Eco Exam 2 wrong answers to study

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is: 200 million. 190 million. 110 million. 100 million.

110 million.

(Table: Unemployment Statistics for Country X) Using the data in the table, what is the natural unemployment rate for this country in the year 2005? 1% 4.7% 2.9% 1.9%

2.9

If a zero-coupon bond with a face value of $1,000 costs $800, then the rate of return if held to maturity would be: -20%. 20%. -25%. 25%.

25%

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the unemployment rate of the country in 2009? 3% 3.9% 4% 5%

3.9%

In a small economy, the quantity of money circulating in the economy is $2.5 million. Real GDP for the current year is $5 million, and the average price level is 2. What is the velocity of money? 4 2 2.5 5

4

(Table: Unemployment Statistics for Country X) Using the data in the table, what is the natural unemployment rate for this country in the year 1995? 1.5% 4% 3.4% 2.5%

4%

(Figure: Labor Supply and Demand) Refer to the figure. What is the unemployment rate caused by the labor union's action to increase its wage demands to $11 an hour? Hint: Compute the numbers of those who are employed and unemployed. 40% 60% 66.7% 75.6%

40%

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force participation rate is: 5%. 9%. 50%. 55%.

55%

A country has a population of 160 million. Thirty million of its people are under the age of 16 and 10% of the population is either in the military or institutionalized. Seventy million people have jobs, and five million are looking for work. What is the labor force participation rate in this country? 52% 62% 66% 70%

66%

(Figure: Labor Supply and Demand) Refer to the figure. How much will the quantity of labor employed decline as a result of the labor union's action to increase its wage demands to $11 an hour? 700 1,100 1,800 2,700

700.

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's unemployment rate is: 5%. 9.1%. 10%. 11%.

9.1%

Which of the following best describes the role of banks in the loanable funds market? Banks own the supply of loanable funds and distribute them to borrowers. Banks act as a nonprofit middleman whose primary goal is to facilitate trade in the loanable funds market. Banks act as profit-seeking institutions, taking the supply of loanable funds from households and distributing them to borrowers. Banks are the primary demanders of loanable funds and thus have an important role in setting interest rates.

Banks act as profit-seeking institutions, taking the supply of loanable funds from households and distributing them to borrowers.

What effect will an investment tax credit have on interest rates and the quantity of savings? There will be no effect because investment tax credits only affect the amount of taxes paid by firms. Both interest rates and the quantity of savings will increase. Interest rates will decrease and the quantity of savings will increase. Interest rates will not change, but the quantity of savings will decrease.

Both interest rates and the quantity of savings will increase.

Which of the following statements is TRUE?I. Stock prices provide signals on how well a company is performing.II. The stock market is a mechanism that firms use to raise money to buy capital.III. The stock market provides a mechanism for poorly managed companies to be taken over by more competent managers. III only I and II only I, II, and III I and III only

I, II, and III

Which of the following statements is TRUE?I. Technical analysis has been found to outperform most investing strategies.II. Technical analysis looks for patterns in stock price movements to best determine when to buy and sell.III. Technical analysis is the use of insider information to help determine when to buy and sell. I and II only II and III only II only I and III only

II only

According to the quantity theory/equation of money, an increase in the money supply causes an increase in _____ over the long run. production the velocity of money real GDP prices

Prices

Which of the following statements highlights the difference between the CPI (consumer price index) and the GDP deflator? The CPI measures the average prices of inputs in the production process, whereas the GDP deflator measures the average prices of goods and services purchased by consumers. The CPI measures the average prices of retail goods and services, whereas the GDP deflator measures the average prices of wholesale goods. The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all final goods and services in the economy. The CPI measures the average prices of all final goods and services purchased by consumers, whereas the GDP deflator measures the average prices of all inputs used in the economy.

The CPI measures the average prices of goods and services consumed by typical consumers, whereas the GDP deflator measures the average prices of all final goods and services in the economy.

Why could very high rates of inflation cause velocity to increase? The more people earn, the faster they spend it. The more money loses its value, the faster people try to spend it. The more people earn, the faster prices rise. The more inflation there is, the more there is to buy.

The more money loses its value, the faster people try to spend it.

In the real business cycle model that includes the AD and LRAS curves only, increased spending growth causes: a lower inflation rate, but no change in the real growth rate. a higher inflation rate, but no change in the real growth rate. a lower real growth rate, but no change in the inflation rate. a higher real growth rate, but no change in the inflation rate.

a higher inflation rate, but no change in the real growth rate.

Consumption smoothing means: never borrowing. borrowing every year to consume more than one earns. borrowing to consume more than one's income in high-income years and consuming less than one's income in low-income years. borrowing to consume more than one's income in low-income years and consuming less than one's income in high-income years.

borrowing to consume more than one's income in low-income years and consuming less than one's income in high-income years.

People who accept the efficient markets hypothesis should: buy a large number of stocks from different companies and hold them for a long period. buy a small number of stocks from several companies, selling the stocks whose price has fallen and keeping the rest. buy stocks only at a low price and sell them when their prices have increased by more than the market average. constantly buy and sell stocks to avoid the risk of large price swings.

buy a large number of stocks from different companies and hold them for a long period.

If the money supply and the velocity of money are fixed, then increases in real GDP: are impossible because real GDP must also be fixed. cause increases in the price level. cause decreases in the price level. occur without changes in the price level.

cause decreases in the price level.

A typical person's: saving is smooth over their entire lifetime. consumption is smooth over their entire lifetime. consumption in a given year is related to their income in that year. saving is the highest when they die.

consumption is smooth over their entire lifetime.

For a given nominal interest rate, an increase in the inflation rate will cause real interest rates to: remain relatively constant. increase. decrease. become unpredictable.

decrease

If the growth rate of the money supply decreases from 10% to 5%, which of the following is a prediction of the quantity theory of money? disinflation deflation hyperinflation money illusion

disinflation

If the equilibrium wage is $9 in the market for hotel workers and $8 in the market for restaurant workers and both markets have similar elasticities of labor supply and demand, then a minimum wage of $4 in both markets will: cause more unemployment among hotel workers than restaurant workers. cause more unemployment among restaurant workers than hotel workers. cause the same amount of unemployment in both markets. have no effect in either market.

have no effect in either market

For a given nominal interest rate, an increase in deflation will cause the real rate of interest to: remain relatively constant. increase. decrease. become unpredictable.

increase

In the long run, money: always increases real GDP. will not affect prices. will lift the standard of living for everyone in a nation. is neutral with respect to quantity produced.

is neutral with respect to quantity produced.

The quantity theory of money/equation assumes that real GDP: increases with the quantity of money in the economy. decreases with the quantity of money in the economy. is relatively stable. is difficult to predict.

is relatively stable.

Stock market bubbles have real effects in the economy because: overvalued stocks cause inflationary effects in the economy. overvalued stocks violate the efficient markets hypothesis. overvalued stocks divert capital to less-productive uses. when these bubbles burst, they raise the value of capital in those industries.

overvalued stocks divert capital to less-productive uses.

An increase in expected inflation will cause the economy's aggregate demand curve to: shift outward. shift inward. become steeper. remain unchanged.

remain unchanged

On the basis of their role in the financial system, from the macroeconomic viewpoint, venture capitalists are BEST described as: borrowers. savers. financial intermediaries. investors.

savers

What is one of the causes of frictional unemployment? uneducated work force willingness to take lower level jobs scarcity of information overabundance of job vacancies

scarcity of information

Sticky wages and prices are incorporated in the AD-AS model by the: long-run aggregate supply curve. short-run aggregate supply curve. aggregate demand curve. both the aggregate demand and short-run aggregate supply curves.

short-run aggregate supply curve.

The Keynesian explanation for cyclical unemployment is: that labor is reallocated across different industries. the same as that for frictional and structural unemployment. that wage demands are too high relative to falling prices. that it is a normal response to real shocks in the economy.

that wage demands are too high relative to falling prices.

If the interest rate in the market for loanable funds is below the market-clearing rate, then: individuals will become more impatient. individuals will become less impatient. there will be a shortage of savings, and demanders will bid the interest rate up as they compete to borrow. there will be a surplus of savings, and suppliers will bid the interest rate down as they compete to lend.

there will be a shortage of savings, and demanders will bid the interest rate up as they compete to borrow.