macro exam 3
if an unemployed person quits looking for work, then, eventually the unemployment rate
and the labor-force participation rate both decrease
when the fed decreases the discount rate, banks will
borrow more from the fed and lend more to the public. the money supply increases
since the 1940's US union membership has
fallen. this decline should have reduced structural unemployment
people who hold well-diversified portfolios of stocks have greatly reduced or eliminated
firm-specific risk, but still they have reason to worry about their wealth decreasing as a result of recessions
providing training for unemployed individuals is primarily intended to reduce
frictional unemployment
a decrease in the money supply might indicate that the fed had
sold bonds in an attempt to increase the federal funds rate
according to the efficient market hypothesis, which of the following statements is not corrected?
stock market prices tend to rise today if the rose yesterday
cyclical unemployment refers to
year-to-year fluctuations of the unemployment around its natural rate
which of the following statements regarding the federal open market committee is correct?
all regional fed presidents attend the meetings, but only five get to vote
the problem of moral hazard arises because
after people buy insurance, they have less incentive to be careful about their risky behavior
figure 27-1 the properties exhibited by this utility fluctuation help to explain various things we observe in the economy, including
all of the above are correct
which of the following games might a risk-averse-person play?
all of the above are correct
suppose the interest rate is 10 percent. which of the following payments has the largest present value?
all of these payments have the same present value to the nearest cent
The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 10 percent, how much is the bank holding in excess reserves?
$15 million
what is the present value of a payment of $2000 to be received two years from today if the interest rate is 5%?
$1814.06
Table 29-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. Assets Liabilities Reserves $750 Deposits $10,000 Loans 9,250 Refer to Table 29-2. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for all banks by
$2,000.00
suppose you put $500 into a bank account today. interest is paid annually and the annual interest rate is 8 percent. the future value of the $500 after 2 years is
$583.20
what is the present value of a payment of $100 one year from today if the interest rate is 5 percent?
$95.24
figure 28-3 if the government imposes a minimum wage of $4, how many workers will be unemployed?
0
the largest reduction in a portfolio's risk is achieved when the number of stocks in the portfolio is increased from
1 to 10
based on the quantity equation, if M=150, V=4, and Y=300, then P=
2
table 28-1 how many in the sample are unemployed
3
if reserve ratio is 2.5 percent, then the money multiplier is
40
the bureau of labor statistics reported in 2005 that there were 28.19 million people over age 25 who had no high school degree or its equivalent. 11.73 million of whom were employed and 1.04 million of whom were unemployed. what were the labor-force participation rate and the unemployment rate for this group?
45.3% and 8.1%
suppose a bank holds reserves equal to $1200 loans equal to $8000 securities equal to $800 deposits equal to $9000 and debt equal to $800. this banks leverage ratio is
50
according to the rule of 70, if a person's saving doubles in 10 years, what interest rate were they earning?
7
at which interest rate is the present value of $145.80 two years from today equal to to $125 today?
8 percent
if the nominal interest rate is 5 percent and there is a deflation rate of 3 percent, what is the real interest rate?
8 percent
table 29-6 if the bank of spingfield has lent out all the money it can given its level of deposits, then what is the reserve requirement?
8.00 percent
suppose that the adult population is 6 million, the number of employed is 3.8 million, and is the labor-force participation rate is 70%. what is the unemployment rate?
9.5%
John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available.
John is frictionally unemployed, and Curtis is structurally unemployed
which of the following actions best illustrates adverse selection?
a person who has narrowly avoided many accidents applies for automobile insurance
wages in excess of their equilibrium level help explain
both structural unemployment and the natural rate of unemployment
An economist claims that changes in information technology and unemployment insurance have reduced unemployment. Which of these changes affect frictional unemployment?
both the changes in information technology and unemployment insurance
according to the quantity theory of money, a 3 percent increase in the money supply
causes the price level to rise by 3 percent
if an economy used gold as money, its money would be
commodity money but not fiat money
diversifying
decreases the standard deviation of the value of a portfolio indication its risk has decreased
the classical dichotomy refers to the idea that the supply of money
determines nominal variables, but not real variables
the designation "natural" implies that the natural rate of unemployment
does not go away on its own even in the long run
the primary cause of inflation is
growth in the quantity of money
the efficient markets hypothesis says that beating the market consistently is
impossible. many studies find that beating the market is, at best, extremely difficult
if a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply
increase by $100 while wealth does not change
satchel loses his job and immediately begins looking for another. other things the same, the unemployment rate
increases and the labor force participation is unaffected
in a fractional-reserve banking system, a decrease in reserve requirements
increases both the money multiplier and the money supply
which of the following is correct?
index funds typically have a higher rate of return than managed funds. this tends to support the efficient market hypothesis
the concept of present value helps explain why
investment decreases when the interest rate, and it also helps explain why the quantity of loanable funds demanded decreases when the interest rate increases
the risk of a portfolio
is positively related to the average return of the portfolio
People hold $400 million of bank deposits but no currency. Banks have $20 million dollars of reserves and do not plan to change the reserve ratio. there is an open market sale bonds equal to $10 million by the fed to banks. what is the eventual (post multiplier) effect on the money supply?
it falls by $200 million
which of the following does the federal reserve not do?
it makes loans to any qualified business that requests one
which of the following is not an explanation for the existence of structural unemployment?
job search
Derek decides to forego a major appliance purchase and save the money. He transfers $2,100 from his checking account to his savings account. as a result of this transfer by itself
m1 decreases by $2,100 and m2 stays the same
given the following information, what are the values of m1 and m2?
m1= $980 billion, m2= $4370 billion
If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold
more reserves, so the reserve ratio will rise
when we measure and record economic value, we use money as the
not of account
the federal deposit insurance corporation
protects depositors in the event of bank failures
according to the classical dichotomy, which of the following is influenced by monetary factors?
real GDP, unemployment
people who are unemployed because wages are for some reason set above the level that brings labor supply and demand into equilibrium are best classified as
structurally unemployed
the fed has the power to increase or decrease the number of dollars in the economy through the decisions of
the FOMC
suppose the monetary neutrality and the fisher effect both hold. an increase in the money supply growth rate increases
the inflation rate, but not real interest rates
figure 27-1 for the person to whom this utility function applies
the more wealth she has, the less utility she gets from an additional dollar of wealth
money is
the most liquid asset but an imperfect store of value
as asset market is said to experience a speculative bubble when
the price of the asset rises above what appears to be its fundamental value
hyperinflation can be explained by
the quantity theory of money