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Free CFA-Level-I Exam Braindumps (page: 349)

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PDF with 3963 Questions

Which one of the following would be classified as employed?

  1. an auto worker vacationing in Florida during a layoff at a General Motors plant due to an annual change- over in models
  2. a parent who works 50-60 hours per week caring for family members
  3. a 21-year-old full-time college student
  4. a 17-year-old high school student who works six hours per week as a route person for the local newspaper

Answer(s): D

Explanation:

A person who is not actively looking for a job is not a member of the labor force and therefore is not employed.
An individual who is not a member of the formal market and works at home without wages is not a member of the formal labor force. An auto worker who is waiting to be re-hired or who was laid off is considered unemployed.



If unemployment was deemed too high by policy makers, which of the following policy tools might be utilized?

  1. decrease the money supply
  2. borrow to finance new military spending
  3. reduce government debt
  4. increase target interest rates
  5. reduce both taxes and government spending
  6. raise tariffs to help domestic workers

Answer(s): B

Explanation:

One method to reduce unemployment is to engage in expansionary fiscal policy. This requires the government to spend more than it collects in taxes. The result is a net increase in aggregate demand, which will increase the quantity supplied, and therefore reduce unemployment.



An increase in the expected future inflation rate will:

  1. Move the short-run supply curve to the left.
  2. Move the short-run supply curve to the right.
  3. Move the long-run supply curve to the right.
  4. Move the long-run supply curve to the left.

Answer(s): A

Explanation:

An increase in the expected future inflation rate will have two impacts. First, sellers will have reduced incentive to sell at current prices; they would rather store the current production for future sales at higher prices.
Secondly, resource suppliers, to the extent that they anticipate the higher inflation, will increase the resource prices in their contracts. Both these factors will serve to reduce the quantity the producers will be ready to supply at any given price, moving the short run supply curve to the left. The long-run supply curve will not be affected since over that period, all adjustments to the expected future conditions will have been made, restoring the equilibrium.



Countries A and B have the same monetary base and reserve requirement. People in A tend to hold more currency than people in B. The money supply will be:

  1. higher in B
  2. same in the two countries.
  3. insufficient information.
  4. higher in A

Answer(s): A

Explanation:

When people hold currency instead of bank deposits, the money goes out of circulation temporarily and the full impact of the deposit expansion multiplier is not felt. The higher this tendency to hold currency, the lower will be the money supply, even though the monetary base has not been affected.






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