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Macro Econo

Exam 2 of Macro Economics

QuestionAnswer
What causes the price level to decrease? The population spends less money.
Because of the money illusion inflation usually confuses. Consumers, workers, and firms.
In a small economy, The rate of money growth for the current year is 2 percent. Velocity of money circulation is stable. Inflation is expected to be about 1.5% over the current year. What is the short run economic growth rate? 0.5%
Jordan lent Taylor $1,200 on March 15, 2009. Taylor returned $1,260 on March 14, 2010. Inflation was 2% over the one-year period. Wheat is the real interest rate that Taylor paid? 3%
Which of the following is NOT a price index used by economists to measure inflation? Commodity Consumption Indicator (CCI)
Lillian lent A.J. $10,000 and increased her purchasing power by #200 when AJ repaid the loan a year later. Deflation of 2 percent also occurred that year. What nominal interest rate did Lillian charge A.J.? 0%
According to the quantity theory of money, an increasing in the money supply will cause the price level to Increase by the same percentage as the money supply.
According to the quantity theory of money, a nation that increases its money supply by 30 percent should expect its price level to increase by approximately 30 percent.
EXAM 2 Those first ones i messed up and did exam 3...
What are the factors of production in the Solow model of economic growth? physical capital, human capital, and ideas
What has led to the high growth rate in China's economy over the last twenty-five years? improved worker productivity
When investment is equal to depreciation, the capital stock remains constant.
Small country each labor hr has capital stock equal to 900 units. This year it produced 20 units of new capital goods, with a depreciation rate of 10%, and a production function of Y = K1/2. There is no tech. advancement, what will the growth rate next year? -3.96%
The larger the spillovers, the stronger the argument for government subsidies.
In recent years, real GDP in China has grown faster than real GDP in the United States.
A small country's aggregate production function per hour of labor is given by Y = K1/2. Its depreciation rate is 5 percent and its investment rate is 25 percent. What is its steady-state level of real GDP? 5
If two or more people can use a good at the same time without preventing others from using it, the good is said to be a(n) nonrivalrous good
If a country's saving preference increased from 10 percent to 12 percent of disposable income and it was operating at its steady state before the change, we would expect to see which of the following? III. an increase in real GDP IV. an increase in capital stock
According to the Solow model, countries with higher savings rates have higher levels of investment, output, and per capita GDP.
Which of the following is an example of an increase in human capital? an increase in the training of bone cancer researchers
Other things held constant, an increase in depreciation will cause the capital stock to Decrease
______ grants temporary monopoly rights, typically for 20 years from its filing date. A patent
Countries with more human capital have a higher GDP per capita.
In a steady state, the capital stock Remains Constant
When the U.S. government borrows, it sells treasury bonds.
Which of the following can be defined as saving according to economics? Sandra purchases a certificate of deposit from a bank.
Why do people save during their working lifetimes? They save for retirement especially if average life expectancy is higher. They save to prepare for those periods of unemployment. They may want to save for unexpected hospitalizations and illnesses.
What is the most harmful consequence to GDP from interest rate ceilings? Investment falls, dragging down GDP and future growth.
A leverage ratio is the ratio of debt equity.
Fluctuations in income cause most people to save
If zero-coupon bonds are available that have an implied interest rate of 5 percent and a face value of $30,000, what is the approximate purchase price for those bonds? $28,571.43
What is a frequent temporary government solution to combat the decreased investment demand during a recession? offer an investment tax credit
Which variable is determined in the market for loanable funds? The interest rate
All else equal, time preference is the desire to have goods and services sooner rather than later.
Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and Causes investment to fall. Causes consumption to fall.
The life cycle theory of savings predicts individuals will save during the middle years of life.
The supply of savings function shows the relationship between saving and the interest rate.
If consumers expect to have shorter life expectancy and desire to save less, then the supply of loanable funds will decrease, and the equilibrium interest rate will increase.
If the government raises taxes on investment returns, then the demand for loanable funds will decrease, and the equilibrium interest rate will decrease.
A decrease in investment demand decreases both the amount saved and the interest rate.
Which of the following individuals can be counted as unemployed?
The short-term unemployment caused by the ordinary difficulties of matching employee to employer is called frictional unemployment.
If the average wage is $9 in country X and $8 in country Y and both countries have similar elasticities of labor supply and demand, then a minimum wage of $4 in both countries will tend to make unemployment higher in country X than in country Y.
A minimum wage is The lowest amount of money an employer can pay.
Examples of active labor market policies include I. job-retraining programs. II. job-search assistance. III. early re-employment bonuses.
The natural unemployment rate is defined as the structural plus frictional unemployment rates.
According to the Bureau of Labor Statistics, unemployment includes
Discouraged workers and underemployed workers are examples of workers not included in the unemployment rate.
Which of the following is an example of an unemployed person? a recent college graduate looking for her first job
An increase in unemployment benefits tends to lower the incentive to search for a job and raise frictional unemployment.
What is one of the causes of frictional unemployment? scarcity of information
In a nonrecession year, the majority of U.S. unemployment is: frictional
Higher GDP growth decreases the unemployment rate
Employment protection laws tend to increase the duration of unemployment, increase the job security of workers.
Created by: Dylan Austin