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Mankiw Macroeconomics 6e Ch06

1. If the rate of unemployment is neither rising nor falling, then the number of people finding jobs must equal the number of people
losing or leaving jobs.
2. If the rate of job finding rises, the natural rate of unemployment will
decrease.
3. Suppose that 2 percent of the employed lose their jobs each month (s = 0.02) and 38 percent of the unemployed find a job each month (f = 0.38). Then, the steady-state rate of unemployment is
5 percent.
4. The unemployment rate is 10 percent. The rate of job separation is 5 percent. How high does the rate of job finding have to be to keep the unemployment rate constant?
45 percent

5. Unemployment insurance
frictional unemployment.
6. The unemployment caused by the time that it takes to match workers and jobs is called
frictional unemployment.
7. Frictional unemployment occurs because
it takes time to match firms and workers.
8. Which of the following policies would reduce the amount of frictional unemployment?
Public retraining programs
9. If the government increases the amount of unemployment insurance that unemployed workers can collect, the amount of frictional unemployment would be expected to
rise.
10. When the real wage is above the level that equilibrates supply and demand, then the quantity of labor supplied
is greater than the quantity of labor demanded.
11. The unemployment resulting from wage rigidity and job rationing is called
structural unemployment.
12. A teenager is not able to find a job because the legal minimum wage is higher than the wage that firms are willing to offer.This situation is an example of
structural unemployment.
13. Minimum-wage laws are an example of
wage rigidity.
14. Structural unemployment results when

the real wage is above its market-clearing level.
15. Which of the following is not a cause for real wage rigidity?
Unemployment insurance
16. The unemployment caused by unions and by the threat of unionization is an instance of
conflict between insiders and outsiders.
17. Unions may cause unemployment if
insiders force real wages higher than the market-clearing level.
18. Efficiency wage theories claim that firms may pay high real wages in order to
make workers more productive.
19. Efficiency wages do not lead to
lower firm profits.
20. Which of the following statements about unemployment is true?
Most unemployment is accounted for by the long-term unemployed.
21. Compared to long-term unemployment, short-term unemployment is more likely to be
frictional unemployment.
22. Suppose that 130 people are unemployed for part of a given year; 120 are unemployed for 1 month, 10 are unemployed throughout the year; what percentage of total months of unemployment is attributable to the long-term unemployed?
50 percent
23. Measured unemployment may be lower than actual unemployment because

some individuals may want a job but have become discouraged and stopped looking for one.
24. Discouraged workers who want jobs, but have stopped looking for jobs are
no longer in the labor force.
25. Many economists believe that the rise in European unemployment is caused by
generous government benefits.



 

Mankiw Macroeconomics 6e Ch07

1. The Solow growth model assumes that the production function exhibits
constant returns to scale.
2. Which of the following is not assumed by the Solow growth model?
Output is constant
3. In the Solow model, the depreciation rate represents the
fraction of the capital stock that wears out each year.
4. The change in the capital stock is equal to
investment - depreciation.
5. Suppose that the capital stock is 100, the depreciation rate is 10 percent per year, and output is 25. What must the saving rate be to keep the capital stock constant?
40 percent
6. If the capital stock is above the steady-state level, then investment
is smaller than depreciation.
7. If an economy is initially in a steady state and it experiences an increase in its saving rate, then the steady-state capital stock will
rise.
8. Suppose that output per worker is 10, the production function is y = sqrt(k) [that is, output per worker is equal to the square root of capital per worker] and the total capital stock is 1,000. How large is the labor force?
10
9. Suppose that the production function is y = sqrt(k) [that is, output per worker is equal to the square root of capital per worker], s = 0.40, and delta [the depreciation rate] = 0.10. What is the steady-state level of capital?
16
10. Suppose that the production function is y = sqrt(k) [that is, output per worker is equal to the square root of capital per worker], s = 0.40, and delta [the depreciation rate] = 0.10. What level saving will lead to the highest possible level of output in the steady state?
100 percent
11. A war has wrecked the economy of Baloneya: both the capital stock and the work force have been reduced by 50 percent. If the economy's production function has constant returns to scale, how will the postwar level of output per worker compare to the prewar level?
It will be the same.
12. The Golden Rule level of capital accumulation is defined as the level of the capital stock that achieves a steady state with the
highest level of consumption.
13. At the Golden Rule level of capital accumulation, the marginal product of capital equals the

depreciation rate.
14. Suppose that an economy is in steady state and has more capital than it would have in the Golden Rule steady state. A policymaker would want to pursue policies aimed at decreasing
the rate of saving.
15. An economy starts off in a steady state with less capital than at the Golden Rule level. Now the saving rate changes to the level that will achieve the Golden Rule. What is the path of consumption during the transition to the Golden Rule steady state?
It is lower, then higher than in the initial steady state.
16. An economy is in a steady state with capital higher than the Golden Rule level. Now the saving rate falls to a level that will achieve the Golden Rule capital stock in the long run. What will happen to the level of consumption between the initial and new steady states?
It will rise instantly and then will fall gradually.
17. If two economies are identical except for their rates of population growth, then the economy with the higher rate of population growth will have
lower steady-state output per worker.
18. If two economies are identical except for their rates of population growth, then if both economies are in steady state, the economy with the higher rate of population growth will have a
higher rate of growth of total output.
19. If the population growth rate decreases in an economy described by the Solow growth model, the line representing population growth and depreciation will
shift downward.
20. In the Solow growth model with population growth, the Golden Rule steady state is achieved when the marginal product of capital equals
the population growth rate plus the rate of depreciation.
21. Suppose that the production function is y = sqrt(k) [that is, output per worker is equal to the square root of capital per worker], s = 0.20, and delta [the depreciation rate] = 0.10. What is the Golden Rule level of capital per capita?
25

 

Chapter 8

1. In the Solow growth model with population growth (n) and technological progress (g), the steady-state growth rate of output per efficiency unit is
A. 0.
2. In the Solow growth model with population growth (n) and technological progress (g), the steady-state growth rate of output per worker is
C. g.
3. In the Solow growth model with population growth (n) and technological Progress (g), the steady-state growth rate of total output is
D. n + g.
4. A permanent change in the growth rate of total output can arise from a change in the
A. rate of technological progress.
5. In the Solow model with technological progress, an increase in the rate of technological change will
C. leave the investment curve unchanged.
6. In a Solow model with population growth and technological progress, the steady state level of consumption is maximized when the steady state marginal product of capital equals the rate of depreciation plus
A. the rate of population growth plus the rate of technological change.
7. The steady state level of income
B. the current level of income in the country.
8. Using the framework of the Solow growth model, the U.S. level of capital is presently
C. below the Golden Rule level.
9. All of the following are possible explanations for the worldwide slowdown in economic growth during the 70's and 80's EXCEPT
D. scarcity of non-petroleum raw materials.
10. In the basic endogenous growth model, the production function exhibits
B. constant returns.
11. In the basic endogenous growth model, usually called the Y=AK model, as long as the savings rate times the constant A is greater the rate of depreciation, income will grow
D. forever.
12. In the Solow model, savings leads to _______ growth, but in the Y=AK model, savings can lead to _______ growth.
B. temporary; persistent
13. Advocates of the Y=AK model interpret capital as
C. including knowledge.
14. In the two sector model presented in Section 8-4, where the sectors consist of manufacturing firms and research universities,
A. only firms use capital as inputs.
15. In the two sector model, the proportion of labor devoted to research universities determines the
D. steady-state growth rate of income.
16. In most endogenous growth theories, externalities from firms' research play a crucial role. Economists agree that research
B. can exhibit externalities of ambiguous value.
17. The marginal product of capital (MPK) is 1/3; the marginal product of labor (MPL) is 3. Capital is increased by 30; the labor force is increased by 10. How much does output increase?
D. 40
18. Suppose that the production function is Y = AF(K,L). The (unchanging) share of capital in output is 0.5. Suppose that output increases by 4 percent, the labor force increases by 3 percent, and the capital stock increases by 2 percent. What is the Solow residual in this case?
C. 1.5 percent

 

Mankiw Macroeconomics 6e Ch09

1. The model of aggregate supply and aggregate demand in the short run differs from our long-run model of the economy because, in the short run

C. prices are fixed.
2. Suppose that the price level is 1 and output is 100. Then the Fed suddenly increases the money supply by 10 percent. According to the AD/AS model, what would be the most probable paths for output and prices?
A. Y: 100, 105, 100; P: 1, 1, 1.1
3. The model of aggregate supply and aggregate demand that assumes sticky prices
B. shows that output depends on demand as well as supply.

4. The assumption of sticky prices is NOT valid for the case of the
A. pork-belly market.
5. One explanation for the stickiness of magazine newsstand prices is
D. customers would be annoyed if the price of their favorite magazine changed every month.
6. The quantity equation MV = PY implies that the AD curve is
D. downward sloping.
7. For a fixed money supply, a higher level of real balances implies
B. a lower price level.
8. If the Fed reduces the supply of money, the
D. AD curve shifts inward.
9. The LRAS curve of the classical model is
A. vertical.
10. In the short run, if prices are fixed, the aggregate supply curve is
C. horizontal.
11. The effect of a change in aggregate demand on income and prices depends crucially on
A. the time horizon.
12. An increase in aggregate demand, such as that due to an increase in government purchases increases
D. output in the short run and prices in the long run.
13. The AS/AD model with sticky prices predicts that, in the long run, a reduction of the money supply results in
B. lower prices and no change in output.
14. If the money supply is held constant, an increase in the velocity of money would cause the AD curve to
B. shift outward.
15. The occurrence of falling output combined with rising prices is called
D. stagflation.
16. Stagflation--a period of rising unemployment coupled with rising inflation--could most easily result from a(n)
C. increase in the price of oil.
17. Faced with an adverse supply shock, if the central bank wants to stabilize output, it should
B. increase the money supply.
18. All of the following represent supply/price shocks EXCEPT
C. the introduction of a debit card, increasing the velocity of money.
19. Consider the following data on inflation and unemployment

Year Inflation Unemployment
10% 5%
8% 6%
4% 9%


The part of the business cycle characterizing this economy from year 1 to year 3 is
A. recession.
20. Suppose the economy is faced with an adverse supply shock. The Fed decides to immediately accommodate the shock. What path of income and prices would be observed in the economy?
D. Y: 100, 100, 100; P: 1, 1.2, 1.2

Mankiw Macroeconomics 6e Ch10
1. In "The General Theory of Employment, Interest, and Money," John Maynard Keynes proposed that the Great Depression was caused by
B. low aggregate demand.
2. Which of the following is NOT exogenous in the IS-LM model?
A. The interest rate
3. In the Keynesian cross model of Chapter 10, if the interest rate is constant and the MPC is 0.7, then the government purchases multiplier is
D. 3.3.
4. In the Keynesian cross model of Chapter 10, if the interest rate is constant, the MPC is 0.6, and taxes are increased by $100, by how much does income change?
B. It decreases by $150.
5. The relationship between interest rates and the level of income that arises in the market for goods and services is called the
B. IS curve.
6. The investment function and the IS curve slope .
D. downward because higher interest rates induce less investment.
7. The slope of the IS curve depends on
A. the sensitivity of investment to the interest rate.
8. The IS curve is drawn for a given
A. fiscal policy.
9. Exogenous increases in the supply of loanable funds shift the
D. IS curve inward.
10. If investment becomes less sensitive to the interest rate, then the
C. IS curve becomes steeper.
11. If the marginal propensity to consume is large, then the
D. IS curve is relatively flat.
12. The LM curve is drawn for a given
C. money supply.
13. The quantity of real money balances demanded depends on the
C. nominal money supply.
14. The quantity of real money balances demanded depends on
B. real income.
15. The relationship between the interest rate and the level of income that arises in the market for money balances is called the
A. LM curve.
16. The theory of liquidity preference assumes that the supply of real money balances, plotted against the interest rate, is
D. vertical.
17. The theory of liquidity preference postulates that the demand for real money balances, plotted against the interest rate, is
B. downward sloping.
18. In the early 1980's the Federal Reserve, under Paul Volcker, began a period of tight money aimed at reducing inflation. Under this policy, nominal interest rates were:
B. higher in the short run and lower in the long run.
19. In the quantity theory interpretation of the LM curve, the LM curve slopes up because
B. velocity depends on the interest rate.
20. If the central bank increased the supply of real money balances, then the LM curve would
D. shift outward.
21. If money demand became more sensitive to the level of income, the LM curve would
A. become steeper.

 


Date: 2015-12-11; view: 2081


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