Chapters_20_17_18_19_ProblemSession

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1 Chapters_20_17_18_19_ProblemSession Multiple Choice Identify the choice that best completes the statement or answers the question. Table 28-1 Labor Data for Wrexington Year Adult population Number of employed Number of unemployed Refer to Table The labor force of Wrexington in 2004 was a b c d Refer to Table The unemployment rate of Wrexington in 2004 was a. 10%. b. 12.5%. c. 14.3%. d. 80%. 3. Refer to Table The labor-force participation rate of Wrexington in 2005 was a. 43.3%. b. 54.2%. c. 63.3%. d. 68.4%. 4. Waldo works eight hours and produces 7 units of goods per hour. Emerson works six hours and produces 10 units of goods per hour. a. Waldo s productivity and output are greater than Emerson s. b. Waldo s productivity is greater than Emerson s but his output is less. c. Emerson s productivity and output are greater than Waldo s. d. Emerson s productivity is greater than Waldo s but his output is less. 5. Which of the following is a determinant of productivity? a. human capital per worker b. physical capital per worker c. natural resources per worker d. All of the above are correct. 6. At the broadest level, the financial system moves the economy s scarce resources from a. the rich to the poor. b. financial institutions to business firms and government. c. households to financial institutions. d. savers to borrowers.

2 7. In a closed economy, what does (T - G) represent? a. national saving b. investment c. private saving d. public saving 8. The identity that shows that total income and total expenditure are equal is a. GDP = Y. b. Y = DI + T + NX. c. GDP = GNP - NX. d. Y = C + I + G + NX. 9. Which of the following expressions must be equal to national saving for a closed economy? a. Y - I - G - NX b. Y - C - G c. Y - I - C d. G + C - Y Scenario Assume the following information for an imaginary, closed economy. GDP = $110,000; consumption = $70,000; private saving = $8,000; national saving = $12, Refer to Scenario For this economy, investment amounts to a. $4,000. b. $8,000. c. $12,000. d. $16, Refer to Scenario This economy s government is running a a. budget surplus of $4,000. b. budget surplus of $8,000. c. budget deficit of $4,000. d. budget deficit of $8, Refer to Scenario For this economy, government purchases amount to a. $12,000. b. $18,000. c. $28,000. d. $40, What would happen in the market for loanable funds if the government were to increase the tax on interest income? a. The supply of loanable funds would shift right. b. The demand for loanable funds would shift right. c. The supply of loanable funds would shift left. d. The demand for loanable funds would shift left. 14. When the government runs a budget deficit, a. interest rates are lower than they would be if the budget were balanced. b. national saving is higher than it would be if the budget were balanced. c. investment is lower than it would be if the budget were balanced.

3 d. All of the above are correct. 15. Suppose you put $500 into a bank account today. Interest is paid annually and the annual interest rate is 5.5 percent. The future value of the $500 is a. $ after 5 years and $ after 10 years. b. $ after 5 years and $ after 10 years. c. $ after 5 years and $ after 10 years. d. $ after 5 years and $ after 10 years. 16. Imagine that someone offers you $X today or $1,500 in 5 years. If the interest rate is 6 percent, then you would prefer to take the $X today if and only if a. X > 1, b. X > 1, c. X > 1, d. X > 1,

4 Chapters_20_17_18_19_ProblemSession Answer Section MULTIPLE CHOICE 1. ANS: B PTS: 1 DIF: 2 REF: 28-1 TOP: Labor force 2. ANS: B PTS: 1 DIF: 2 REF: 28-1 NAT: Analytic LOC: Unemployment and inflation TOP: Unemployment rate 3. ANS: C PTS: 1 DIF: 2 REF: 28-1 TOP: Labor-force participation rate 4. ANS: C PTS: 1 DIF: 2 REF: 25-2 NAT: Analytic LOC: Productivity and growth TOP: Productivity 5. ANS: D PTS: 1 DIF: 1 REF: 25-2 NAT: Analytic LOC: Productivity and growth TOP: Productivity 6. ANS: D PTS: 1 DIF: 1 REF: 26-1 TOP: Financial system 7. ANS: D PTS: 1 DIF: 1 REF: 26-2 TOP: Public saving MSC: Definitional 8. ANS: D PTS: 1 DIF: 1 REF: 26-2 TOP: Gross domestic product 9. ANS: B PTS: 1 DIF: 1 REF: 26-2 TOP: National saving 10. ANS: C PTS: 1 DIF: 2 REF: 26-2 TOP: Investment 11. ANS: A PTS: 1 DIF: 2 REF: 26-2 TOP: Government purchases 12. ANS: C PTS: 1 DIF: 2 REF: 26-2 TOP: Government purchases 13. ANS: C PTS: 1 DIF: 2 REF: 26-3 NAT: Analytic LOC: Understanding and applying economic models TOP: Market for loanable funds 14. ANS: C PTS: 1 DIF: 1 REF: 26-3 NAT: Analytic LOC: Understanding and applying economic models TOP: Budget deficits Crowding out 15. ANS: C PTS: 1 DIF: 2 REF: 27-1

5 TOP: Future value 16. ANS: B PTS: 1 DIF: 3 REF: 27-1 TOP: Present value