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Lecture

ECON 112 Lecture Notes - Gdp Deflator, Unemployment Benefits, Nominal Interest Rate


Department
Economics
Course Code
ECON 112
Professor
M Gurvits

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ECN204 W2013 MTPractice
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. Which of the following is characteristic of the relationship between unemployment insurance and job-search
effort?
a.
A typical unemployed worker near the end of the time in which he or she can receive
benefits increases job-search efforts.
b.
Unemployed people need to put less job-search effort now than they did in 1971 because
in 1971 the conditions to receive unemployment benefits were stricter than today.
c.
Unemployment insurance raises structural unemployment because it reduces the job
search of the unemployed.
d.
Most economists are skeptical of the value of unemployment insurance because they
believe that it results in a poorer match between workers and jobs.
____ 2. For what reason are production possibilities frontiers usually bowed outward?
a.
It is because of the effects of technological change.
b.
The more resources a society uses to produce one good, the fewer resources it has
available to produce another good.
c.
It reflects the fact that the opportunity cost of producing a good falls as one produces more
and more of it.
d.
Resources are specialized, that is, some are better at producing particular goods rather than
other goods.
____ 3. Consider two people who are currently out of work. Deb is not currently looking for work but would like a
job. Although she is not currently searching for work, she has done so at some time in the recent past. Ted is
not looking for work, because he doesn't think there are jobs available for which he would qualify. Who does
Statistics Canada consider to be a discouraged worker?
a.
both Deb and Ted
b.
only Ted
c.
only Deb
d.
Neither Deb nor Ted
____ 4. Suppose you bake cookies. One day, you double the time you spend; double the number of chocolate chips,
flour, eggs, and all your other inputs; and bake twice as many cookies. What kind of production function is
this?
a.
decreasing returns to scale
b.
constant returns to scale
c.
increasing returns to scale
d.
zero returns to scale
____ 5. Suppose that in a closed economy GDP is 10,000, consumption is 6500, and taxes are 2000. What value of
government expenditures would make national saving equal 1000?
a.
7500
b.
3500
c.
9000
d.
2500

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____ 6. World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.
Which of the following would we expect?
a.
This would decrease the demand for existing shares of the stock, causing its price to fall.
b.
This would raise the demand for existing shares of the stock, causing its price to rise.
c.
This would raise the supply of the existing shares of stock, causing its price to fall.
d.
This would raise the supply of the existing shares of stock, causing its price to rise.
____ 7. The price index in the first year is 100, in the second year is 90, and in the third year is 80. What is the
deflation rate between the first and second year, and between the second and third year?
a.
10 percent between the first and second year, 11 percent between the second and third year
b.
11 percent between the first and second year, 11 percent between the second and third year
c.
10 percent between the first and second year, 12 percent between the second and third year
d.
11 percent between the first and second year, 12 percent between the second and third year
____ 8. Which of the following laws is most likely to reduce the natural rate of unemployment?
a.
a law that increases the minimum wage
b.
a law that makes it harder to find out about job candidates’ past job history
c.
a law that abolishes the minimum wage
d.
a law that makes all provinces repeal right-to-work laws
____ 9. Suppose that in a closed economy GDP is equal to 15,000, taxes are equal to 2500, consumption equals 7500,
and government expenditures equal 3000. What is public saving?
a.
500
b.
600
c.
600
d.
500
____ 10. Between 2006 and 2007, the country of Aquilonia reported an increase in the number of people who were
employed. It also reported an increase in the unemployment rate. Which of the following would best explain
the two reports?
a.
The two reports are contradictory and cannot be reconciled.
b.
There was an increase in the size of the labour force between 2006 and 2007.
c.
There was an increase in the size of the adult population between 2006 and 2007.
d.
There was a decrease in the size of the labour force between 2006 and 2007.
____ 11. How do economists consider normative statements?
a.
statements that establish production goals for the economy
b.
statements about the normal condition of the world
c.
descriptive, making a claim about how the world is
d.
prescriptive, making a claim about how the world ought to be
____ 12. Tom is looking for work after school, but everywhere he fills out an application he is told that so have lots of
others. Simon has a law degree. Several firms have made him offers, but he thinks he might be able to find a
firm where his talents could be put to better use. To which categories of unemployment the two persons
belong?
a.
Tom is structurally unemployed, and Simon is frictionally unemployed.
b.
Tom and Simon are both structurally unemployed.
c.
Tom is frictionally unemployed, and Simon is structurally unemployed.
d.
Tom and Simon are both frictionally unemployed.

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____ 13. In 2000 in the United Kingdom, the adult population was about 46.5 million, the labour force participation
rate was 63.5 percent, and the unemployment rate was 5.8 percent. What was the number of people
unemployed?
a.
1.7 million
b.
2.7 million
c.
3.7 million
d.
0.7 million
Figure 2-3
____ 14. Refer to Figure 2-3. At which point or points can the economy NOT produce?
a.
point C
b.
point A, C
c.
point A, C, D
d.
point A
____ 15. When the quality of a good deteriorates, what happens to the purchasing power of the dollar?
a.
It increases, so the CPI overstates the change in the cost of living if the quality change is
not accounted for.
b.
It increases, so the CPI understates the change in the cost of living if the quality change is
not accounted for.
c.
It decreases, so the CPI understates the change in the cost of living if the quality change is
not accounted for.
d.
It decreases, so the CPI overstates the change in the cost of living if the quality change is
not accounted for.
____ 16. PacknCamp Corporation has a price of $50, has issued 2 000 000 shares, has increased its cumulated retained
earnings by $2 million, and has a dividend yield of 2 percent. What is the price-earnings ratio of PacknCamp?
a.
50, which is low compared to historical standards of the market
b.
25, which is high compared to historical standards of the market
c.
25, which is low compared to historical standards of the market
d.
50, which is high compared to historical standards of the market
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