Macroeconomic HW(Ch. 5,6,7)

The U.S. personal savings rate for the first quarter of 2012 dropped to its lowest level since the start of the recession. Americans stashed away 3.6 percent of personal income in the first quarter, down from 4.2 percent in the fourth quarter and a near-term peak of 6.2 percent in the second quarter of 2009. Which of the following could explain this drop in savings? -a rise in consumer confidence that their incomes will be higher in the future -a rise in the real interest rate -a increase in disposable income as the job market recovers -a decrease in wealth from a fall in stock prices

-a rise in consumer confidence that their incomes will be higher in the future

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate? A) A lower real interest rate makes more investment projects profitable. B) Consumers are willing to spend less and hence save more at higher real interest rates. C) Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment. D) All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate.

A) A lower real interest rate makes more investment projects profitable. Answer: A Topic: The Real Interest Rate and Investment Skill: Conceptual Question history: Modified 10th edition

In the illustration above, which figure shows an aggregate production function? A) Figure A B) Figure B C) Figure C D) Figure D

A) Figure A Answer: A Topic: Aggregate Production Function Skill: Recognition Question history: Previous edition, Chapter 6

In addition to saving and investment in capital, making an even larger contribution to long-term economic growth in real GDP per person A) are technological advances. B) is lower current consumption. C) is higher current consumption. D) is a larger work force.

A) are technological advances. Answer: A Topic: Labor Productivity, Technological Advance Skill: Conceptual Question history: Previous edition, Chapter 6

Full employment corresponds to A) equilibrium in the labor market, with real GDP being equal to potential GDP. B) labor demand being greater than labor supply and real GDP being equal to potential GDP. C) being at the point where the marginal product of labor equals zero. D) equilibrium in the labor market, and real GDP exceeding potential GDP.

A) equilibrium in the labor market, with real GDP being equal to potential GDP. Answer: A Topic: The Labor Market and Full Employment Skill: Recognition Question history: Previous edition, Chapter 6

If the inflation rate is negative, the price level in an economy is A) falling. B) rising slowly. C) constant. D) rising rapidly.

A) falling. CH5

When a government has a budget surplus, the surplus A) helps finance investment. B) crowds-out private saving. C) must be subtracted from private saving to get total saving. D) increases the world real interest rate.

A) helps finance investment. Answer: A Topic: Government Saving Skill: Conceptual Question history: Previous edition, Chapter 7

If the population increases, then potential GDP ________ and employment ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

A) increases; increases Answer: A Topic: Labor Market Equilibrium with an Increase in Population Skill: Analytical Question history: Previous edition, Chapter 6

If a rich country grows at a faster rate than a poor one, then A) the gap in their standard of living will widen over time. B) the gap in their standard of living will close over time. C) the difference in their living standards will not change over time. D) whether or not the living standards gap widens or closes over time depends on the absolute size of the relative growth rates.

A) the gap in their standard of living will widen over time. CH6 Answer: A Topic: Real GDP Growth in the World Economy Skill: Conceptual Question history: Previous edition, Chapter 6

An article in the Financial Times reports on a trend by college students to take a year off after graduation given the lack of success in finding a job. ʺIn a survey published last month by TMP Worldwide... 54 per cent of the final-year undergraduate interviewees were thinking about taking a gap year and one in 10 was planning to wait for a year to escape the financial chaos and wait for the economy to either improve or for the picture to become clearer.ʺ www.ft.com, 10/13/2008 These choices add to the fluctuations seen in the ________ as workers leave the labor force given their unsuccessful job searches. A) labor force participation rate B) employment rate C) efficiency wage D) inflation rate

A) labor force participation rate. CH5

All of the following contribute to labor productivity growth EXCEPT: A) population growth. B) physical capital growth. C) human capital growth. D) technological advancements.

A) population growth. Answer: A Topic: Factors Creating Economic Growth Skill: Conceptual Question history: New 10th edition

U.S. investment is financed from A) private saving, government budget surpluses, and borrowing from the rest of the world. B) private saving, government budget deficits, and borrowing from the rest of the world. C) private borrowing, government budget deficits, and lending to the rest of the world. D) private saving and borrowing from the rest of the world only.

A) private saving, government budget surpluses, and borrowing from the rest of the world. Answer: A Topic: Financing Investment Skill: Recognition Question history: Previous edition, Chapter 7

As the real wage rate increases, the A) quantity of labor supplied increases. B) supply of labor curve shifts rightward. C) supply of labor curve shifts leftward. D) quantity of labor supplied increases and the supply of labor shifts rightward.

A) quantity of labor supplied increases. Answer: A Topic: Supply of Labor Curve Skill: Recognition Question history: Previous edition, Chapter 6

In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment. A) raises; increases B) raises; decreases C) lowers; increases D) lowers; decreases

A) raises; increases Answer: A Topic: Labor Market Equilibrium Skill: Analytical Question history: Previous edition, Chapter 6

All of the following lead to more rapid economic growth EXCEPT A) restricting international trade. B) encouraging higher rates of saving. C) supporting more research and development. D) encouraging higher quality education.

A) restricting international trade. Answer: A Topic: Achieving Faster Economic Growth Skill: Conceptual Question history: New 10th edition

Along the aggregate production function, as the quantity of labor rises, real GDP A) rises B) falls C) stays the same D) may fall, rise, or stay the same

A) rises Answer: A Topic: Aggregate Production Function Skill: Conceptual Question history: Previous edition, Chapter 6

Because the productivity of labor decreases as the quantity of labor employed increases, A) the quantity of labor a firm demands increases as the real wage rate decreases. B) the quantity of labor a firm demands increases as the money wage rate decreases. C) the labor demand curve shifts right as the real wage rate decreases. D) the aggregate production function shifts upward as the real wage rate decreases.

A) the quantity of labor a firm demands increases as the real wage rate decreases. Answer: A Topic: Demand for Labor Skill: Conceptual Question history: Previous edition, Chapter 6

The cost of inflation to society includes A) unpredictable changes in the value of money. B) higher interest rates paid by borrowers. C) higher interest rates paid by the government on its debt. D) the lost spending when people do not have enough money.

A) unpredictable changes in the value of money. CH5

An advance in technology increases the productivity of labor. As a result, the nationʹs production function shifts ________ and the ________ labor curve shifts rightward. A) upward; demand for B) downward; demand for C) upward; supply of D) downward; supply of

A) upward; demand for Answer: A Topic: Labor Market Equilibrium with an Increase in Productivity Skill: Analytical Question history: Previous edition, Chapter 6

If the nominal interest rate is 8 percent and the inflation rate is 2 percent, the real interest rate is approximately A) 4 percent. B) 6 percent. C) 0.25 percent. D) 10 percent.

B) 6 percent. Answer: B Topic: Real Interest Rate Skill: Analytical Question history: Previous edition, Chapter 7

If the price level increases, but workersʹ money wage rates remain constant,which of the following is TRUE? I. The quantity of labor demanded will increase. II. The real wage rate will decrease. III. The demand for labor curve shifts rightward. A) I only B) I and II C) II and III D) I, II and III

B) I and II CH6 Answer: B Topic: Demand for Labor Curve Skill: Conceptual Question history: Previous edition, Chapter 6

As currently calculated, the CPI tends to overstate the true inflation rate because A) we cannot know what the true inflation rate is. B) it fails to correctly measure quality changes for some products. C) the market basket selected is inappropriate. D) the market basket fails to weigh housing costs sufficiently.

B) it fails to correctly measure quality changes for some products.

Human capital is A) the saving done by human beings. B) peopleʹs knowledge and skills. C) a measure of the labor productivity of workers. D) the investment people make in industries that make capital goods.

B) peopleʹs knowledge and skills. Answer: B Topic: Human Capital Skill: Recognition Question history: Previous edition, Chapter 6

22) When the inflation rate is positive, the A) real interest rate is greater than the nominal interest rate. B) real interest rate is less than the nominal interest rate. C) nominal interest rate is zero. D) real interest rate equals the nominal interest rate.

B) real interest rate is less than the nominal interest rate. CH7 Answer: B Topic: Real Interest Rate Skill: Conceptual Question history: Previous edition, Chapter 7

Assume the inflation rate falls from 4 percent to 2 percent. This means that A) the price level has fallen. B) the price level is increasing more slowly. C) the economy is experiencing deflation. D) real GDP is decreasing.

B) the price level is increasing more slowly. Answer: B Topic: Inflation and the Price Level Skill: Conceptual Question history: Previous edition, Chapter 5

An individual who has stopped looking for a job because he is convinced that he cannot find a job is referred to as A) a contingent worker. B) a productive worker. C) a discouraged worker. D) an unemployed worker.

C) a discouraged worker. Answer: C Topic: Discouraged Workers Skill: Recognition Question history: Previous edition, Chapter 5

The crowding out effect refers to A) government spending crowding out private spending. B) private saving crowding out government saving. C) government investment crowding out private investment. D) private investment crowding out government saving.

C) government investment crowding out private investment. Answer: C Topic: Crowding Out Effect Skill: Recognition Question history: Previous edition, Chapter 7

An increase in the price level is defined as A) a recession. B) a growth boom. C) inflation. D) an expansion.

C) inflation. Answer: C Topic: Inflation Skill: Recognition Question history: Previous edition, Chapter 5

An unemployment rate of zero percent cannot be expected because A) there are some people who do not want to work. B) there will always be discouraged workers. C) some portion of the labor force will always be between jobs. D) cyclical unemployment will always exist.

C) some portion of the labor force will always be between jobs. Answer: C Topic: Natural Unemployment Rate Skill: Conceptual Question history: Previous edition, Chapter 5

The quantity of loanable funds demanded increases so there is a movement downward along the demand for loanable funds curve when A) the expected profit from investment decreases. B) business expectations become more optimistic. C) the real interest rate falls. D) the pool of loanable funds falls.

C) the real interest rate falls. CH7 Answer: C Topic: Demand for Loanable Funds Curve Skill: Conceptual

If at the prevailing real wage rate, the quantity of labor supplied exceeds the quantity demanded, A) there is a shortage of labor. B) the real wage rate will rise to restore equilibrium. C) the real wage rate is greater than the equilibrium real wage rate. D) None of the above answers is correct.

C) the real wage rate is greater than the equilibrium real wage rate. Answer: C Topic: Labor Market Equilibrium Skill: Recognition Question history: Previous edition, Chapter 6

An economy is at full employment when ________. A) the unemployment rate is zero B) there is no frictional unemployment C) the unemployment rate equals the natural unemployment rate D) there is no structural unemployment

C) the unemployment rate equals the natural unemployment rate Answer: C Topic: Full Employment Skill: Recognition Question history: Previous edition, Chapter 5

At the full-employment equilibrium in the labor market, A) there is no unemployment. B) there are no job vacancies. C) there is neither a shortage nor a surplus of labor. D) the money wage rate equals the real wage rate.

C) there is neither a shortage nor a surplus of labor. Answer: C Topic: Labor Market Equilibrium Skill: Conceptual Question history: Previous edition, Chapter 6

If the real interest rate increases from 3 percent to 5 percent, A) the nominal interest rate will also increase. B) the demand for loanable funds curve will shift rightward. C) there will be a movement up along the demand for loanable funds curve. D) the supply of loanable funds curve will shift rightward.

C) there will be a movement up along the demand for loanable funds curve. CH7 Answer: C Topic: Demand for Loanable Funds Curve Skill: Conceptual Question history: Previous edition, Chapter 7

An individual is structurally unemployed if A) there is a recession and the individual is laid off. B) the individual wants to work just during certain months of the year. C) the individual quits a job in order to search for a better one. D) the individual lacks marketable job skills because technology has changed.

D) the individual lacks marketable job skills because technology has changed. Answer: D Topic: Structural Unemployment Skill: Recognition Question history: Previous edition, Chapter 5