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Free CFA-Level-I Exam Braindumps (page: 339)

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Since World War II the labor force participation rate (LPR)

  1. of women has steadily decreased while the LPR for men has increased.
  2. of women has steadily increased while the LPR for men has declined.
  3. of both women and men has increased.
  4. of both women and men has decreased.

Answer(s): B

Explanation:

Since 1948 the labor force participation rate for women has steadily increased while the rate for men has been declining. This suggests that the composition of work force participation within the family has changed substantially during the last five decades.



To the extent that people eventually adjust to demand stimulus policies, persistent expansionary macropolicy will lead to

  1. lower money interest rates.
  2. a reduction in the long-run unemployment.
  3. inflation with no permanent reduction in unemployment.
  4. more rapid economic growth but no change in prices.

Answer(s): C

Explanation:

Correctly anticipated inflation will result in persistent, though consistent, inflation with no effect on unemployment since there will be no effect on the real wage.



Which of the following is true?

  1. GDP = GNP + (income of citizens received for factors of production supplied abroad) - (income paid to foreigners for their contribution to domestic output)
  2. The GDP is always larger than GNP since it includes the output produced by foreign nationals living in the country.
  3. The GNP is always larger than GDP since it includes the income by the country's citizens living abroad.
  4. GNP = GDP + (income of citizens received for factors of production supplied abroad) - (income paid to foreigners for their contribution to domestic output).

Answer(s): D

Explanation:

GNP measures the productive value generated by the labor and capital owned by the citizens of a country, regardless of whether those citizens and assets reside within the country or out of it. Hence, while calculating GNP, the income generated by foreign nationals residing in the country as well as by assets owned by foreign nationals is excluded. On the other hand, GDP measures the productive activity within the country, regardless of who produces it.



When the economy is in short-run equilibrium below potential output, then

  1. actual unemployment will be greater than the natural unemployment.
  2. the natural unemployment will decline.
  3. the economy will be unable to sustain output in the long run.
  4. actual unemployment will be less than the natural unemployment.
  5. a strong demand for resources will place upward pressure on resource prices.

Answer(s): A

Explanation:

An equilibrium below potential output implies that demand for labor and other resources is weak. This implies that the actual rate of unemployment will be greater than the natural rate since the natural rate prevails when the economy is operating at full employment.






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