Homework 6 Solution PDF

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Solutions for Homework 6...

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Homework 6 solution Chapters 31, 31, 35 & 37

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill. A) employed B) unemployed C) a discouraged worker D) out of the labor force Answer: A The Bureau of Labor Statistics would categorize a retiree who is not working as A) employed. B) unemployed. C) a discouraged worker. D) out of the labor force. Answer: D The labor force equals the number of people A) employed. B) unemployed. C) employed plus unemployed. D) in the working-age population. Answer: C Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will A) increase. B) decrease. C) remain constant. D) not change in a way that can be predicted. Answer: C Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause A) the unemployment rate to decrease. B) the labor force participation rate to decrease. C) the number of discouraged workers to increase. D) no change in the unemployment rate. Answer: B

The response of investment spending to an increase in the government budget deficit is called A) expansionary investment. B) private dissaving. C) crowding out. D) income minus net taxes. Answer: C A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds. A) savers; borrower B) borrower; savers C) governments; households D) firms; insurance companies Answer: A The supply of loanable funds has a ________ slope because the greater the interest rate, the ________ the reward to saving, and the ________ the quantity of loanable funds supplied. A) positive; lesser; lesser B) positive; greater; lesser C) negative; lesser; greater D) positive; greater; greater Answer: D Equilibrium in the loanable funds market determines A) the nominal interest rate. B) the current interest rate. C) the real interest rate. D) the expected interest rate. Answer: C The M1 measure of the money supply equals A) paper money plus coins in circulation. B) currency plus checking account balances. C) currency plus checking account balances plus traveler's checks. D) currency plus checking account balances plus traveler's checks plus savings account balances. Answer: C Credit card balances are A) part of M1. B) part of M2. C) part of M3. D) not part of the money supply. Answer: D

In an attempt to bring lenders and borrowers together following the financial crisis of 2008, the Federal Reserve made a large amount of new funds available to financial markets. Any of these new funds that were obtained by banks but were not loaned out would be classified as ________ of the banks. A) required reserves B) excess reserves C) deposits D) liabilities Answer: B A bank is legally required to hold a fraction of its ________ as ________. A) deposits; required reserves B) deposits; excess reserves C) loans; excess reserves D) loans; required reserves Answer: A The Federal Reserve's two main ________ are the money supply and the interest rate. A) monetary policy targets B) policy tools C) fiscal policy targets D) fiscal tools Answer: A The money demand curve has a A) negative slope because an increase in the interest rate decreases the quantity of money demanded. B) positive slope because an increase in the interest rate increases the quantity of money demanded. C) negative slope because an increase in the price level decreases the quantity of money demanded. D) positive slope because an increase in the price level increases the quantity of money demanded. Answer: A Using the money demand and money supply model, an open market sale of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to A) increase. B) decrease. C) not change. D) increase, then decrease. Answer: A

For purposes of monetary policy, the Federal Reserve has targeted the interest rate known as the A) federal funds rate. B) Treasury bill rate. C) discount rate. D) prime rate. Answer: A Changes in the federal funds rate usually result in A) changes in both short-term and long-term interest rates with more of an effect on short-term interest rates. B) changes in both short-term and long-term interest rates with more of an effect on long-term interest rates. C) changes in both short-term and long-term interest rates with equal effect on both. D) no change in either short-term or long-term interest rates. Answer: A The Fed's two main monetary policy targets are A) the money supply and the inflation rate. B) the money supply and the interest rate. C) the interest rate and real GDP. D) the inflation rate and real GDP. Answer: B Increases in the price level A) increase the opportunity cost of holding money. B) decrease the opportunity cost of holding money. C) increase the quantity of money needed for buying and selling. D) decrease the quantity of money needed for buying and selling. Answer: C Fiscal policy refers to changes in A) state and local taxes and purchases that are intended to achieve macroeconomic policy objectives. B) federal taxes and purchases that are intended to achieve macroeconomic policy objectives. C) federal taxes and purchases that are intended to fund the war on terrorism. D) the money supply and interest rates that are intended to achieve macroeconomic policy objectives. Answer: B The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of A) automatic stabilizers.

B) discretionary fiscal policy. C) discretionary monetary policy. D) automatic monetary policy. Answer: A The largest and fastest-growing category of federal government expenditures is A) grants to state and local governments. B) interest on the national debt. C) national park spending. D) transfer payments. Answer: D Government transfer payments include which of the following? A) interest on the national debt B) grants to state and local governments C) Social Security and Medicare programs D) national defense Answer: C President Trump's proposed increase in spending on infrastructure projects is an example of discretionary fiscal policy aimed at increasing A) real GDP and employment. B) tax revenues and the federal budget surplus. C) disposable income and interest rates. D) the money supply and money demand. Answer: A Which of the following is a government expenditure, but is not a government purchase? A) The federal government buys a Humvee. B) The federal government pays the salary of an FBI agent. C) The federal government pays out an unemployment insurance claim. D) The Federal government pays to support research on AIDS. Answer: C...