Macro given quizes

Given that M / P = kY, when the demand for money parameter, k, is large, the velocity of money is ______, and money is changing hands ______. a) large; frequently b) small; infrequently c) large; infrequently d) small; frequently

b) small; infrequently

When f (k) is drawn on a graph with increases in k noted along the horizontal axis, the slope of the curve denotes: a) output per worker. b) the marginal product of capital. c) the marginal product of labor. d) output per unit of capital.

b) the marginal product of capital.

The real return on holding money is a) the real interest rate. b) the inflation rate. c) minus the real interest rate. d) minus the inflation rate.

d) minus the inflation rate.

Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to: a) reduce the firm's wage bill. b) reduce labor turnover. c) increase worker effort. d) improve the quality of the firm's labor force.

a) reduce the firm's wage bill.

In the long run, according to the quantity theory of money and classical macroeconomic theory, if velocity is constant, then ______ determines real GDP and ______ determines nominal GDP. a) the productive capability of the economy; the money supply b) the money supply; the productive capability of the economy c) velocity; the money supply d) the money supply; velocity

a) the productive capability of the economy; the money supply

All of the following are reasons for frictional unemployment except: a) unemployed workers accept the first job offer that they receive. b) the flow of information is imperfect. c) workers have different preferences and abilities. d) geographic mobility takes time.

a) unemployed workers accept the first job offer that they receive.

The costs of reprinting catalogs and price lists because of inflation are called: a) fixed costs. b) variable yardstick costs. c) menu costs. d) shoeleather costs.

c) menu costs.

In the model of the steady-state unemployment rate with a fixed labor force, the rate of job finding equals the percentage of the ______ who find a job each month, while the rate of job separation equals the percentage of the ______ who lose their job each month. a) unemployed; employed b) labor force; labor force c) labor force; unemployed d) employed; labor force

a) unemployed; employed

If the nominal interest rate is 1 percent and the inflation rate is 5 percent, the real interest rate is: a) 6 percent. b) -4 percent. c) 1 percent. d) -5 percent.

b) -4 percent.

The inconvenience associated with reducing money holdings to avoid the inflation tax is called: a) fixed costs. b) shoeleather costs. c) variable yardstick costs. d) menu costs.

b) shoeleather costs.

In the Solow growth model, where s is the saving rate, y is output per worker, and i is investment per worker, consumption per worker (c) equals: a) (1 + s) y b) (1 - s) y - i c) (1 - s) y d) sy

c) (1 - s) y

If the average price of goods and services in the economy equals $10 and the quantity of money in the economy equals $200,000, then real balances in the economy equal: a) 200,000. b) 10. c) 20,000. d) 2,000,000.

c) 20,000.

If the money supply increases 12 percent, velocity decreases 4 percent, and the price level increases 5 percent, then the change in real GDP must be ______ percent. a) 4 b) 11 c) 9 d) 3

d) 3

If nominal wages cannot be cut, then the only way to reduce real wages is by: a) unions. b) productivity increases. c) legislation. d) adjustments via inflation.

d) adjustments via inflation.

According to the classical theory of money, inflation does not make workers poorer because wages increase: a) in real terms during periods of inflation. b) faster than the overall price level. c) more slowly than the overall price level. d) in proportion to the increase in the overall price level.

d) in proportion to the increase in the overall price level.

If the per-worker production function is given by y = k1/2, the saving rate (s) is 0.2, and the depreciation rate is 0.1, then the steady-state capital per worker is: a) 4. b) 9. c) 1. d) 2.

a) 4.

If there are 100 transactions in a year and the average value of each transaction is $10, then if there is $200 of money in the economy, transactions velocity is ______ times per year. a) 5 b) 10 c) 2 d) 0.2

a) 5

If inflation was 6 percent last year and a worker received a 4 percent nominal wage increase last year, then the worker's real wage: a) decreased 2 percent. b) increased 4 percent. c) increased 2 percent. d) decreased 6 percent.

a) decreased 2 percent.

Equilibrium in the market for goods and services determines the ______ interest rate, and the expected rate of inflation determines the ______ interest rate. a) ex ante real; ex ante nominal b) ex ante nominal; ex post real c) ex post nominal; ex post real d) ex post real; ex post nominal

a) ex ante real; ex ante nominal

The characteristic of the classical model that the money supply does not affect real variables is called: a) monetary neutrality. b) monetary policy. c) the quantity theory of money. d) the monetary basis.

a) monetary neutrality.

If the steady-state rate of unemployment equals 0.10 and the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.02, then the fraction of unemployed workers who find jobs each month (the rate of job findings) must be: a) 0.02. b) 0.18. c) 0.08. d) 0.10.

b) 0.18.

If the real return on government bonds is 3 percent and the expected rate of inflation is 4 percent, then the cost of holding money is ______ percent. a) 1 b) 7 c) 4 d) 3

b) 7

If the money supply is held constant, then an increase in the nominal interest rate will ______ the demand for money and ______ the price level. a) increase; increase b) decrease; increase c) increase; decrease d) decrease; decrease

b) decrease; increase

Any policy aimed at lowering the natural rate of unemployment must either ______ the rate of job separation or ______ the rate of job finding. a) increase; reduce b) increase; increase c) reduce; reduce d) reduce; increase

d) reduce; increase

Short-term unemployment is most likely to be ______ unemployment, while long-term unemployment is mostly likely to be _____ unemployment. a) frictional; structural b) structural; frictional c) the natural rate of; frictional d) structural; the natural rate of

a) frictional; structural

In the Solow growth model, for any given capital stock, the ______ determines how much output the economy produces, and the ______ determines the allocation of output between consumption and investment. a) production function; saving rate b) population growth rate; saving rate c) saving rate; production function d) depreciation rate; population growth rate

a) production function; saving rate

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the real wage were rigid, this would lead to: a) a decrease in the real wage. b) no change in the real wage and a rise in unemployment. c) no change in the real wage and no change in unemployment. d) no change in the real wage and a fall in unemployment.

b) no change in the real wage and a rise in unemployment.

f the Fed announces that it will raise the money supply in the future but does not change the money supply today, a) the nominal interest rate will increase and the current price level will decrease. b) both the nominal interest rate and the current price level will increase. c) both the nominal interest rate and the current price level will decrease. d) the nominal interest rate will decrease and the current price level will increase.

b) both the nominal interest rate and the current price level will increase.

In the case of an unanticipated increase in inflation: a) debtors with an unindexed contract do not gain because they pay exactly what they contracted for in nominal terms. b) creditors with an unindexed contract are hurt because they get less than they expected in real terms. c) debtors with an indexed contract are hurt because they pay more than they contracted for in nominal terms. d) creditors with an indexed contract gain because they get more than they contracted for in nominal terms.

b) creditors with an unindexed contract are hurt because they get less than they expected in real terms.

If the real interest rate and real national income are constant, according to the quantity theory and the Fisher effect, a 1 percent increase in money growth will lead to rises in: a) inflation of 1 percent and the nominal interest rate of less than 1 percent. b) inflation of 1 percent and the nominal interest rate of 1 percent. c) inflation of 1 percent and the nominal interest rate of more than 1 percent. d) both inflation and the nominal interest rate of less than 1 percent.

b) inflation of 1 percent and the nominal interest rate of 1 percent.

Exhibit: Output, Consumption, and InvestmentIn this graph, when the capital stock per worker is OA, AB represents: a) investment per worker, and AC represents consumption per worker. b) investment per worker, and BC represents consumption per worker. c) consumption per worker, and BC represents investment per worker. d) consumption per worker, and AC represents investment per worker.

b) investment per worker, and BC represents consumption per worker.

Which of the following is an example of frictional unemployment? a) Bill is qualified and would like to be an airline pilot, but airlines do not find it profitable to hire him at the wage established by the airline pilots' union. b) Elaine is willing to work for less than the minimum wage, but employers cannot hire her for less than the minimum wage. c) Dave searches for a new job after voluntarily moving to San Diego. d) Joan is willing to work for less than the going wage, but there are no jobs available.

c) Dave searches for a new job after voluntarily moving to San Diego.

______ cause(s) the capital stock to rise, while ______ cause(s) the capital stock to fall. a) Interest rates; the discount rate b) Inflation; deflation c) Investment; depreciation d) International trade; depressions

c) Investment; depreciation

Which of the following is the best example of structural unemployment? a) Fatima lost her job at a packing plant but has not looked very intensively for a new job because she still has two months of unemployment insurance benefits left. b) Tim is looking for a job with flexible hours but has not been offered one yet. c) Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available. d) Vickie lost her job as a graphic artist at a movie studio because she did not have training in computer-generated animation.

c) Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available.

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the labor market were always in equilibrium, this would lead to: a) no change in real wage or in unemployment. b) a lower real wage and a rise in unemployment. c) a lower real wage and no change in unemployment. d) a lower real wage and less unemployment.

c) a lower real wage and no change in unemployment.

When a person purchases a 90-day Treasury bill, he or she cannot know the: a) nominal interest rate. b) ex ante real interest rate. c) ex post real interest rate. d) expected rate of inflation.

c) ex post real interest rate.

A rate of inflation that exceeds 50 percent per month is typically referred to as a: a) disinflation. b) deflation. c) hyperinflation. d) conflagration.

c) hyperinflation.

If the real interest rate declines by 1 percent and the inflation rate increases by 2 percent, the nominal interest rate implied by the Fisher equation: a) increases by 2 percent. b) remains constant. c) increases by 1 percent. d) decreases by 1 percent.

c) increases by 1 percent.

Sectoral shifts: a) explain the payment of efficiency wages. b) lead to wage rigidity. c) make frictional unemployment inevitable. d) depend on the level of the minimum wage.

c) make frictional unemployment inevitable.

The opportunity cost of holding money is the: a) prevailing Treasury bill rate. b) federal funds rate. c) nominal interest rate. d) real interest rate.

c) nominal interest rate.

When the unemployment rate is at a steady state: a) the number of people losing jobs exceeds the number of people finding jobs. b) the number of people finding jobs exceeds the number of people losing jobs. c) the number of people finding jobs equals the number of people losing jobs. d) no hiring or firings are occurring.

c) the number of people finding jobs equals the number of people losing jobs.

The quantity theory of money assumes that: a) prices are constant. b) income is constant. c) velocity is constant. d) the money supply is constant.

c) velocity is constant.

A policy that increases the job-finding rate _____ the natural rate of unemployment. a) will increase b) will not change c) will decrease d) could either increase or decrease

c) will decrease

Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. An extra unit of capital per worker increases output per worker: a) more in Highland. b) by the same amount in Highland and Lowland. c) in Highland but not in Lowland. d) more in Lowland.

d) more in Lowland.

The costs of unexpected inflation, but not of expected inflation, are: a) the costs of relative price variability. b) unintended distortions of individual tax liabilities. c) menu costs. d) the arbitrary redistribution of wealth between debtors and creditors.

d) the arbitrary redistribution of wealth between debtors and creditors.