Given:Population 50 millionNumber in the labor force 30 millionNumber employed full time 20 millionNumber employed part time 8 millionNumber unemployed 2 millionWhat is the unemployment rate of the economy?
Answer(s): D
The unemployment rate is the number of unemployed people divided by the number of people in the labor force or: 2/20 = 6.7%.
Which of the following about the multiplier is false?
Answer(s): C
The multiplier is defined as M = 1/(1-MPC) rather than 1 / (1 - MPS).
In Keynesian view, the best macroeconomic policy is to:
Answer(s): B
In Keynesian economics, fluctuations in aggregate demand are a major source of movements in the economy.Equilibrium occurs at any output level which equals the spending level. To maintain an equilibrium at the maximum sustainable real GDP, Keynesians prescribe regulating the planned aggregate expenditures to equal the potential real GDP.
If the Fed introduces an expansionary monetary policy:
When the Fed introduces an expansionary monetary policy, the money supply increases, causing the real interest rate to fall. This leads to a flow of funds out of the U.S. and into economies with higher real rates. The decreased demand for the U.S. dollar causes it to depreciate. This, in turn, makes the U.S. goods cheaper relative to foreign goods, increasing the U.S. exports and decreasing its imports. Note that this offsetting increase in the demand for U.S. dollar works more slowly than the initial depreciation caused by the outflow of monetary funds.
The nation of Myopia is having a massive inflation problem. To stabilize prices, the Myopian Central Bank decides to acquire large numbers of Capitalian Dollars (a very stable currency) and offer to exchange five Myopian Pesos for one Capitalian Dollar on demand. How does this impact the monetary base and the effective money supply for the nation of Capitalia?
The monetary base is made up of currency and bank reserves. In this case, Myopia has taken large amounts of currency out of circulation in Capitalia, but the expatriated currency is technically still part of the monetary base.Therefore the base has not changed, but the effective money in circulation has decreased. This is one of the problems economists face in attempting to measure the real money supply.
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