Econ 2120 Exam 2

Which of the following is a case of cyclical unemployment?

Garrett lost his job after the company closed during last year's recession.

Individuals who have given up looking for work but still would take a job are considered

discouraged workers.

Higher GDP growth

decreases the unemployment rate.

Which of the following is TRUE regarding the natural rate of unemployment?

-The natural rate of unemployment equals the sum of the frictional and structural rates. -If the economy is operating at the natural rate of unemployment, cyclical unemployment is equal to zero.

An increase in the growth rate of velocity will result in

-an increase in inflation -an increase in the growth rate of real GDP

Patents

-encourage firms to invest in costly research and development. -give firms monopoly power and lead to higher prices than otherwise would exist in the market place

Employment protection laws typically

-increase the duration of unemployment -create insurance for workers with full-time jobs.

Which of the following may explain the significant increase in female labor force participation since 1948?

-increased demand for service professionals over manufacturing workers -rise of feminism -invention of the birth control pill

The development of new and better ideas leads to

-more output. -more consumption and investment. -more capital accumulation

When inflation is high, inflation also tends to be more:

-more variable -more difficult to predict -more difficult to stop

A patent

-provides temporary monopoly power to the company that receives it -is issued by the government

The economics of ideas

-refers to cutting edge growth. -helps explain why countries like the United States have been growing for the past two centuries. -explains why the simple Solow growth model incorrectly predicts no long-run economic growth.

The quantity theory of money provides a general relationship between the quantity of money in the economy and:

-the velocity of money. -the price level. -real output.

An investment of $1,000 in the bank at an annual interest rate of 4 percent at the same time that prices rise by 2.5 percent generates a real return of:

1.5%

What is the unemployment rate of the country in 2010?

4 percent

If the growth rate of the money supply in an economy is 7 percent, the growth rate of output is 2 percent, and the velocity of money is constant, what will the inflation rate in this economy be?

5 percent

In 2009 what the labor force to population ratio is roughly?

67 percent

Table: Labor Data Adult population: 200 million Labor force:150 million Employed persons: 138.75 million Discouraged workers: 10.5 million According to the accompanying labor data, the unemployment rate is _________ and the labor force participation rate is __________.

7.5%; 75%

Table: Employment, Unemployment, and Labor Force Participation Year 2009 2010 Population 380 million 400 million Adults in labor force 255 million 260 million Adults not in labor force 78 million 80 million Employed workers 245 million 247 million What is the labor force participation rate of this country in 2010?

76 percent

What is the employment rate of the country in 2009?

96 percent

Suppose that during the last recession economists observed the interest rates falling and lower levels of investment. Economists would think that markets viewed the recession as being caused by ________

A permanent (or long-lived) negative "shock".

Which of the following individuals can be counted as unemployed?

A. Darren, a ten-year-old child B. Moesha, a full-time college student C. Nazma, a stay-at-home mom D. None of the answers is correct*

Which of the following statements is NOT true?

A. Ideas for increasing output are primarily researched, developed, and implemented by profit-seeking firms. B. Ideas can be freely shared, but spillovers mean that ideas are under provided. C. Government has a role in improving the production of ideas. D. The smaller the market, the greater the incentive to research and develop new ideas.* E. All are true

A minimum wage is:

A. an employment protection law. B. a labor market price ceiling. C. the equilibrium wage in an unskilled labor market. D. None of the answers are correct

The number of new ideas is a function of all of the following EXCEPT the

A. level of capital invested.* B. number of people. C. incentive to innovate. D. number of ideas per hour each person has.

Structural unemployment is a bigger problem in Europe than in the United States because of

A. technological differences. B. labor market are more flexible in Europe C. oil prices. D. drug use. E. None of the above*

Which of the following is NOT a price index used to measure inflation?

A.consumer price index B. producer price index C. manufacturing price index* D. GDP deflator

Which of the following is a concern among economists regarding the aging of the U.S. population?

Since older people are less likely to work, an aging population will lead to a decreased labor force participation rate in the United States and lower tax revenues.

A country's total civilian non-institutionalized adult population is 1 million, and 500,000 people in this country are working, with another 20,000 people looking for work. Which of the following statements about the labor force statistics in this country is accurate?

The employment rate is 96.15 percent and the labor force participation rate is 52 percent.

Which of the following best defines a nation's labor force?

the total number of employed and unemployed persons

A real price is:

a price that has been corrected for inflation.

Discouraged workers are counted as part of the

adult population.

Technological advances are generally expected to have ______ spillovers

both positive and negative

To compare the $1 an hour your grandfather earned in 1950 with the $8 an hour you earn today, you would need to:

calculate real wages in both 1950 and today.

Structural unemployment is

caused by long-lasting shocks or changes in permanent features of an economy

Which measure of the average price level most closely corresponds to a student's daily economic activities?

consumer price index

Frictional unemployment is caused by:

creative destruction

Most economists expect labor force participation rates to:

decrease over time

An unemployed person is one who

does not have a job but is actively looking for one.

The labor force is made up of:

employed and unemployed workers

We would expect imitation and copying of ideas to be highest when the fixed costs of research and development is ______ and the marginal cost of producing the good is _______.

high; low

Which of the following is not a cost of inflation

higher real business expenses

Inflation tends to cause wages to

increase

When the size of the market grows,

more resources are spent in research and development.

Since the mid 1980s, (nominal) median household income has __________ average prices as measured by the consumer price index

increased at a faster rate than

When workers lose their jobs and become officially unemployed, the unemployment rate:

increases

The unemployment rate of individuals with only some college education looks most similar to _____________.

individuals with a high school degree

The GDP deflator:

is the price index adjusted with changes in GDP

The optimal private investment in R&D would likely be __________ the optimal social investment.

less than

In a closed economy, a temporary increase in income would lead to a ___________ and __________

lower interest rate, higher level of investment

An increase in unemployment benefits tends to:

lower the incentive to search for a job and raise structural unemployment.

Nobel Prize-winning economist Milton Friedman says, "Inflation is always and everywhere a:

monetary phenomenon.

In the long run, money is

neutral

The two challenging factors faced by the BLS when computing the consumer price index are:

new goods and better-quality goods

Governments can play a role in supporting the production of new ideas by

protecting intellectual property

During the 1980s, a reduction in the marginal tax rate, the tax on additional income, was found to

raise the amount of structural unemployment

When the expected rate of inflation is higher than the actual rate of inflation, wealth is:

redistributed from borrowers to lenders

The Fisher effect predicts that the nominal interest rate:

rises as the expected inflation rate rises

In the past several hundred years, economic growth in the United States has been

roughly constant

Frictional unemployment is

short-term unemployment due to the normal difficulties of matching employers and employees.

Europe has unemployment that is more persistent and longer in duration than unemployment in the United States. This suggests that Europe has higher

structural unemployment

Assume that a country's production function changes from to Y=2√K to Y=3√K . Which of the following could explain the change in this production function?

the arrival of robotic technology in production

The velocity of money is:

the average number of times a dollar is spent on final goods and services in a year

If the internet boom in the 1990s was viewed a permanent technology shock then we would expect that

the investment demand curve would shift out and the saving supply curve would not change

Changing demographics, cultural attitudes about women, and government tax policies all affect:

the labor participation rate.

A profit-maximizing firm will invest in research and development as long as

the private marginal benefit is greater than the marginal cost.

Suppose there is a temporary decrease in output (income or production), we would expect:

the saving supply curve to decrease and interest rates to rise

Cyclical unemployment is

unemployment correlated with the business cycle