Test 2 Matthews Macro

Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation

Greater than 7 percent

During the great depression, cyclical unemployment increased as the recession continued. The increase in cyclical unemployment

Had no affect on the natural rate of unemployment

Which of the following is true regarding the productivity slowdown in the United States during the mid-1970s?

High oil prices raised the costs of doing business for markets worldwide, and reduced output worldwide as well

The term "brain drain" refers to

Highly educated individuals who leave developing countries for high-income countries.

Knowledge capital non-rival in the sense that

Two people can use the same knowledge to develop and produce a product

Firms free ride on the research and development of other firms when they

Use knowledge other firms have developed without paying for that knowledge

Cyclical unemployment is the result of

a slowdown in the economy

Creative destruction means that

firms develop new products that replace old products in the economy, thereby encouraging economic growth.

The cost of firms changing prices

is called a menu cost.

If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?

9.5%

Which of the following price indices comes closest to measuring the cost of living of the typical household?

Consumer Price Index

If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would

Decrease

In a small European country, it is estimated that a $10,000 increase in capital per hour worked will increase real GDP per hour worked by $300. Based on this information, what is the slope of the per worker production function in this range?

0.03

A patent grants an inventor exclusive rights to a product for how long?

20 years

Which of the following would increase the unemployment rate?

An increase in unemployment insurance payments

Suppose that in 2012, all prices in the economy double and that all wages and salaries have also doubled. In 2012 you

Are no better off or worse off than you were in 2011 as the purchasing power of your salary has remained the same

The natural rate of unemployment is the amount of unemployment

Associated with the business cycle

Which of the following would be a consequence of substitution bias in the CPI?

Businesses would over compensate employees for inflation when giving the cost of living rises

Suppose that in 2011 real GDP grew in Estonia by 3% and that the population increased by 5%. Therefore in 2011, Estonia experienced

Economic growth, but not an increase in living standards

The industrial revolution began in

England around 1750

Efficiency wages cause unemployment because

Firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied

The purchase by an individual or firm of stock or bonds issued in another country is called

Foreign portfolio investment

Using a broader measure of the unemployment rate where discouraged workers and part-time workers who wished to work full time were counted as unemployed, the BLS estimates the unemployment rate in September 2011 would have ________ compared to the measured unemployment rate.

Increased by more than 7 percentage points

The percent increase in the CPI from one year to the next is a measure of the

Inflation Rate

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey

Is based on actual payrolls, rather than on unverified answers

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working age population?

Labor force participation rate

The "new product bias" in the consumer price index refers to the idea that

New product prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

Not in the labor force

The bureau of labor statistics would categorize a retiree who is not working as

Out of the labor force

In September 2011, Bank of America laid off 30,000 employees. The laid-off employees who were not able to find jobs at another bank due to a permanent decline in business in the financial industry would be considered

Structurally unemployed

According the new growth theory

Technological change is influenced by economic incentives

Globalization refers to?

The process of countries becoming more open to to foreign trade and investments

If inflation is positive and is perfectly anticipated

Those that hold paper money lose