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11) As the average annual inflation rate ________, the volatility of inflation tends to ________. A) decreases; increase B) increases; increase C) increases; remain stable D) decreases; remain stable 12) If the real wage needs to decrease to restore equilibrium in a labor market, this can happen by A) keeping the nominal wage constant and allowing.
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Article Summary   In response to a local newspaper report stating that foreign investment in the mining industry will be restricted, the Brazilian government announced that it has no immediate plans to limit this investment, and increase royalties in the industry. The Brazilian mining industry is dominated by domestic iron ore producer.
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5.1   Labor Productivity and the Standard of Living 1) The most widely available measure of the standard of living is A) labor productivity. B) real GDP per capita. C) total factor productivity. D) the labor force growth rate. 2) Real GDP per capita is  measured as A) labor productivity x hours worked per person. B) real GDP.
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Article Summary   College tuition prices have been on the rise for the past several years, but tuition is not the only price increase college students are facing.  A report issued by the College Board shows that increases in room and board prices at a typical public university have been outpacing inflation.
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3.1   Overview of the Financial System 1) One difference between stocks and bonds is that A) unlike bonds, stocks do not represent a claim on a share in the profits and assets of firms. B) stocks are financial securities and bonds are labor market securities. C) unlike bonds, stocks do not promise to repay.
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6.2   The Federal Reserve and the Money Supply 1) Reserves are a bank ________ consisting of ________. A) asset; vault cash plus bank deposits with the Federal Reserve B) asset; checking account deposits and savings account balances C) liability; vault cash plus bank deposits with the Federal Reserve D) liability; checking account deposits and savings.
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5.2   The Solow Growth Model 1) Keeping total factor productivity constant, as the capital-labor ratio increases, labor productivity A) increases at a constant rate. B) increases at an increasing rate. C) increases at a decreasing rate. D) does not change. 2) An economy accumulates capital when A) its capital-labor ratio increases. B) it increases the number of hours.
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11) Recent research on the relationship between the level of income and happiness indicates that higher levels of income that result from economic growth A) have no measurable effect on levels of happiness. B) do make people happier. C) do not increase happiness at low levels of real GDP per capita. D) only increase.
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5.4   Balanced Growth Path, Convergence, and Long-Run Equilibrium 1) Balanced growth occurs when A) the economy is in steady state. B) the growth rates for the capital-labor ratio and real GDP per hour worked are the same. C) total factor productivity and capital accumulation each account for the same amount of growth in labor.
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11) If Jennifer withdraws $750 from her savings account and deposits it in her checking account, then M1 will ________ and M2 will ________. A) increase; increase B) increase; decrease C) increase; not change D) not change; decrease 12) If Jennifer withdraws $750 from her checking account and holds it as currency, then M1 will.
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6) Identify which of the following people would be considered either employed, unemployed, or not in the labor force: a.Alejandro just lost his job at an automobile assembly plant and is looking for work in another industry. b.Bonnie quit her job 6 months ago to take care of her newborn triplets. c.Cheyenne just.
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21) The relationship among interest rates on bonds that are otherwise similar but that have different maturities is known as the A) term structure of interest rates. B) risk structure of interest rates. C) term premium. D) Treasury bond coupon. 22) ________ Treasury bonds tend to have lower interest rates than ________ Treasury bonds. A) Lower.
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5.3   Total Factor Productivity and Labor Productivity 1) Assume the capital-labor ratio remains constant. If investment increases at a constant rate, output per hour worked will increase ________,  and if total factor productivity increases at a constant rate, output per hour worked will increase ________. A) at an increasing rate; at an.
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11) If the capital-labor ratio equals 1.5 in the steady state, depreciation equals 20, and dilution equals 10, break-even investment equals A) 15. B) 20. C) 30. D) 45. 12) If the capital-labor ratio equals 1.5 in the steady state, depreciation equals 20, and dilution equals 10, investment per hour worked equals A) 15. B) 20. C) 30. D).
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5) By the time the German hyperinflation following World War I ended in November 1923, the price level in Germany was ________ times higher than at the beginning of the hyperinflation. A) 1,000 B) 1 million C) 250 million D) 50 billion 6) In countries that have experienced hyperinflation, what role have large government budget.
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11) Real interest rates have, at times, been negative. Why would anyone lending money agree to a negative real interest rate? 12) During the 1990s, Japan experienced periods of deflation and nominal interest rates that approached zero percent. Why would anyone lending money agree to a nominal interest rate of almost.
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11) By the 2000s, an important change in the mortgage market had occurred when ________ became significant participants in the secondary market for mortgages by buying, bundling, and reselling mortgages as mortgage-backed securities. A) commercial banks B) investment banks C) financial markets D) foreign governments 12) When the housing bubble began to burst in 2006,.
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Table 4.1   Country Capital per worker Total factor productivity Terra Firma $70,000 7.4 Aquaria 115,000 12.2 11) Refer to Table 4.1. Assume the production function for real GDP per worker is y = Ak0.5 for both countries. The rate of return for capital in Terra Firma is A) 0.001. B) 0.014. C) 0.021. D) 0.032. 12) Refer to Table 4.1. Assume the production function for.
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6.5   The Costs of Inflation 1) All of the following are costs of expected inflation except A) seigniorage. B) menu costs. C) velocity costs. D) tax distortions. 2) The government's profit from issuing fiat money is known as A) seigniorage. B) menu costs. C) commodity profit. D) tax distortions. 3) The costs of inflation to firms due to reprinting price lists.
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21) Explain the differences between the loanable funds market and the money market. 22) Suppose the federal government is successful in reducing the budget deficit, households decide to increase their saving, corporate taxes are reduced, and businesses expect to see an increase in future profits. Use the loanable funds model to.
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Table 2.6   20102011 Nominal GDP $350 million $390 million Real GDP $325 million $375 million 29) Refer to Table 2.6. What is the inflation rate for 2011? Table 2.7   Gross domestic product $475,000 Transfer payments received by households        1,120 Retained earnings of corporations      21,400 Consumption of fixed capital      16,975 Personal tax payments            880 Interest on government bonds received by households            205 30) Refer to Table 2.7. Use.
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11) How  does an increase in technology affect total factor productivity? Use a graph to show this effect on the production function, investment, and break-even investment. 12) What is human capital? How do workers acquire human capital, and how does the acquisition of human capital influence total factor productivity and labor.
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3.3   Determining Interest Rates: The Market for Loanable Funds and the Market for Money 1) When determining interest rates, the loanable funds model is more useful when we are concerned with the determinants of the ________, and the money market model is more useful when we are concerned with the determinants.
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29) Describe the steady state in the Solow growth model. 30) Suppose the nation of Atlantica is experiencing a decline in population growth, while the nation of Pacifica is experiencing an increase in population growth. These changes in population growth rates are having a direct impact on changes in the growth.
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11) The supply curves for labor and capital are ________ and the demand curves for labor and capital are ________. A) upward sloping; downward sloping B) vertical; horizontal C) vertical; downward sloping D) upward sloping; vertical 12) All else equal, if the demand for labor increases and the supply of labor does not change, the.
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Article Summary   Inflation in Brazil continued to rise in 2011, with its headline inflation index up 5.99% annually in January, well above the target rate of 4.5%. Increases in wages, government spending, and food prices, coupled with growing consumer demand, are being credited with the rise in the price level. Surveys.
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11) Balanced growth paths can differ across countries due to differences in savings, human capital, and social institutions. These differences are likely to result in differences in ________, a common measure of the standard of living. A) happiness B) life expectancy C) income distribution D) real GDP per capita 12) How might a natural disaster.
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4.4   GDP per Hour Worked Among Countries 1) Suppose Canada and Thailand have the same level of total factor productivity and capital's share of income. If capital per worker is greater in Canada than in Thailand, the slope of the production function is steeper for ________, and capital will flow to.
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3.4   Calculating Interest Rates 1) When you borrow money from a bank, your bank charges you interest on the loan to compensate for all of the following except A) inflation. B) liquidity risk. C) the risk of default. D) the opportunity cost of other uses for the loaned money. 2) If you put $2,000 in a.
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4.1   The Aggregate Production Function 1) The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the firm's A) total factor productivity. B) marginal production level. C) technological ratio. D) production function. 2) The processes a firm uses to turn inputs into outputs of goods.
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5.5   Appendix A: Capital Accumulation and Endogenous Growth 1) Endogenous growth theory tries to explain A) why the growth rate of total factor productivity varies across countries. B) why capital is not subject to diminishing marginal returns. C) total factor productivity is the only determinant of labor productivity. D) balanced growth occurs in all.
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