prices went up across the economy by 3%.

Which of the following encourages the development of new ideas and inventions? negative economic growth capital accumulation government control of resources patents

patents

The fundamental value of a business is the: value of the forecasted future profits. stock price. earnings per share. present value of the future profits it will earn.

present value of the future profits it will earn.

The GDP deflator is an index that tracks the: highest prices consumers pay over time for imported goods and services. price that businesses pay over time for the inputs used in the production process. price of all goods and services produced domestically. average price that consumers pay over time for a representative basket of goods and services.

price of all goods and services produced domestically.

If the fundamental value of a stock is above the current market price of the stock, there will be a: rise in the price and demand of its stock. decrease in the demand and supply of its stock. fall in the price and demand of its stock. fall in the price and supply of its stock.

rise in the price and demand of its stock.

A constant returns to scale production function means that if all inputs are increased by 75%, this should lead to output: rising by 75%. falling by less than 75%. rising by more than 75%. falling by more than 75%.

rising by 75%.

In macroeconomics, the difference between saving and investment is that: saving is the money left over after paying for spending, and investment is the purchase of new capital. saving is created by the government, and investment is specific to firms. saving does not depend on income, but investment depends on profitability. saving is the money left over after paying for spending, and investment is the purchase of stocks and bonds.

saving is the money left over after paying for spending, and investment is the purchase of new capital.

The three major pillars of the financial sector are the: banks, the goods market, and the labor market. stock market, the labor market, and the bond market. foreign exchange market, the bond market, and the government. stock market, the bond market, and the banks.

stock market, the bond market, and the banks.

Along the same aggregate production function, the level of _____ is the same. labor economic growth capital technology

technology

Money illusion is the: illusion that one's earnings this year are higher than they were last year. tendency to focus on nominal values instead of inflation-adjusted values. increase in the amount of money that it takes to purchase goods and services when prices rise. inability to understand that prices always rise.

tendency to focus on nominal values instead of inflation-adjusted values.

Technological advancement is NOT represented by which of the following? the adoption of an existing technology by new firms the creation of new apps designed to enhance efficiency and reduce wastage in production lines the invention of robotic meal preparation the invention of the light bulb

the adoption of an existing technology by new firms

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that: there is 2.25% actual unemployment. the economy is experiencing an economic boom. the equilibrium rate of unemployment is 3.75%. the labor force participation rate has fallen significantly.

the equilibrium rate of unemployment is 3.75%.

Even though deposit insurance existed, the United States experienced a major financial crisis from 2007 to 2009 because: there was excess competition from other countries. there was a run on shadow banks, which were not covered by deposit insurance. the deposit insurance system failed during that time. banks refused to honor the deposit insurance scheme.

there was a run on shadow banks, which were not covered by deposit insurance.

An underemployed person is one who is: retired or outside of the labor force. employed in the underground economy. working but whose skills are not fully utilized. cyclically unemployed.

working but whose skills are not fully utilized.