Which of the following is considered out of the labor force?
A) the unemployed
B) those temporarily laid off who will soon be recalled
C) those who worked full time, but in a family business
D) those individuals who have started searching for employment for the first time
E) none of the above
Assume individuals consider only the long run effects of changes in future macro
variables when forming expectations of future output and future interest rates. Suppose
individuals expect future government spending to increase. Given this information,
individuals will expect
A) an increase in the expected future interest rate and no change in expected future
output.
B) an increase in the expected future interest rate and an increase in expected future
output.
C) an increase in the expected future interest rate and a reduction in expected future
output.
D) an increase in the expected future interest rate and an ambiguous effect on expected
future output.
An economy is in equilibrium when which of the following conditions is satisfied?
A) consumption equals saving
B) output equals consumption
C) total saving equals zero
D) total saving equals investment
E) all of the above
The Phillips curve describes the relationship between
A) output growth and unemployment.
B) inflation and output growth.
C) output growth and money supply.
D) inflation and unemployment .
For this question, assume that there is a simultaneous tax increase and monetary
expansion. In a flexible exchange rate regime, we know with certainty that
A) the exchange rate and output would both increase.
B) the exchange rate would increase and output would decrease.
C) the exchange rate would decrease.
D) the exchange rate would decrease and output would increase.
E) none of the above
Bonds with relatively high risk of default are called
A) Brady bonds.
B) junk bonds.
C) zero coupon bonds.
D) investment grade bonds.
In a flexible exchange rate regime, a reduction in the expected future exchange rate will
cause
A) the IP curve to shift to the left/up.
B) the IP curve to shift to the right/down.
C) a movement along the IP curve.
D) neither a shift nor movement along the IP curve.
Graphically illustrate and explain the effects of a reduction in the saving rate on the
Solow growth model. In your answer, you must clearly label all curves and the initial
and final equilibria. In your answer, explain what happens to the rate of growth of
output per worker and the rate of growth of output as the economy adjusts to this
decrease in the saving rate.
Which of the following statements is true about the United States over the past fifty
years?
A) There is no evidence of political business cycles in the United States.
B) The debt-to-GDP ratio has been roughly constant.
C) Under either party, output growth has been generally higher in the year preceding an
election than in other years.
D) none of the above
As the IS curve becomes steeper, we know that
A) a given change in the money supply will cause a larger change in output.
B) a given change in the money supply will cause a smaller change in output.
C) a given change in the money supply will cause the same change in output.
D) monetary policy becomes more effective.
Research by Richard Layard indicates that happiness
A) increases as output per capita increases.
B) decreases as output per capita increases.
C) does not change as output per capita changes.
D) appears to depend on people’s relative incomes.
For this question, assume that investment spending depends only on output and no
longer depends on the interest rate. Given this information, an increase in the money
supply
A) will cause investment to decrease.
B) will cause investment to increase.
C) will cause a reduction in the interest rate.
D) will have no effect on output or the interest rate.
E) will cause an increase in output and have no effect on the interest rate.
The fundamental value of a share of stock is equal to which of the following?
A) the sum of expected dividends
B) the present value of expected dividends
C) the sum of coupon payments
D) the present value of coupon payments
E) the present value of the expected yield
Which of the following represents a form of equity finance?
A) stock
B) loans
C) bonds
D) all of the above
E) none of the above
Since approximately 1970, the most stable Phillips-type relationship for the United
States has been between which of the following?
A) the rate of inflation and the change in the unemployment rate
B) the unemployment rate and the change in the rate of inflation
C) the change in the unemployment rate and the change in the rate of inflation
D) the inverse of the unemployment rate and the rate of inflation
E) the unemployment rate and the rate of inflation
How many interest rates were there in the IS-LM model in Chapter 5?
A) one
B) two
C) three
D) zero
By 2006, about ________ of all U.S mortgages were subprimes.
A) 10%
B) 20%
C) 30%
D) 25%
For this question, assume that the Phillips curve equation is represented by the
following: πt – πt-1 = (m + z) – αut. Which of the following will cause a reduction in the
natural rate of unemployment?
A) an increase in m
B) an increase in z
C) an increase in α
D) an increase in actual inflation
E) an increase in expected inflation
During the 1970s and 1980s, macroeconomists were busy integrating the insights of
which of the following into their ideas about the economy?
A) real business cycle theory
B) Keynesian theory
C) supply side economics
D) classical macroeconomics
E) none of the above
Monetary policy has medium-run effects on which of the following?
A) the level of output but not its composition
B) both the level and composition of output
C) the nominal interest rate
D) the real interest rate
E) none of the above
When steady state capital per worker is above the golden-rule level, we know with
certainty that an increase in the saving rate will
A) increase consumption in both the short run and the long run.
B) decrease consumption in both the short run and the long run.
C) decrease consumption in the short run, and increase it in the long run.
D) increase consumption in the short run, and decrease it in the long run.
E) none of the above
Refer to the information above. Which of the following represents the level of
investment needed to maintain constant capital per effective worker (K/NA) in this
economy?
A) .02K
B) .03K
C) .05K
D) .10K
E) .15K
Assume the exchange rate is fixed. Using the IS-LM model, graphically illustrate and
explain what effect a reduction in consumer confidence will have on the domestic
economy. In your graphs, clearly label all curves and equilibria.
A real appreciation will tend to cause
A) an increase in exports.
B) a reduction in imports.
C) an increase in net exports.
D) a reduction in demand for domestic goods.
E) none of the above
Which of the following will cause aggregate private spending to increase?
A) an increase in government spending
B) a reduction in expected future interest rates
C) a reduction in expected future taxes
D) all of the above
E) none of the above
A bond has a face value of $10,000, a price of $12,000, and coupon payments of $2000
for two years. The current yield of this bond is
A) 10%.
B) 16.7%.
C) 20%.
D) 30%.
E) none of the above
Which of the following does not represent a “labor market rigidity” to which critics
refer when discussing unemployment in Europe?
A) generous unemployment insurance
B) restrictive monetary and fiscal policies
C) a high degree of employment protection
D) relatively high minimum wages
E) none of the above
Which of the following will not cause aggregate private spending to increase?
A) an increase in expected future real interest rates
B) an increase in government spending
C) a reduction in future taxes
D) all of the above
E) none of the above
When an economy is operating at the steady state, we know that
A) steady state saving equals consumption.
B) steady state saving is less than total consumption.
C) steady state saving is equal to depreciation per worker.
D) steady state saving exceeds depreciation each year by a constant amount.
E) none of the above
A change in the reserve requirement changes
A) the monetary base.
B) the money multiplier.
C) the discount rate.
D) all of the above
E) none of the above
Game theory analysis of macro policy suggests that as voters become more
short-sighted
A) policy makers will be tempted to raise taxes.
B) policy makers will be forced to balance the budget.
C) policy makers will adopt policies today to achieve balanced budgets in the future.
D) all of the above
E) none of the above
The differences in the ratios of exports to GDP across countries are believed to be
caused primarily by
A) trade barriers.
B) each country’s size.
C) geography.
D) all of the above
E) both B and C
Bracket creep would less likely occur in which of the following?
A) a progressive income tax system
B) a regressive income tax system
C) a flat income tax system
D) none of the above