hw2

9. The real exchange rate: A) measures how many Japanese yen one really gets for a U.S. dollar. B) is equal to the nominal exchange rate multiplied by the domestic price level divided by the foreign price level. C) is equal to the nominal exchange rate multiplied by the foreign price level divided by the domestic price level. D) the price of a domestic car divided by the price of a foreign car. 10. If 5 French francs trade for $1, the U.S. price level equals $1 per good, and the French price level equals 2 francs per good, then the real exchange rate between French goods and U.S. goods is ______ French goods per U.S. good. A) 0.5 B) 2.5 C) 5 D) 10 11. A) B) C) D) An effective policy to reduce a trade deficit in a small open economy would be to: increase tariffs on imports. impose stricter quotas on imported goods. increase government spending. increase taxes.
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12. If purchasing-power parity held, if a Big Mac costs $2 in the United States, and if 5 French francs trade for $1 dollar, then a Big Mac in Paris should cost: A) 1 franc. B) 5 francs. C) 7 francs. D) 10 francs. 13. A) B) C) D) The natural rate of unemployment is: the average rate of unemployment around which the economy fluctuates. about 10 percent of the labor force. a rate that never changes. the transition of individuals between employment and unemployment.
4. In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to: A) make loans to the government. B) make loans to foreigners. C) repay the national debt. D) repay loans to the Federal Reserve. 5. A) B) C) D) A small economy is one in which the: level of output is fixed. price level is fixed. domestic interest rate equals the world interest rate. domestic saving is less than domestic investment.
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18. All of the following policies were adopted by government in an attempt to reduce the natural rate of unemployment except: A) unemployment insurance. B) government employment agencies. C) public retraining programs. D) the Illinois bonus program for unemployment insurance claimants who found jobs quickly. 19. A) B) C) D) The minimum wage: is usually about 75 percent of the average wage earned in manufacturing. raises the wages of highly skilled workers. encourages master workers to take on apprentices. has its greatest impact on teenage unemployment.
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6. A) B) C) D) 7. A) B) C) D) 8. A) B) C) D)
An increase in the trade deficit of a small open economy could be the result of: an increase in taxes. an increase in government spending. a decrease in the world interest rate. the expiration of an investment tax-credit provision. In a small open economy, policies that increase: investment tend to cause a trade surplus. investment tend to cause a trade deficit. saving do not affect the trade balance. saving tend to cause a trade deficit. The nominal exchange rate between the U.S. dollar and the Japanese yen is the: number of yen you can get for lending one dollar in Japan for one year. number of yen you can get for one dollar. price of U.S. goods divided by the price of Japanese goods. price of Japanese goods divided by the price of U.S. goods.
Intermediate Macroeconomics, Class No.2 Fall 2010 Homework 2 Due Nov. 6th 2010 Multiple choice questions (1 point each) 1. A country's exports may be written as equal to: A) GDP minus consumption minus investment minus government spending. B) GDP minus consumption of domestic goods and services minus investment of domestic goods and services minus government purchases of domestic goods and services. C) imports. D) GDP minus imports. 2. A) B) C) D) 3. A) B) C) D) If net capital outflow is positive, then: exports must be positive. exports must be negative. the trade balance must be positive. the trade balance must be negative. When exports exceed imports, all of the following are true except: net capital outflows are positive. net exports are positive. domestic investment exceeds domestic saving. domestic output exceeds spending.
14. If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings) is 0.56, then the fraction of employed workers who lose their jobs each month (the rate of job separations) must be: A) 0.08. B) 0.125. C) 0.22. D) 0.435. 15. Which of the following is an example of frictional unemployment? A) Dave searches for a new job after voluntarily moving to San Diego. B) Elaine is willing to work for less than the minimum wage, but employers cannot hire her. C) Bill is qualified and would like to be an airline pilot, but airlines do not find it profitable to hire him at the wage established by the airline pilot's union. D) Joan is willing to work at the going wage, but there are no jobs available. 16. A) B) C) D) 17. A) B) C) D) Unemployment insurance increases the amount of frictional unemployment by: making workers more frantic in their search for new jobs. inducing workers to accept the first job offer that they receive. making employers more reluctant to lay off workers. softening the economic hardship of unemployment. When there is structural unemployment, the real wage is: rigid at a level below the market-clearing level. rigid at the market-clearing level. rigid at a level above the market-clearing level. flexible.