econ exam 2
You expect a share of EconNews.Com to sell for $65 a year from now and to pay a $2 dividend per share in one year. What should you pay (rounded to the nearest dollar) for the stock today if you require an 8% return?
$62
In Macroland there is $10,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks desired reserve deposit ratio is 10%, deposits in Macroland equal ________ and the money supply equals ________.
50,000,000 ; 55,000,000
If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are ______ and the money supply is _____.
800 ; 1,200
Which of the following statements will increase the domestic real interest rate in an open economy?
A decrease in the domestic saving
Domestic citizens decide to save more
As a consequence of the new real interest rate, net capital inflows will decrease
The amount of investment opportunities in the country diminishes due to an economic slowdown.
As a consequence of the new real interest rate, net capital inflows will decrease
The government budget surplus in the country rises
As a consequence of the new real interest rate, net capital inflows will decrease
Domestic citizens decide to spend more and save less.
As a consequence of the new real interest rate, net capital inflows will increase
Investment opportunities in the country improve owing to new technologies.
As a consequence of the new real interest rate, net capital inflows will increase
The government budget deficit rises
As a consequence of the new real interest rate, net capital inflows will increase
Identify the most likely purpose of each the following types of savings accounts: An account established in the name of a grandchild:
Bequest saving
Is that statement capital inflow or capital outflow from the perspective of the US? When a Peruvian buys a US government bond.
Capital Inflow
Is that statement capital inflow or capital outflow from the perspective of the US? When the Chinese government buys bonds issued by an American company.
Capital Inflows
Is that statement capital inflow or capital outflow from the perspective of the US? When an American buys stock in a French company.
Capital Outflows
Alice was laid off from her job at the auto plant because the recession reduced the demand for cars. She expects to get her job back when the economy picks up.
Cyclical
state whether the following individuals are more likely to be structurally unemployed, frictionally unemployed, or cyclically unemployed: A construction worker laid off during a recession.
Cyclical
state whether the following individuals are more likely to be structurally unemployed, frictionally unemployed, or cyclically unemployed: A textile worker laid off due to a temporary decrease in demand.
Cyclical
If the price of vacuums produced by Best Quality Vacuum falls from $300 to $250 per vacuum, then the
Demand for labor by the best quality vacuum decreases
Kesha lost her job when the start-up company she was working for went bankrupt. She is currently interviewing with five different companies before deciding where to accept another job in the same industry.
Frictional
state whether the following individuals are more likely to be structurally unemployed, frictionally unemployed, or cyclically unemployed: A computer technician who moves to find a new job in California.
Frictional
Suppose the price of Walter and Jesse's product increases relative to other goods. Holding other factors constant, then ________ increases, leading to ________ in the real interest rate and ________ in equilibrium quantity of national saving and investment.
Investment; increase; increase
Identify the most likely purpose of each the following types of savings accounts: A college fund account:
Life cycle saving
Identify the most likely purpose of each the following types of savings accounts: A retirement account:
Life cycle saving
Identify the most likely purpose of each the following types of savings accounts: An account earmarked for the down payment on a house:
Life cycle saving
Using the information given below for the fictitious country "Alpha," find national saving, private saving, public saving, and the national saving rate. Household saving = 80 Business saving = 420 Government purchases of goods and services = 240 Government transfers and interest payments = 100 Tax collections = 320 GDP = 2,250
National Saving : 480 Private Saving : 500 Public Saving: -20 National Saving Rate: 21.3%
When people keep their currency for the purpose of saving it, money performs the following function:
People are holding money for future use, so the money is functioning as a store of value
Identify the most likely purpose of each the following types of savings accounts: A "rainy day" account:
Precautionary saving
Identify the most likely purpose of each the following types of savings accounts: An emergency account
Precautionary saving
which of the following describes dollars serving as a medium of exchange?
Saul sells a cellphone and receives dollars in exchange
Ted lost his job when the steel mill closed down. He lacks the skills to work in another industry and so has been unemployed over a year.
Structural
state whether the following individuals are more likely to be structurally unemployed, frictionally unemployed, or cyclically unemployed: A bank teller replaced by a computer.
Structural
state whether the following individuals are more likely to be structurally unemployed, frictionally unemployed, or cyclically unemployed: An assembly line worker replaced by a machine.
Structural
How would each of the following situations be likely to affect the economy-wide demand or supply of labor? A decrease in real life price of finished goods produced.
The demand of labor would decrease
How would each of the following situations be likely to affect the economy-wide demand or supply of labor? An increase in workers marginal productivity.
The demand of labor would increase
The government raises its tax on corporate profits. Other tax changes also are made, such that the government's deficit remains unchanged.
The real interest rate decreases National Savings decreases Investment decreases
A reduction in military spending moves the government's budget from deficit into surplus.
The real interest rate decreases National saving increases Investment increases
The legislature passes a 10 percent investment tax credit. Under this program, for every $100 that a firm spends on new capital equipment, it receives an extra $10 in tax refunds from the government.
The real interest rate increases National saving increases Investment increases
A new generation of computer-controlled machines becomes available. These machines produce manufactured goods much more quickly and with fewer defects.
The real interest rate increases National savings increases Investment increases
How would each of the following factors be likely to affect the economywide supply of labor? War preparations lead to the institution of a national draft, and many young people are called up.
The supply labor would decrease
How would each of the following factors be likely to affect the economywide supply of labor? Social Security benefits are made more generous.
The supply of labor would decrease
How would each of the following factors be likely to affect the economywide supply of labor? The age at which people are eligible for Medicare is increased.
The supply of labor would increase
How would each of the following situations be likely to affect the economy-wide demand or supply of labor? Unemployment benefits are made less generous.
The supply of labor would increase
How would each of the following factors be likely to affect the economywide supply of labor? Increased productivity causes real wages to rise.
The supply of labor would remain unchanged
When and individual withdraws currency from a checking account
bank reserves decrease, which reduces the amount banks can lend and reduces the growth of the money supply
Suppose that new electronic equipment is introduced that increases the marginal product of skilled workers (who can use the equipment to produce more toys per hour worked). The increases in the marginal product of skilled workers will result in:
both the equilibrium wage and employment increasing.
In an open-market purchase the Federal Reserve ______ government bonds from the public and the supply of bank reserves ______.
buys; increases
Jack is a server at a restaurant in New Orleans. When businesses shut down due to Covid-19, the restaurant he worked for was unable to operate and ended up shutting down for good, and Jack became unemployed. Jack would be considered _________ unemployed
cyclical
Does this situation increase or decrease the money supply : banks increase the reserve deposit ratio from .1 to .15
decrease
Does this situation increase or decrease the money supply : the fed decreases bank reserves through open market operations
decrease
Holding other factors constant, if state income tax is replaces with a consumption tax, then the real interest rate will ________ and the equilibrium quantity of saving and investment will ______.
decrease; increase
Holding constant risk and the real returns available abroad, lower domestic real interest rates ______ capital inflows, ______ capital outflows, and ______ net capital inflows.
decrease; increase; decrease
A decrease in the perceived riskiness of Company A stock ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock.
decreases; increases
suppose computers allow factory workers at capsule corp to manufacture more computers in an hour than they could before. Then
demand for labor by capsule corp increases
Shannon is a highly skilled software engineer who recently left her job because she wanted to move closer to her family. She has been searching for a job for two weeks and has had three offers she is considering but has not yet accepted. Shannon would be considered ________ unemployed.
frictional
When a U.S. restaurant purchases French wine and the French wine company uses the proceeds to buy U.S. government debt, U.S. ______ and there is a capital ______ the United States.
imports increase; inflow to
Does this situation increase or decrease the money supply : even though deposits have not changed, banks decide to make more loans
increase
Does this situation increase or decrease the money supply : the fed decides to purchase government bonds
increase
Does this situation increase or decrease the money supply : the public decides to hold more currency, increasing the proportion they hold from 50% to 75%
increase
Does this situation increase or decrease the money supply : the public switches from using cash for most transactions to suing checks instead.
increase
An open-market purchase of government securities by the Fed will
increase bank reserves, and the money supply will increase
suppose that jordan wins $100,000 in the lottery. If he uses the money to pay off his mortgage his wealth would _____; if he puts that money in his checking accoun t his wealth would ______.
increase by $100,000; increase by $100,000
In an open economy with a given level of real interest rates and risk, a decrease in real interest rates abroad will ______ net capital inflows and ________ the equilibrium domestic real interest rate.
increase; decrease
Stock prices increase when expected future dividends ___, interest rates ___, and/or the risk premium ___
increase; decrease; decreases
Holding other factors constant, if computers allow factory workers to manufacture more products per hour, then the real wages of factory workers will ______ and employment of factory workers will _____.
increase; increase
Holding other factors constant. if a change in tax laws discourages people from saving more for retirement, then the real interest rate will_________ and the equilibrium quantity of saving and investment will ________.
increase;decrease
Holding other factors constant, if Congress passes a 5% investment tax credit under which a firm receives $5 in tax refunds from the government for every $100 it spends on new capital equipment, then the real interest rate will ______ and the equilibrium quantity of national savings and investment will_____.
increase;increase
When the central bank buys $1,000,000 worth of government bonds from the public, the money supply
increases by more than $1,000,000
In an open economy, a decrease in capital inflows _____ the equilibrium domestic real interest rate and ________ the quantity of domestic investment.
increases; decreases
Which of the following is an example of the life-cycle motive for saving?
leslie puts $400 per month is her 401k retirement account
Han pays $10,000 for a newly issued two year government bond with $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Han sells the bond. If the current one year interest rate on government bonds is 7 percent then the price Han receives is
less than $10,000
Shannon's current income is $100 more per month than her current consumption needs. She decides to use the $100 to reduce her credit card debt. As a result, her
liabilities will decrease, and her wealth will increase
From an economic perspective, the best response to increased wage inequality is to
provide transition aid to disadvantaged workers
The money supply in Macroland is currently 4,000, bank reserves are 200, currency held by public is 500, and banks' desired reserve-deposit ratio is 0.4. Assuming the values of the currency held by the public and the desired reserve-deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 4,500, then it should conduct an open-market ______ government bonds.
purchase of 200
Lisa lost her job when the typewriter factory shut down 9 years ago and has been unemployed ever since. Lisa would be considered __________ unemployed
structural
suppose the existence of alternative opportunities make people less willing to work in poultry processing plants. Then the
supply of labor to poultry processing plants decreases
How would each of the following situations be likely to affect the economy-wide demand or supply of labor? Real GDP increases.
the demand of labor would increase
Suppose that unskilled workers find it worthwhile to acquire skills to become skilled workers who can use the equipment to produce more toys per hour worked. Using the graph below, indicate what happens as these unskilled workers acquire new skills:
the real wage of unskilled workers will rise while the real wage of skilled workers will fall, leading to a smaller wage gap between the two groups.
How would each of the following situations be likely to affect the economy-wide demand or supply of labor? The mandatory retirement age is lowered.
the supply of labor would decrease
How would each of the following factors be likely to affect the economywide supply of labor? More people decide to have children (consider both short-run and long-run effects).
the supply of labor would decrease in the short run and increase in the long run
If the United States has a 300 billion net capital inflow, then there must be a
trade deficit of $300 billion
