Exam #3
Wages in excess of their equilibrium level help explain
structural but not frictional unemployment.
Which of the following is correct
studies show that when they unemployment become ineligible for benefits the probability of their finding a home rise marketdly
If a firm wants to borrow it can
supply bonds by selling them
Minimum wages create unemployment in markets where they create a
surplus of labor. Unemployment of this type is called structural.
Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would cause
the demand for this company 's stock to decrease, so the price would fall
If there is a surplus of loanable funds, then
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium
If the efficient markets hypothesis is correct then,
the stock market is informationally efficient.
Borrowers can (and sometimes do) default on their loans when
they declare bankruptcy.
Malthus predicted that the power of population
was greater than the power of the earth to produce subsistence. His forecast was off the mark.
Suppose government expenditures on goods and services increase, transfers are unchanged and taxes rise by less than the increase in expenditures. These changes in the governments budget cause
The equilibrium interest rate to rise and the equilibrium quantity to loanable funds fall
Consider the expressions T - G and Y - T - C. Which of the following statements is correct?
The first of these is public saving; the second one is private saving
The future value of a deposit in a savings account will be larger
The longer a person waits to withdraw funds, the higher interest rate is, the larger the initial deposit is
Unions contribute to
The natural rate of unemployment but not frictional unemployment
As the number if stocks in a persons portfolio increases
The risk of the portfolio decreases as indicated by the decreasing value of the standard deviation of the portfolio
As the number if stocks in a persons portfolio increases
The risk of the portfolio decreases, as indicated by decreasing the value of the standard deviation of the portfolio
The word efficient int he term efficient markets hypothesis refers to the idea that
The stock market is informationally efficient
If Joanna is risk averse, then
she dislikes bad things more than she likes comparable good things
People who hold well-diversified portfolios of stocks have greatly reduced or eliminated
firm-specific risk, but still they have reason to worry about their wealth decreasing as a result of recessions
A bond buyer is a
saver. Bond buyers may sell their bonds prior to maturity.
As of 2008, using real GDP per person as a measure, we would classify
Canada as an advanced economy, Mexico as a middle-income country, and Pakistan as a poor country.
Which if the following would shift the demand or loanable funds to the right
Congress and the president pass an investment tax credit
Spells of unemployment end about
1/2 of the time with the person leaving the labor force
In June 2009 the BLS reported an adult population of 234.9 million unemployment of 12.4 million, and employment of 141.6 million based in these numbers the labor force participation rate was
154/234.9
If the nominal interest rate is 7 percent and the rate of inflation is 3 percent then the real interest rate is
4 percent
If the inflation rate is 2 percent and the real interest rate is 3 percent then the nominal interest rate is
5 percent
Country A has a population of 1,000 of whom 800 work 8 hours a day to make 128,000 final goods. Country b has a population of 2,000 of whom 1,800 work 6 hours a day to make 270,000final goods.
Country A has lower productivity and lower real GDP per person than country B
You deposit $3000 into an N-year certificate of deposit that pays 4.5 percent annual interest, and at the end of the N years you have $4082.59. What is the number of years, N?
7
Crowing out occurs when investment declines because
A budget deficit makes interest rates rise
On the basis of theory and empirical evidence, economists have reached several conclusions about economic growth. Which of the following is not one of these conclusions?
A relatively simple way to increase growth rates permanently is to increase a country's saving rate.
Which of the following is a source of frictional unemployment
changes in the composition of demand among industries or regions
Other things the same when an economy increases its saving rate
consumption falls now and production rises later
Which if the following make insurance premiums higher than otherwise
Adverse selection and moral hazard
Which of the following make insurance premiums higher than otherwise
Adverse selection and moral hazard
Which of the following best illustrates moral hazards
After a person obtains life, insurance she takes up skydiving
The problem of moral hazard arise because
After people by insurance, they have less incentives to be careful about their risky behavior
Which if the following is an example of an efficient wage
An above equilibrium wage offered by a firm to attract a more talented pool of jobs applicants
Unions
And firms paying wages above equilibrium to improve worker effort both create structural unemployment
Suppose that congress were to repeal an investment tax credit, what would happen in the market for lovable funds
The demand for loanable funds would shift leftq
Which of the following could explain a decrease in the equilibrium quantity of loanable funds
The demand for lovable funds shifted leftward
No particular stock is a better buy than any other stock if
The efficient markets hypothesis is correct
Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?
!000, 500 and 1,500 respectively
Two years ago Darryl put $3000 into an account paying 3 percent interest. How much does he have in the account today?
$3,182.70
Which of the following is the correct expression for finding the present vale of $500 payment two years from today if the intrest rate is 6 percent
$500/(1.06)^2
What is the future value of $500 one year from today if the interest rate is 6 percent
$530
Minimum wage laws, unions and efficiency waged contribute to
Both structural unemployment and the natural rate of unemployment
As real interest rates fall, firms desire to
Buy more new equipment and buildings, this response helps explain why the demand for loanable funds is downward slopping
The traditions view of the production process is that captial os subject to
Diminishing returns
Which of the following is not correct
Diversification can eliminate market risk but not firm specific risk
The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's
Earnings
The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will
Fall and remain lower for a long time
Over extend periods of time, population growth
Has uncertain effects in the standard of living
Efficient wage theory suggests that paying
High wages might be profitable because they raise the efficiency of a firms workers
Perry accumulated a lot of mathematical skills while in high school, college and graduate school. Economists include these skills as part of Perry's
Human captial
In answering which of the following questions would you find it necessary to calculate future value
If Jill puts $5000 today into a bank acccount that pays 3 percent invest rate then how much will she have in the account after 2 years
Sectoral shifts ind Em and for output
Increase unemployment due to job search
An increase in the minimum wage
Increases structural unemployment
Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of trucks change. In which case do these changes both make them less likely to buy the truck?
Interest rates rise and truck prices rise.
A person who is not employed and claims to be trying to find a job, but really is not trying had to find a job
Is counted as unemployed but should be counted as out of the labor force
If the government currently has a budget deficit then
It does not necessarily have a debt, its debt is increasing, government expenditures are greater than taxes
The theory of efficiency wages explains why
It may be in the best interest of firms to offer wages that are above the equilibrium level
if congress institutes an investment tax credit
It would make buying capital goods more desirable so the demand for loanable funds would shift
John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available.
John is frictionally unemployed, and Curtis is structurally unemployed.
Who of the following would be included int the bureaus of labor statistics unemployed category
Juli who is on temporary staff
Four employers have justified their actions as follows. Whose logic is not consistent with the logic of efficiency wage theory?
Kay pays her workers less than the equilibrium wage so they won't have the time or money to look for work somewhere else.
If your firms production function has constant returns to scale, and if you double all your inputs, then your firm's productivity will
Not change
Volume, as reported in stock tables refers to the
Number of shares traded
Economists Robert Fogel focused on which of the following factors as one determinant of long-run economic growth
Nutrition
Diversifaction reduces
Only firm specific risk
Which of the following concepts is most helpful in explaining why investment increases when the interest rate falls
Present value
Which of the following is not always correct for a closed economy
Private saving equals investment.
In the 1990s Ireland made unemployment benefits generous, this change would likely have
Reduced frictional unemployment and the a natural rate of unemployment
The source of the supply of loanable funds is
Savings, and the source of the demand for loanable funds is investment
Which of the following is correct concerning a risk averse oerson
She would not play games where the probability of winning and losing a dollar are the same, she might not buy health insurance if she thinks her risks are low, her marginal utility of wealth decreases as her income increases
According to the efficient markets hypothesis, which of the following would increase the price of stock in the Simpson corporation
Simpson announces that its profits were low but not as low as the market had expected
After adjusting for inflation, over time the prices of most natural resources have been
Steadily or falling, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling
For an economy that engages in international trade, GDP is divided into four components. Which of the following is not one of them
Taxes
An understanding of the best ways to produce goods and service is called
Technology
Jerry has the choice of two bonds, one that pays 3 percent interest and one tat pays 6 percent interest. Which of the following is most likely
The 6 percent bod has a longer term than the 3 percent bond
Which of the following is not correct
Unemployment insurance decreases frictional unemployment
The supply of loanable slopes
Upward because an increased in the interest rate induces people to save more
Which of the following is not correct
When unions raise wages above equilibrium, the quantity of labor supplied decreases, and the quantity of labor demanded increases.
Other things the same if the government increases transfer payments to household, then the effect of this on the governments budget
Will make the rate of interest rise
Suppose the government were to replace the income tax with a consumption tax sot hat interest on savings was not taxed. The result would be that the interest rate
Would decrease and investment would increase
Which of the following is adverse selection
a high-risk person being more likely to apply for insurance
In effect an annuity provides insurance
against the risk of living too long
If the demand for loanable funds shifts to the left, then the equilibrium interest rate
and quantity of loanable funds rises
If you believe that stock prices follow a random walk, then probably you
believe in the validity of the efficient markets hypothesis
Retained Earnings are
earnings of a company that are not paid out to stockholders.
Other things the same, which of the following could explain an increase in productivity
either an increase in human capital or an increase in physical capital
Other things the same, when the interest rate rises, the present value of future revenues from investment projects
falls, so investment spending falls
Discounting refers directly to
finding the present value of a future sum of money
In the early 1900s Henry ford introduced
high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory.
Compounding refers directly to
interest being earned on previously-earned interest
When the government has a budget surplus
it buys more of its bonds from the public than it sells to the public.
Economists would predict that, other things the same, the more generous unemployment compensation a country has, the
longer the duration of each spell of unemployment and the higher the unemployment rate.
Meredith recently graduated from college but has not yet started working. To be counted as unemployed she
must have looked for work no more than 4 weeks ago
In a closed economy, what remains after paying for consumption and government purchases is
national saving
From the standpoint of the economy as a whole the role of insurance is
not to eliminate the risks inherent in life, but to spread them around more efficiently
In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise of G, what would happen to the public and national saving
public and national saving would fall
Other things the same, a government budget deficit
reduces both public and national saving
unemployment insurance
reduces search effort which raises unemployment
