Econ Test 2 Multiple Choice

the natural rate of unemployment is the a. unemployment rate that would prevail with zero inflationb. rate associated with the highest possible level of GDPc. difference between the long-run and short run unemployment ratesd. amount of unemployment that the economy normally experiences d
the deviation of unemployment from its natural rate is calleda. the unnatural rate of unemployment b. structural unemploymentc. frictional unemploymentd. cyclical unemployment d
the sum of which of the following must be equal to the adult population a. employed, unemployedb. employed, unemployed, labor forcec. employed, unemployed, not in the labor forced. employed, unemployed, labor force, not in the labor force c
28-1the labor force of Wrexington a. increased from 2004 to 2005 and increased from 2005 to 2006b. increased from 2004 to 2005 and decreased from 2005 to 2006c. decreased from 2004 to 2005 and increased from 2005 to 2006d. decreased from 2004 to 2005 and decreased from 2005 to 2006 b
28-1the unemployment rate of Wrenxington is 2006 wasa. 6.25%b. 11.1%c. 12.5%d. 56.25% b
frictional unemployment can be the consequence ofa. workers leaving existing jobs to fine ones they like betterb. one industry declining while another is growing c. changes in the working conditions offered by competing firmsd. all of the above d
unemployment insurancea. reduces search effort and raises unemploymentb. reduces search effort and lowers unemployment c. increases search effort and raises unemploymentd. increases search effort and decreases unemployment a
when a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a a. shortage of labor and a shortage of jobsb. shortage of labor and a surplus of jobsc. surplus of labor and shortage of jobsd. surplus of labor and surplus of jobs c
sectoral chargesa. create frictional unemployment while firms paying wages above equilibrium to attract a better pool of candidates creates structural unemploymentb. create structural unemployment, while firms paying wages above equilibrium to attract a better pool of candidates creates frictional unemployment. c. and firms paying wages above equilibrium to attract a better pool of candidates both createstructural unemployment. d.and firms paying wages above equilibrium to attract a better pool of candidates both createfrictional unemployment. a
efficiency-wage theory suggests that paying a.low wages might be profitable because they raise the efficiency of a firm’s workers. b.low wages might be profitable because they lower the efficiency of a firm’s workers. c.high wages might be profitable because they raise the efficiency of a firm’s workers. d.high wages might be profitable because they lower the efficiency of a firm’s workers. c
the field of finance primarily studiesa.how society manages its scarce resources.b.the implications of time and risk for allocating resources over time. c.firms’ decisions concerning how much to produce and what price to charge. d.how society can reduce market risk. b
Suppose you put $350 into a bank account today. Interest is paid annually and the annual interest rate is 6 percent. The future value of the $350 after 4 years is a. $414.09. b. $434.00.c. $441.87. d. $481.24. c
Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to take the $100 today if the interest rate is a.4 percent. b.6 percent.c.8 percent. d.All of the above are correct. c
Compounding refers directly to a.finding the present value of a future sum of money. b.finding the future value of a present sum of money.c.changes in the interest rate over time on a bank account or a similar savings vehicle.d.interest being earned on previously-earned interest. d
Which of the following is the correct way to compute the future value of $100 put into an account that earns 4 percent interest for 10 years? a.$100(1 + .0410) b.$100(1 + .04 10)c. $100x10x(1+.04) d.$100(1 + .04)10 d
27-1Refer to Figure 27-1. Let 0A represent the distance between the origin and point A; let AB represent the distance between point A and point B; etc. Which of the following ratios best represents the marginal utility per dollar when wealth increases from $400 to $600?a. 0A/600b. AB/600c. 0B/200d. AB/200 d
The problem of moral hazard arises becausea.life is full of all sorts of risks. b.after people buy insurance, they have less incentive to be careful about their risky behavior. c. a high-risk person is more likely to apply for insurance than is a low-risk person. d. insurance companies go to great effort to avoid paying claims to their policy holders. b
if a person is risk averse, then she hasa. diminishing marginal utility of wealth, implying that her utility function gets flatter as wealth increases.b. diminishing marginal utility of wealth, implying that her utility function gets steeper as wealth increases.c. increasing marginal utility of wealth, implying that her utility function gets flatter as wealth increases.d. increasing marginal utility of wealth, implying that her utility function gets steeper as wealth increases. a
In general, as a person includes fewer stocks and more bonds in his portfolio, a.both risk and expected return rise. b.risk rises but expected return falls. c.risk falls, but expected return rises.d.both risk and expected return fall. d
If you believe that stock prices follow a random walk, then probably you a.do not believe that there is positive relationship between risk and return. b.do not believe that stock prices reflect all available information. c.believe in the validity of the efficient markets hypothesis.d.believe that it is a good idea to engage in fundamental analysis. c
We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that a.the credit risk associated with Bond A is lower than the credit risk associated with BondB. b.Bond A was issued by the state of New York and Bond B was issued by the Exxon MobilCorporation. c. Bond A has a term of 20 years and Bond B has a term of 2 years. d.All of the above are correct. c
The primary economic function of the financial system is to a.keep interest rates low. b.provide expert advice to savers and investors. c.match one person’s consumption expenditures with another person’s capital expenditures. d.match one person’s saving with another person’s investment. d
Net exports must equal zero for any economy a.that is closed. b. for which Y=C+I+G. c. for which S=Y-C-G.d.All of the above are correct. d
In a small closed economy investment is $20 billion and private saving is $22 billion. What are public saving and national saving? a.$24 billion and $2 billion b.$20 billion and -$2 billionc.$2 billion and $24 billiond. -$2 billion and $20 billion d
Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,000. What value of government purchases would make national savings equal to 1,000 and at that value would the government have a deficit or surplus? a.2,500, deficitb.2,500, surplus c.1,000, deficit d.1,000, surplus a
Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds? a.The demand for loanable funds shifted rightward. b.The demand for loanable funds shifted leftward.c.The supply of loanable funds shifted rightward. d.The supply of loanable funds shifted leftward. c
Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium a.interest rates and the equilibrium quantity of loanable funds rise. b.interest rates rise and the equilibrium quantity of loanable funds fall.c.interest rates fall and the equilibrium quantity of loanable funds rise. d.interest rates and the equilibrium quantity of loanable funds fall. b
Crowding out occurs when investment declines because a.a budget deficit makes interest rates rise. b.a budget deficit makes interest rates fall. c.a budget surplus makes interest rates rise.d.a budget surplus makes interest rates fall. a
26-2Refer to Figure 26-2. What is measured along the horizontal axis of the graph? a.the quantity of loanable funds b.the size of the government budget deficit or surplus c.the real interest rated.the nominal interest rate a
Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2? a.The government goes from running a budget deficit to running a budget surplus.b.Firms become optimistic about the future and, as a result, they plan to increase theirpurchases of new equipment and construction of new factories. c.A change in the tax laws encourages people to consume less and save more. d.A change in the tax laws encourages people to consume more and save less. b

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