EC309 Exam 2
5.10. According to the Fisher effect, the nominal interest rate moves one-for-one with changes in the: A) inflation rate. B) expected inflation rate. C) ex ante real interest rate. D)ex post real interest rate.
B) expected inflation rate.
11.14. When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is ______ and the aggregate demand curve shifts ______. A) greater; inward B) greater; outward C) lower; inward D) lower; outward
B) greater; outward
6.38. Suppose that the nominal exchange rate between the United States and Japan, expressed as yen per dollar, increases by 5 percent. If the price level in the United States increases by 3 percent and the price level in Japan increases by 2 percent, the real exchange rate will _____, and U.S. goods and services will become relatively _____ expensive than Japanese goods. A) increase by 4 percent; more B) increase by 6 percent; more C) increase by 4 percent; less D) increase by 6 percent; less
B) increase by 6 percent; more
5.9. Inflation ______ the variability of relative prices and ______ allocative efficiency. A) increases; increases B) increases; decreases C) decreases; decreases D) decreases; increases
B) increases; decreases
6.24. The real exchange rate: A) measures how many Japanese yen you can get for one U.S. dollar. B) is equal to the nominal exchange rate (measured in units of the foreign currency divided by units of home currency) multiplied by the domestic price level divided by the foreign price level. C) is equal to the nominal exchange rate (measured in units of the foreign currency divided by units of home currency) multiplied by the foreign price level divided by the domestic price level. D) domestic price level divided by the foreign price level.
B) is equal to the nominal exchange rate (measured in units of the foreign currency divided by units of home currency) multiplied by the domestic price level divided by the foreign price level.
6.36. Assume that the economy of Agraria produces corn only and does not have a government but is open to trade with other countries. In Agraria, total output of corn is 5 million bushels, residents of Agraria consume 4 million bushels, and investment in terms of seed corn is 2 million bushels of corn. This implies all of these EXCEPT that Agraria: A) is spending more than it produces. B) is running a trade surplus. C) needs to borrow from other countries. D) is running a trade deficit.
B) is running a trade surplus.
6.27. In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to: A) make loans to the domestic government. B) make loans to foreigners. C) repay the national debt. D) repay loans to the Federal Reserve.
B) make loans to foreigners.
11.9. If the short-run aggregate supply curve is horizontal, then a change in the money supply will change ______ in the short run and change ______ in the long run. A) only prices; only output B) only output; only prices C) both prices and output; only prices D) both prices and output; both prices and output
B) only output; only prices
7.15. If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings) is 0.56, then the fraction of employed workers who lose their jobs each month (the rate of job separations) must be: A) 0.08. B) 0.125. C) 0.22. D) 0.435
A) 0.08.
6.10. Nicholas is traveling to Europe, and the exchange rate of euros to the U.S. dollar falls from 1.5 euros for a U.S. dollar to 1.2 euros for a U.S. dollar. The value of the euro in U.S. dollars has changed from 1 euro equals _____ U.S. dollars to 1 euro equals _____ U.S. dollars. A) 0.67; 0.83 B) 6.7; 8.3 C) 0.83; 0.67 D) 8.3; 6.7
A) 0.67; 0.83
11.6. Assume that the economy is at point E. With no further shocks or policy moves, the economy in the long run will be at point: A) A. B) B. C) C. D) D.
A) A.
11.7. Assume that the economy is at point B. With no further shocks or policy moves, the economy in the long run will be at point: A) A. B) B. C) C. D) D.
A) A.
5.6. Which of the following would most likely be called a hyperinflation? A) Price increases averaged 300 percent per year. B) The inflation rate was 10 percent per year. C) Real GDP grew at a rate of 12 percent over a year. D) A stock market index rose by 1,000 points over a year.
A) Price increases averaged 300 percent per year.
7.10. Unemployment caused by the time it takes workers to search for a job is called ______ unemployment. A) frictional B) structural C) efficiency D)insider
A) frictional
5.3. Empirical data shows that countries with high money growth tend to have _____ inflation. A) high B) low C) constant D) decreasing
A) high
11.11. For a fixed money supply, the aggregate demand curve slopes downward because at a lower price level real money balances are ______ generating a ______ quantity of output demanded. A) higher; greater B) higher; smaller C) lower; greater D) lower; smaller
A) higher; greater
11.33. For a fixed money supply, the aggregate demand curve slopes downward because at a lower price level, real money balances are _____, generating a _____ quantity of output demanded. A) higher; greater B) higher; smaller C) lower; greater D) lower; smaller
A) higher; greater
11.18. According to the quantity theory of money, if output is higher, ______ real balances are required, and for fixed M this means ______ P. A) higher; lower B) lower; higher C) higher; higher D) lower; lower
A) higher; lower
11.25. If the short-run aggregate supply curve is horizontal, an increase in union aggressiveness that pushes wages and prices up will result in _____ prices and _____ output in the short run. A) higher; lower B) lower; higher C) higher; higher D)lower; lower
A) higher; lower
11.35. Assume that the economy is initially at point A with aggregate demand given by AD2. A shift in the aggregate demand curve to AD0 could be the result of either a(n)_______ in the money supply or a(n)_______ in velocity. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
A) increase; increase
6.4.Expansionary fiscal policies in foreign countries will cause the world interest rate to _____ and the trade balance in the small open economy to _____. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
A) increase; increase
11.28. Since the Covid-19 health crisis caused many businesses to temporarily shut down and lay off their workers, there was a(n) _____ in the natural rate of unemployment and the long-run aggregate supply (LRAS) curve shifted _____. A) increase; left B) increase; right C) decrease; left D) decrease; right
A) increase; left
6.29. If the government of a small open economy wishes to reduce a trade deficit, which policy action will be successful in achieving this goal? A) increasing taxes B) increasing government spending C) increasing investment tax credits D) imposing protectionist trade policies
A) increasing taxes
6.6.When Y < C + I + G, then S _____ I. A) is less than B) is greater than C) cannot be computed relative to D) is equal to
A) is less than
11.5. Starting from long-run equilibrium, without policy intervention, the long-run impact of an adverse supply shock is that prices will: A) be permanently higher and output will be restored to the natural rate. B) return to the old level and output will be restored to the natural rate. C) be permanently higher and output will be permanently lower. D) return to the old level, but output will be permanently lower.
B) return to the old level and output will be restored to the natural rate.
6.12. In an open economy, if Y > C + I + G, this country: A) must increase investment in order to run a positive trade balance. B) runs a positive trade balance. C) runs a negative trade balance. D) has a balanced budget.
B) runs a positive trade balance.
7.17. Economists call the changes in the composition of demand among industries and regions: A) insider-outsider conflicts. B) sectoral shifts. C) moral hazard. D) adverse selection.
B) sectoral shifts.
6.28. In a small open economy, starting from a position of balanced trade, if the government increases the income tax, this produces a tendency toward a trade _____ and _____ net capital outflow. A) deficit; negative B) surplus; positive C) deficit; positive D) surplus; negative
B) surplus; positive
7.14. In a steady state: A) the number of people losing jobs exceeds the number of people finding jobs. B) the number of people finding jobs equals the number of people losing jobs. C) the number of people finding jobs exceeds the number of people losing jobs. D) no hiring or firings are occurring.
B) the number of people finding jobs equals the number of people losing jobs.
7.5. The macroeconomic problem that affects individuals most directly and severely is: A) inflation. B) unemployment. C) low savings. D)low investment.
B) unemployment.
7.18. A policy that increases the job-finding rate _____ the natural rate of unemployment. A) will increase B) will decrease C) will not change D) could either increase or decrease
B) will decrease
5.16. An economy produces 50 widgets, which sell for $4 each, and has a money supply of $100. What is the velocity of money? A) 1/8. B) 1/2. C) 2. D) 8
C) 2.
6.35. Which event would cause the real exchange rate to rise in a small open economy with perfect capital mobility? A) a global investment boom B) a fiscal expansion in many large foreign countries C) a domestic investment boom D) a reduction in the domestic budget deficit
C) a domestic investment boom
6.32. If an import restriction does not influence domestic investment or saving, it causes a country's currency to A) appreciate, resulting in unchanged imports B) depreciate, resulting in unchanged imports C) appreciate, resulting in an unchanged trade balance D) depreciate resulting in an unchanged trade balance
C) appreciate, resulting in an unchanged trade balance
7.4. If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is 0.10, then the current unemployment rate is ______ the equilibrium rate, and in the next period it will move ______ the equilibrium rate. A) above; toward B) above; away from C) below; toward D)below; away from
C) below; toward
6.31. Other things equal, an increase in government purchases of goods and services pushes the trade balance toward _______ and causes the currency to _______. A) surplus, appreciate B) surplus, depreciate C) deficit, appreciate D) deficit, depreciate
C) deficit, appreciate
5.4. If the real return on government bonds is 3 percent and the expected rate of inflation is 4 percent, then the cost of holding money is ______ percent. A) 1 B) 3 C) 4 D) 7
D) 7
6.8.A Swiss banker rents an apartment in London for 5,000 British pounds per month. At a nominal exchange rate of 1.5 Swiss francs per British pound, the Swiss franc price of the apartment is _____ francs per month. A) 2,500 B) 3,333 C) 5,000 D) 7,500
D) 7,500
11.38. Which of the following changes would contribute to a decline in the index of leading indicators, suggesting that a recession is more likely? A) a rise in stock prices B) a rise in building permits C) a decline in initial claims for unemployment insurance D) a decline in the slope of the yield curve
D) a decline in the slope of the yield curve
6.21. According to recent estimates produced by economists, the trade restrictions announced by the US government at the beginning of 2018 had this effect: A) an increase in exports. B) a decrease in the trade deficit as a percentage of gross domestic product (GDP). C) an increase in imports. D) a decrease in the overall volume of trade.
D) a decrease in the overall volume of trade.
11.8. The short-run aggregate supply curve is horizontal at: A) a level of output determined by aggregate demand. B) the natural level of output. C) the level of output at which the economy's resources are fully employed. D) a fixed price level.
D) a fixed price level.
6.39. Which will cause a fall in the trade balance in a small open economy? A) investment-tax credits given to companies in larger foreign countries B) expansionary fiscal policies in larger foreign countries C) a decrease in domestic investment D) a lower world interest rate
D) a lower world interest rate
6.42. Which of the following events would cause a currency to depreciate? A) a tax cut B) an investment boom C) a tax increase abroad D) a rise in the price level
D) a rise in the price level
11.39. Stagflation—lower output and higher prices—is caused by A) an expansion in aggregate demand. B) a contraction in aggregate demand. C) a favorable shock to aggregate supply. D) an adverse shock to aggregate supply.
D) an adverse shock to aggregate supply.
11.22. A favorable supply shock occurs when: A) environmental protection laws raise costs of production. B) the Fed increases the money supply. C) unions push wages up. D) an oil cartel breaks up and oil prices fall.
D) an oil cartel breaks up and oil prices fall.
6.33. If the euro/dollar exchange rate is e = 0.90 euro per dollar, and a pair of jeans costs 50 euros in France and $40 in the United States, then: A) jeans prices in the United States will fall. B) jeans prices in France will increase. C) purchasing-power parity holds. D) arbitrage profits are possible.
D) arbitrage profits are possible.
5.2. The definition of the transactions velocity of money is: A) money multiplied by prices divided by transactions. B) transactions divided by prices multiplied by money. C) money divided by prices multiplied by transactions. D) prices multiplied by transactions divided by money.
D) prices multiplied by transactions divided by money.
5.7. The one-to-one relation between the inflation rate and the nominal interest rate, the Fisher effect, assumes that the: A) money supply is constant. B) velocity is constant. C) inflation rate is constant. D) real interest rate is constant.
D) real interest rate is constant.
6.14. A U.S. company sells $8 million worth of power generation equipment to China and is paid in U.S. dollars by China. In this case: A) U.S. net exports increase, and U.S. net capital outflow increases. B) net exports and net capital outflow are not equal. C) U.S. net exports increase, but net capital outflows do not change. D) U.S. net exports decrease, and U.S. net capital outflow decreases.
A) U.S. net exports increase, and U.S. net capital outflow increases.
7.8. Unions contribute to structural unemployment when collective bargaining results in wages: A) above the equilibrium level. B) below the minimum wage. C) below the equilibrium level. D) above the level of unemployment compensation.
A) above the equilibrium level.
11.4. Stabilization policy: A) aims at keeping output and employment at their natural rates. B) always succeeds in keeping output and employment at their natural rates. C) is generally ineffective. D) does more harm than good.
A) aims at keeping output and employment at their natural rates.
6.18. Which event would cause the real exchange rate to fall in a small open economy with perfect capital mobility? A) an increase in the world interest rate B) an increase in government spending C) a tax cut D) increased tariffs on imports
A) an increase in the world interest rate
11.36. If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money: A) both Central Bank A and Central Bank B should increase the quantity of money. B) Central Bank A should increase the quantity of money, whereas Central Bank B should keep it stable. C) Central Bank A should keep the quantity of money stable, whereas Central Bank B should increase it. D) both Central Bank A and Central Bank B should keep the quantity of money stable.
A) both Central Bank A and Central Bank B should increase the quantity of money.
5.14. All of the following are costs of fully expected inflation except that expected inflation: A) causes lower real wages. B) leads to shoeleather costs. C) increases menu costs. D) leads to taxing of nominal capital gains that are not real.
A) causes lower real wages.
11.26. The version of Okun's law studied in Chapter 11 assumes that with no change in unemployment, real gross domestic product (GDP) normally grows by 3 percent over a year. If the unemployment rate rose by 2 percentage points over a year, Okun's law predicts that real GDP would: A) decrease by 1 percent. B) decrease by 2 percent. C) decrease by 3 percent. D) increase by 1 percent.
A) decrease by 1 percent.
6.34. Consider a small open economy with balanced trade. If foreign countries increase investment in their own economies because of technological advance, then investment in the small open economy will _____, and the small open economy will run a trade _____. A) decrease; surplus B) decrease; deficit C) increase; deficit D) increase; surplus
A) decrease; surplus
6.37. A small open economy is in equilibrium with ε = 2, NX = 1,000 − 100ε , and S − I = 800. If the government increases government purchases by 100, then saving _____, investment _____, and the real exchange rate increases. A) decreases; does not change B) increases; does not change C) decreases; increases D) increases; decreases
A) decreases; does not change
6.30. When a nation runs a trade deficit, A) it experiences a capital inflow. B) its saving exceeds its domestic investment. C) its output exceeds the sum of its consumption, investment, and government purchases. D) all of the above
A) it experiences a capital inflow.
11.23. If the Fed accommodates an adverse supply shock, output falls _____, and prices rise _____. A) less; more B) less; less C) more; less D) more; more
A) less; more
5.5. The costs of unexpected inflation, but not of expected inflation, are: A) menu costs. B) the arbitrary redistribution of wealth between debtors and creditors. C) unintended distortions of individual tax liabilities D) the costs of relative price variability.
A) menu costs.
7.13. When insiders have a much greater impact on the wage bargaining process than do outsiders, the negotiated wage is likely to be ______ the equilibrium wage. A) much greater than B) much less than C) almost equal to D) about one-half of
A) much greater than
11.30. If the short-run aggregate supply curve is horizontal and the Fed increases the money supply, then: A) output and employment will increase in the short run. B) output and employment will decrease in the short run. C) prices will increase in the short run. D) prices will decrease in the short run.
A) output and employment will increase in the short run.
11.29. Stabilization policy refers to policy actions aimed at: A) reducing the severity of short-run economic fluctuations. B) equalizing incomes of households in the economy. C) maintaining constant shares of output going to labor and capital. D) preventing increases in the poverty rate.
A) reducing the severity of short-run economic fluctuations.
6.1. In the classical model of a small open economy, trade policies such as import tariffs or export subsidies will affect: A) the volume of trade. B) net exports. C) net capital outflow. D) the relationship between imports and exports.
A) the volume of trade.
6.2. Assume that three countries—the Czech Republic, Lichtenstein, and France—trade with one another. France exports 100 euros worth of wine to Lichtenstein, Lichtenstein exports 100 euros worth of chocolate to the Czech Republic, and the Czech Republic exports 100 euros worth of glass to France. If this is the only trade, net capital outflow for France is: A) −100. B) 0. C) 100. D) 300.
B) 0.
6.17. In the United States, a bushel of wheat costs 9 U.S. dollars. In Russia, a bushel of wheat costs 400 Russian rubles. The exchange rate is 33 rubles per dollar. The real exchange rate is: A) 1.347 dollars per ruble. B) 0.7425 Russian wheat per U.S. wheat. C) 0.7425 rubles per dollar. D) 1.347 Russian wheat per U.S. wheat.
B) 0.7425 Russian wheat per U.S. wheat.
6.41. A small open economy has exports valued at 5,000 million pesos, imports valued at 7,000 million pesos, and investment valued at 3,000 million pesos. In this case, saving equals _____ million pesos. A) −1,000 B) 1,000 C) 2,000 D) 4,000
B) 1,000
5.12. If the quantity of real money balances is kY, where k is a constant, then velocity is: A) k. B) 1/k. C) kP. D) P/k.
B) 1/k.
6.13. Under the law of one price, if the nominal exchange is e = 33 Pakistani rupees per dollar, and the price of a bushel of wheat in Pakistan is 9,900 rupees, then the price of a bushel of wheat in the United States is _____ dollars. A) 33.30 B) 300 C) 333.30 D) 900
B) 300
6.5.A small open economy is in equilibrium with ε = 3, NX = 1,000 − 100ε = 700, and S − I = 700. If the government increases its purchases by 200, then the new equilibrium real exchange rate is ε = _____, and net exports _____. A) 5; increase B) 5; decrease C) 2; increase D) 2; decrease
B) 5; decrease
5.17. An economy with constant velocity of money has real GDP growth of 3%, money growth of 7%, and a real interest rate of 2%. The nominal interest rate is A) 2 percent. B) 6 percent. C) 8 percent. D) 12 percent.
B) 6 percent.
6.40. Suppose that NX = 1,000 − 100(ε). If S − I = 400, then the equilibrium real exchange rate is: A) 2.5. B) 6. C) 225. D) 500.
B) 6.
6.7.If a pair of socks costs 28.50 krone in Denmark and $4.07 in the United States, then the law of one price predicts that the nominal exchange rate measured in krone per U.S dollar is _____ krone (rounded to the nearest integer). A) 1 B) 7 C) 10 D) 24
B) 7
6.11. Tomas purchases a wallet in a shopping mall in Salt Lake City, Utah. The wallet is made in China. The purchase of this wallet will impact the _____ part(s) of the national income accounts identity. A) C B) C and NX C) NX D) IM
B) C and NX
5.13. Maria lives in an economy with hyperinflation. Each day after being paid, she runs to the store as quickly as possible so she can spend her money before it loses value. Select the cost of inflation that best describes this scenario. A) Menu costs B) Shoeleather costs C) Cost of unexpected inflation D) Inconvenience of a changing price level
B) Shoeleather costs
6.16. Which event would cause the real exchange rate to fall in a small open economy with perfect capital mobility? A) an increase in government purchases B) a tax increase C) an increase in domestic investment caused by technological advance D) a drop in the world interest rate
B) a tax increase
11.16. The relationship between the quantity of goods and services supplied and the price level is called: A) aggregate demand. B) aggregate supply. C) aggregate investment. D) aggregate production
B) aggregate supply.
11.13. If an aggregate demand curve is drawn with real GDP (Y) along the horizontal axis and the price level (P) along the vertical axis, using the quantity theory of money as a theory of aggregate demand, this curve slopes ______ to the right and gets ______ as it moves further to the right. A) downward; steeper B) downward; flatter C) upward; steeper D) upward; flatter
B) downward; flatter
11.17. A difference between the economic long run and the short run is that: A) the classical dichotomy holds in the short run but not in the long run. B) monetary and fiscal policy affect output only in the long run. C) demand can affect output and employment in the short run, whereas supply is the ruling force in the long run. D) prices and wages are sticky in the long run only.
C) demand can affect output and employment in the short run, whereas supply is the ruling force in the long run.
6.25. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase: A) investment in the small open economy. B) saving in the small open economy. C) exports by the small open economy. D) imports by the small open economy.
C) exports by the small open economy.
7.2. As the relative demand for unskilled workers falls, wages for unskilled workers _____, and unemployment compensation becomes a _____ attractive option. A) rise; more B) rise; less C) fall; more D) fall; less
C) fall; more
5.8. According to the classical theory of money, inflation does not make workers poorer because wages increase: A) faster than the overall price level. B) more slowly than the overall price level. C) in proportion to the increase in the overall price level. D) in real terms during periods of inflation.
C) in proportion to the increase in the overall price level.
11.40. If the Fed responds to an adverse supply shock by expanding the money supply, it will A) stabilize aggregate demand at its previous level. B) make the resulting recession deeper than it otherwise would be. C) keep the economy closer to its natural levels of output and employment. D) allow the price level to return to the level that prevailed before the shock.
C) keep the economy closer to its natural levels of output and employment.
6.15. An increase in taxes, all else equal, increases national saving, _____ the exchange rate, and pushes the trade balance toward _____. A) lowers; deficit B) raises; surplus C) lowers; surplus D) raises; deficit
C) lowers; surplus
6.23. The real exchange rate is determined by the equality of: A) saving and the demand for net exports. B) investment and the demand for net exports. C) net capital outflow and the demand for net exports. D) the negative value of net capital outflow and the demand for net exports.
C) net capital outflow and the demand for net exports.
6.20. In a large open economy, the real exchange rate adjusts so that net exports equal: A) domestic saving. B) domestic investment. C) net capital outflow. D) domestic investment plus net capital outflow.
C) net capital outflow.
5.15. The real interest rate is equal to the: A) amount of interest that a lender actually receives when making a loan. B) nominal interest rate plus the inflation rate. C) nominal interest rate minus the inflation rate. D) nominal interest rate.
C) nominal interest rate minus the inflation rate.
5.11. The rate of inflation is the: A) median level of prices. B) average level of prices. C) percentage change in the level of prices. D) measure of the overall level of prices.
C) percentage change in the level of prices.
11.24. In the short run, a favorable supply shock causes: A) both prices and output to rise. B) prices to rise and output to fall. C) prices to fall and output to rise. D) both prices and output to fall.
C) prices to fall and output to rise.
11.32. A short-run aggregate supply curve shows fixed _____, and a long-run aggregate supply curve shows fixed _____. A) output; output B) prices; prices C) prices; output D) output; prices
C) prices; output
7.9. When there is structural unemployment, the real wage is: A) rigid at a level below the market-clearing level. B) rigid at the market-clearing level. C) rigid at a level above the market-clearing level. D) flexible.
C) rigid at a level above the market-clearing level.
6.26. In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade _____ and _____ net capital outflow. A) surplus; negative B) deficit; positive C) surplus; positive D) deficit; negative
C) surplus; positive
11.20. Starting from long-run equilibrium, if the velocity of money increases (due to, for example, the invention of automatic teller machines), the Fed might be able to stabilize output by ______ the rate of growth of the money supply. A) permanently decreasing B) permanently increasing C) temporarily decreasing D) temporarily increasing
C) temporarily decreasing
6.9.A Brazilian company exports 5 million reais (Brazilian currency) worth of granite to the Arizona Tile company in the United States. The Brazilian company is paid in U.S. dollars, with which Brazil purchases U.S. Treasury bonds. As a result: A) Brazil experiences a capital inflow. B) net exports will not change. C) the United States experiences a capital inflow. D) U.S. purchases of foreign assets will increase.
C) the United States experiences a capital inflow.
11.15. The natural level of output is: A) affected by aggregate demand. B) the level of output at which the unemployment rate is zero. C) the level of output at which the unemployment rate is at its natural level. D) permanent and unchangeable.
C) the level of output at which the unemployment rate is at its natural level.
7.16. Efficiency-wage theory implies that firms pay high wages because: A) this practice increases the problem of moral hazard. B) in wealthy countries, it is important to pay workers high wages to improve their health. C) the more a firm pays its workers, the greater their incentive to stay with the firm. D) paying high wages promotes adverse selection.
C) the more a firm pays its workers, the greater their incentive to stay with the firm.
7.6. Frictional unemployment is unemployment caused by: A) wage rigidity. B) minimum-wage legislation. C) the time it takes workers to search for a job. D) clashes between the motives of insiders and outsiders.
C) the time it takes workers to search for a job.
7.19. All of these are causes of structural unemployment EXCEPT: A) minimum-wage laws. B) the monopoly power of unions. C) unemployment insurance. D) efficiency wages
C) unemployment insurance.
11.37 Leading economic indicators are: A) the most popular economic statistics. B) data that are used to construct the consumer price index and the unemployment rate. C) variables that tend to fluctuate in advance of the overall economy. D) standardized statistics compiled by the National Bureau of Economic Research.
C) variables that tend to fluctuate in advance of the overall economy.
11.27. Measures of average workweeks and building permits for new housing units are included in the index of leading indicators, because shorter workweeks tend to indicate _____ future economic activity and increased permits for new units tend to indicate _____ future economic activity. A) stronger; stronger B) stronger; weaker C) weaker; stronger D) weaker; weaker
C) weaker; stronger
11.10. If a short-run equilibrium occurs at a level of output below the natural rate, then in the transition to the long run prices will ______ and output will ______. A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase
D) decrease; increase
11.31. The assumption of constant velocity in the quantity equation is the equivalent of the assumption of a constant: A) short-run aggregate supply curve. B) long-run aggregate supply curve. C) price level in the short run. D) demand for real balances per unit of output.
D) demand for real balances per unit of output.
11.19. If the demand for money increases, but the Fed keeps the money supply the same, then in the short run output will: A) fall and in the long run prices will remain unchanged. B) remain unchanged and in the long run prices will fall. C) remain unchanged and in the long run prices will remain unchanged. D) fall and in the long run prices will fall.
D) fall and in the long run prices will fall.
6.19. In a large open economy, if political instability abroad lowers the net capital outflow function, then the real interest rate: A) rises, while the real exchange rate rises and net exports fall. B) rises, while the real exchange rate falls and net exports rise. C) falls, while the real exchange rate rises and net exports rise. D) falls, while the real exchange rate rises and net exports fall.
D) falls, while the real exchange rate rises and net exports fall.
7.3. A spell of unemployment begins when a person leaves their job or: A) withdraws from the labor force. B) enters the labor force. C) takes a vacation. D) has been without a job for at least four weeks.
D) has been without a job for at least four weeks.
7.11. The unemployment insurance system may be desirable because unemployment insurance: A) raises the natural rate of unemployment. B) reduces the rate of job finding. C) increases workers' uncertainty about their incomes. D) induces workers to reject unattractive job offers
D) induces workers to reject unattractive job offers
11.34. Business cycles are: A) regular and predictable. B) irregular but predictable. C) regular but unpredictable. D) irregular and unpredictable.
D) irregular and unpredictable.
11.1. Over the business cycle, consumption spending _____ investment spending. A) is inversely proportional to B) is more volatile than C) has about the same volatility D) is less volatile than
D) is less volatile than
7.7. Sectoral shifts: A) lead to wage rigidity. B) explain the payment of efficiency wages. C) depend on the level of the minimum wage. D) make frictional employment inevitable.
D) make frictional employment inevitable.
6.3. Graphing the relationship NX = NX(ε), with ε on the vertical axis and NX on the horizontal axis, shows a: A) straight vertical line. B) straight horizontal line. C) positively sloped curve. D) negatively sloped curve.
D) negatively sloped curve.
11.3. Looking at the aggregate demand curve alone, one can tell: A) the quantity of output and the price level. B) the quantity of output. C) the price level. D) neither the quantity of output nor the price level.
D) neither the quantity of output nor the price level.
7.12. Wage rigidity: A) is caused by sectoral shifts. B) forces labor demand to equal labor supply. C) increases the rate of job finding. D) prevents labor demand and labor supply from reaching the equilibrium level.
D) prevents labor demand and labor supply from reaching the equilibrium level.
7.1. Unemployment insurance increases the amount of frictional unemployment by: A) making workers more frantic in their search for new jobs. B) inducing workers to accept the first job offer that they receive. C) making employers more reluctant to lay off workers. D) softening the economic hardship of unemployment.
D) softening the economic hardship of unemployment.
6.22.A depreciation of the real exchange rate in a small open economy could be the result of: A) a domestic tax cut. B) an increase in government spending. C) a decrease in the world interest rate. D) the expiration of an investment tax-credit provision.
D) the expiration of an investment tax-credit provision.
11.12. Along an aggregate demand curve, which of the following are held constant? A) real output and prices B) nominal output and velocity C) the money supply and real output D) the money supply and velocity
D) the money supply and velocity
5.1. A variable rate of inflation is undesirable because: A) debtors and creditors cannot protect themselves by indexing contracts. B) shoeleather costs are greater under variable inflation than under constant inflation. C) menu costs are greater under variable inflation than under constant inflation. D) variable inflation leads to greater uncertainty and risk than under constant inflation.
D) variable inflation leads to greater uncertainty and risk than under constant inflation.
11.21. Aggregate supply is the relationship between the quantity of goods and services supplied and the: A) money supply. B) unemployment rate. C) interest rate. D)price level.
D)price level.
