Homework answers / question archive / University of California, Santa Barbara - Econ 2 Winter 2011 Midterm 2 1)Which of the following is true about the Malthusian model? The birth rate is directly related to income

University of California, Santa Barbara - Econ 2 Winter 2011 Midterm 2 1)Which of the following is true about the Malthusian model? The birth rate is directly related to income

Economics

Share With

---

University of California, Santa Barbara -

Econ 2 Winter 2011 Midterm 2

1)Which of the following is true about the Malthusian model?

1. 1. The birth rate is directly related to income.
   2. The death rate is directly related to income.
   3. If the average product of labor is higher than that needed for zero population growth, the population will fall.
   4. If the average product of labor is lower than that needed for zero population growth, the poulation will rise.

 

 

Table 28-3

 

2003 Labor Data for Adults (age 16 and older) in Meditor

 

Males not in labor force	45 million
Females not in labor force	35 million
Males unemployed	5 million
Females unemployed	5 million
Males employed	85 million
Females employed	65 million

 

 

2. Refer to Table 28-3.  What is the adult female unemployment rate in Meditor? a. 4.8 percent
   2. 5 percent
   3. 7.1 percent
   4. 7.7 percent

  

3. Twenty years ago, Dr. Montgomery borrowed money from her parents to pay her tuition at graduate school. Now she wants to pay them back. She gives them double what they gave her. According to the rule of 70, what interest rate would have given her parents the same amount of money if they had put it in the bank rather than lending it to their daughter?
   1. 3.5 percent
   2. 4.5 percent
   3. 5 percent
   4. 7 percent

  

4. In the article Voodoo Multipliers, Robert Barro states, “I have estimated (in my book Macroeconomics,A Modern Approach) that World War II raised U.S. real defense expenditures by $540 billion (1996 dollars) per year at the peak.”  Which of the following was NOT listed as one of the other components of GDP that experienced a significant decline.
   1. Private investment
   2. Non-military governemnt purchases
   3. Personal consumption expenditure
   4. Net exports

  

5. What is the future value of $450 at an interest rate of 15 percent two years from today? a. $525.87
   2. $566.00
   3. $585.00
   4. $595.13

  

6. For an imaginary closed economy, T = $5,000; S = $11,000; C = $50,000; and the government is running a budget deficit of $1,000.  Then 
   1. private saving = $10,000 and GDP = $54,000.
   2. private saving = $10,000 and GDP = $58,000.
   3. private saving = $12,000 and GDP = $67,000.
   4. private saving = $12,000 and GDP = $72,000.

  

7. Other things the same, when the interest rate rises, the present value of future revenues from investment projects a. rises, so investment spending rises.
   2. falls, so investment spending rises.
   3. rises, so investment spending falls.
   4. falls, so investment spending falls.

  

8. When we say that stock prices should follow a “random walk” we mean that: 
   1. Changes in stock prices are impossible to predict from available information. 
   2. Today's price is the best guess of tomorrow's price.
   3. Both a) and b) 
   4. Neither a) or b)

  

9. Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving? a. 1,500, 1,000, and 500, respectively
   2. 1,000, 500, and 1,500, respectively
   3. 500, 1,500, and 1,000, respectively
   4. None of the above is correct.

  

10. In a small closed economy investment is $20 billion and private saving is $22 billion. What are public saving and national saving?
    1. $24 billion and $2 billion
    2. $20 billion and -$2 billion
    3. $2 billion and $24 billion
    4. -$2 billion and $20 billion

  

11. Wages in excess of their equilibrium level help explain
    1. frictional but not structural unemployment.
    2. structural but not frictional unemployment.
    3. both frictional and structural unemployment.
    4. neither frictional nor structural unemployment.

  

12. Suppose that neither textile workers nor shoemakers are unionized. Unionized workers negotiate higher than equilibrium wages.  If textile workers unionize, then the supply of shoemakers will a. rise and their wages will rise.
    2. rise and their wages will fall.
    3. fall and their wages will fall.
    4. fall and their wages will rise.

  

13. Which of the following unemployed persons would be classified as structural unemployment?
    1. Jimmy just lost his job at a mortgage brokerage firm after the housing market collapse.
    2. Allison lost her job at a CD manufacturing company because of the rise of MP3 listeners.
    3. Sara recently quit her job as a sales rep to pursue her passion for graphic design (she is currently looking for a new job).
    4. Charles just graduated from UCSB and is moving back home to Chicago, so he had to quit his job at Woodstock's. Pizza.

  

14. Who is included in the labor force by the Bureau of Labor Statistics?
    1. Aibne, who works most of the week in a steel factory
    2. Modlen, who is waiting for her new job at the bank to start
    3. Wyclef, who does not have a job, but is looking for work
    4. All of the above are included in the labor force.

  

15. The sum of which of the following must be equal to the adult population?
    1. employed, unemployed
    2. employed, unemployed, labor force
    3. employed, unemployed, not in the labor force
    4. employed, unemployed, labor force, not in the labor force

  

16. As the number of stocks in a portfolio rises,
    1. both firm-specific risks and market risk fall.
    2. firm-specific risks fall; market risk does not.
    3. market risk falls; firm-specific risks do not.
    4. neither firm-specific risks nor market risk falls.

 

 

Table 28-1

 

Labor Data for Wrexington

 

Year	2004	2005	2006
Adult population	2000	3000	3200
Number of employed	1400	1300	1600
Number of unemployed	200	600	200

 

 

17. Refer to Table 28-1.  The labor-force participation rate of Wrexington in 2006 was a. 50%.
    2. 53.3%.
    3. 56.25%.
    4. 88.9%.

  

18. Anna deposited $10,000 into an account three years ago. The first year she earned 12 percent interest, the second year she earned 8 percent interest, and the third year she earned 4 percent interest. How much money does she have in her account today? a. $12,579.84
    2. $12,596.80
    3. $12,597.12
    4. None of the above are correct to the nearest cent.

  

19. Susan put $375 into an account and one year later had $405.  What interest rate was paid on Susan’s deposit? a. 5 percent
    2. 7 percent
    3. 8 percent
    4. 10 percent

 

 

20. How much investment do we need to keep the capital to labor ratio constant if the population is growing at rate n? a. I=K/n
    2. I=nK
    3. I=n+K
    4. I=K

  

21. Efficiency wages
    1. increase frictional unemployment by keeping wages above equilibrium.
    2. decrease frictional unemployment by keeping wages at equilibrium.
    3. increase structural unemployment by keeping wages above equilibrium.
    4. decrease structural unemployment by keeping wages at equilibrium.

  

22. Capital widening is when:
    1. The growth rate of the capital stock equals the growth rate of workers.
    2. The growth rate of the capital stock is greater than the growth rate of workers.
    3. The growth rate of the capital stock is less than the growth rate of workers. d. None of the above

  

23. An increase in government spending, holding tax revenue constant, causes 
    1. an increase in private saving
    2. an decrease in private saving
    3. an increase in public saving
    4. an decrease in public saving

  

24. An increase in the budget deficit would cause a
    1. shortage of loanable funds at the original interest rate, which would lead to falling interest rates.
    2. surplus of loanable funds at the original interest rate, which would lead to rising interest rates.
    3. shortage of loanable funds at the original interest rate, which would lead to rising interest rates.
    4. surplus of loanable funds at the original interest rate, which would lead to falling interest rates.

  

25. According to the efficient markets hypothesis, worse-than-expected news about a corporation will a. have no effect on its stock price.
    2. raise the price of the stock.
    3. lower the price of the stock.
    4. change the price of the stock in a random direction.

  

26. Dividends
    1. are the rates of return on mutual funds.
    2. are cash payments that companies make to shareholders.
    3. are the difference between the price and present value per share of a stock.
    4. are the rates of return on a company’s capital stock.

  

27. If there are more vacancies relative to the unemployed, this means
    1. It is easier for a worker to find a job, but more difficult for a job to find a worker.
    2. It is easier for a worker to find a job, and easier for a job to find a worker.
    3. It is more difficult for a worker to find a job, and more diffiuclt for a job to find a worker.
    4. It is more difficult for a worker to find a job, and easier for a job to find a workerr.

 

 

28. George has $300 in a bank account. Some years ago he put $213.20 into this account, and it has earned 5 percent interest every year since then.  How many years ago did he open his account? a. 4 years
    2. 5 years
    3. 6 years
    4. 7 years

  

29. If A is the area between the perfect equality line and the Lorenz curve and B is the area under the Lorenz curve, how do you calculate the Gini coefficient? a. A/(A-B)
    2. B/(A-B)
    3. B/(A+B)
    4. A/(A+B)

  

30. At which interest rate will an individual be indifferent between receiving $50 per year every year forever (starting one year from now), and receiving $1000 today? a. 2.5%
    2. 5%
    3. 10%
    4. 7.5%

  

31. A Gini coefficient of 0 means:
    1. the lowest 10% of the population is earning 100% of the income.
    2. the lowest 10% of the population is earning 50% of the income.
    3. the lowest 10% of the population is earning 10% of the income.
    4. the lowest 10% of the population is earning 1% of the income.

  

32. In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of
    1. the inflation rate.
    2. gross domestic product. 
    3. the real interest rate.
    4. the nominal interest rate.

  

33. If the wage increases from below Zach’s _______ wage to above Zach’s _______ wage, Zach will ______ the labor force.
    1. Matching, Matching, Leave
    2. Reservation, Reservation, Enter
    3. Matching, Matching, Enter
    4. Reservation, Reservation, Leave

  

34. Robert is risk averse and has $1,000 with which to make a financial investment. He has three options. Option A is
    1. risk-free government bond that pays 5 percent interest each year for two years. Option B is a low-risk stock that analysts expect to be worth about $1,102.50 in two years. Option C is a high-risk stock that is expected to be worth about $1,200 in four years. Robert should choose a. option A.
    2. option B.
    3. option C.
    4. either A or B because they are the same to him.

  

35. The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. The increase in the rate of interest should
    1. not influence the decision to build the factory because The Eye of Horus doesn't have to borrow any money.
    2. not influence the decision to build the factory because its stockholders are expecting a new factory.
    3. make it more likely that The Eye of Horus will build the factory because a higher interest rate will make the factory more valuable.
    4. make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.

  

36. Unemployment that exists because it takes time for workers to search for the jobs that suit them best is
    1. frictional unemployment, which contributes to the natural rate of unemployment.
    2. frictional unemployment, which does not contribute to the natural rate of unemployment.
    3. structural unemployment, which contributes to the natural rate of unemployment.
    4. structural unemployment, which does not contribute to the natural rate of unemployment.

  

37. You want to buy 100 shares of USAT stock at $30 a share, but you only have $2,000, so you buy on the margin.  There is a revolution in Egypt and the price falls to $25 a share, and you sell before it goes lower.  What is your return?
    1. -16.7%
    2. -20.0%
    3. -25.0%
    4. -50.0%

  

38. You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?
    1. Private and public saving are both positive.
    2. Private saving is positive; public saving is negative.
    3. Private saving is negative; public saving is positive.
    4. Both private saving and public saving are negative.

  

39. Pekelo owns his own business.  The Bureau of Labor Statistics counts Pekelo as
    1. unemployed and in the labor force.
    2. unemployed and not in the labor force.
    3. employed and in the labor force.
    4. employed and not in the labor force.

 

 

Figure 26-3.   The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.

 

 

A

B

C

F

S

S

D

D

1

2

1

2

i

 

   

40. Refer to Figure 26-3.   Which of the following movements would be consistent with the the enactment of an investment tax credit?
    1. a movement from Point A to Point C
    2. a movement from Point A to Point B
    3. a movement from Point A to Point F
    4. None of the above