WVU Econ 202 Practice Exam 2

Iggie took a university teaching job as an assistant professor in 1980 at a salary of $15,000. By 2011, she had been promoted to full professor, with a salary of $70,000. If the price index was 82 in 1980 and 225 in 2011, then what is Iggie's 2011 salary in 1980 dollars?

$25,511

Marion collected Social Security payments of $250 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986 should have been

$300.

Refer to Figure 28-3. If the government imposes a minimum wage of $4, how many workers will be unemployed?

0

Refer to Table 3-39. Korea should specialize in the production of

airplanes and import cars.

Assume that England and Spain can switch between producing cheese and producing bread at a constant rate.

bread and import cheese.

When the consumer price index falls, the typical family

can spend fewer dollars to maintain the same standard of living.

Suppose that the Bureau of Labor Statistics reports that the entire adult population of Mankiwland can be categorized as follows: 25 million people employed, 3 million people unemployed, 1 million discouraged workers, and 1 million people who are either students, homemakers, retirees, or other people not seeking employment.

28 million

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

5 percent.

Refer to Figure 28-3. If the government imposes a minimum wage of $4, how many workers will be employed?

5,000

Suppose that the Bureau of Labor Statistics reports that the entire adult population of Mankiwland can be categorized as follows: 25 million people employed, 3 million people unemployed, 1 million discouraged workers, and 1 million people who are either students, homemakers, retirees, or other people not seeking employment.

93.3%

As long as prices are rising over time, then

the nominal interest rate exceeds the real interest rate.

If at a given exchange rate U.S. citizens wanted to buy more foreign bonds

the supply of dollars in the market for foreign-currency exchange shifts right.

By far the largest category of goods and services in the CPI basket is

housing

Frictional unemployment is

inevitable, because at any given time, jobs are being created in some firms and destroyed in other firms.

Frictional unemployment results from

job searching. It is often thought to explain relatively short spells of unemployment.

The inflation rate is defined as the

percentage change in the price level from the previous period.

A COLA automatically raises the wage when

the consumer price index increases.

If U.S. net exports are positive, then net capital outflow is

positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.

The aggregate supply curve is

vertical in the long run and slopes upward in the short run.

All else equal, which of the following would increase the unemployment rate? (i)an increase in the number of women who return to work after being stay-at-home mothers (ii)a preference among older men to retire early (iii)an increase in the maximum number of weeks for which someone can receive government unemployment benefits (iv)an increase in the number of previously unemployed women who stop looking for work and become discouraged workers

(ii) and (iii) only

Refer to Table 28-2. The labor force of Aridia in 2010 was

1,600.

Refer to Table 3-39. Japan should specialize in the production of

cars and import airplanes.

The classical dichotomy and monetary neutrality are represented graphically by

a vertical long-run aggregate-supply curve.

Table 3-38 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate.

cheese and import bread.

Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.

coolers and import radios.

An increase in the minimum wage

decreases the quantity of labor demanded but increases the quantity of labor supplied.

Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent. A year later, after Rosa has accumulated $20 in interest, she withdraws her $120. Rosa's purchasing power

did not change if the inflation rate was 20 percent.

If net exports are positive, then

exports are greater than imports.

Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production. This is inconsistent with monetary neutrality because

monetary neutrality would mean the prices should have risen, but production should not have changed.

The consumer price index is used to

monitor changes in the cost of living over time.

Cyclical unemployment is caused by

neither frictional nor structural unemployment

At the equilibrium real interest rate in the open-economy macroeconomic model

net capital outflow + domestic investment = saving

In an open economy,

net capital outflow = net exports.

The aggregate-demand curve shows the

quantity of domestically produced goods and services that households, firms, the government, and customers abroad want to buy at each price level.

The classical dichotomy refers to the separation of

real and nominal variables.

The investment component of GDP measures spending on

residential construction, business equipment, business structures, and changes in inventory. During recessions it declines by a relatively large amount.

Cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment.

Minimum wages create unemployment in markets where they create a

surplus of labor. Minimum wage laws are not the predominant reason for unemployment in the U.S.

Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes

the short run, but not the long run.

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.