Econ hw 6 review 2

At an 8% interest rate, the quantity of savings is $250 billion. What would the quantity of savings be if the interest rate falls to 5%?

$190 billion

Compare a fund that charges a 0.25% annual fee with a fund that charges a 1.25% annual fee. If an investment of $5,000 earns an average return of 8% over the course of 5 years, approximately how much more will fees over those 5 years be for the higher-fee fund?

$330

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

3.9%

(Table: Employment, Unemployment, and Labor Force Participation) Refer to the table. What is the unemployment rate of the country in 2010?

5%

Collateral is:

Something of value that secures a loan to protect the lender

In a nonrecession year, the majority of U.S. unemployment is:

frictional.

High volatility in the inflation rate can result in:

improper allocation of resources

Fluctuations in income cause most people to:

save

Cyclical unemployment is:

unemployment correlated with the business cycle

(Figure: Labor Market) Refer to the figure. What is the unemployment rate in this market as a result of the implementation of a $10 minimum wage?

50%

A saver buys a $10,000 zero-coupon government bond for $9,375. When it matures a year from now, what will be the approximate implied interest rate?

6.67%

Debt monetization means that a government pays off its debt by:

increasing the money supply

In the long run, the quantity theory of money says that the growth rate of the money supply will be approximately equal to the:

inflation rate.

A bank lends money for a year at an interest rate of 7%, and the inflation rate for that year turns out to be 5%. What is the bank's real rate of return for that year?

2%

According to the rule of 70, a stock portfolio growing at a rate of 3.5% will double approximately every ______ years.

20

Deflation is:

a decrease in the average level of prices

A higher leverage ratio means that

the firm is at a greater risk for becoming insolvent.

A stock that has a high covariance with market conditions is considered risky because:

when the market is declining that stock will decline too.

high fees

are not likely to generate higher returns in the long run because of the efficient markets hypothesis.

(Table: CPI) According to the table, in which of the following years did this country experience disinflation?

both 2001 and 2002