Final-MC - Radu Munteanu Economics 3 Spring 08 Practice...

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Radu Munteanu Economics 3, Spring 08 Practice problems – Final Exam (many thanks to Kristy Buzard for her help with the questions) 1. If unemployment compensation benefits are extended to more groups in an economy, the opportunity cost of job search will _______ and the natural unemployment rate will ___________ . 1. increase; decrease 3. decrease; decrease 2. decrease; increase;* 4. increase; increase 2. In the labor market, an increase in labor productivity __________ the real wage rate and _________ the level of employment. 1. raises; decreases 2. lowers; decreases 3. raises; increases* 4. lowers; increases 3. Which of the following statements are TRUE regarding the demand for labor? I) The quantity of labor demanded depends on the real wage rate. II) If the money wage rate increases and the price level remains the same, the quantity of labor demanded decreases. III) If the money wage rate and the price level increase in the same proportion, the quantity of labor demanded decreases. 1. I and II * 3. I, II and III 2. II and III 4. I 4. Saving is a(n) ______ and wealth is a(n) ______. 1. flow; stock* 3. asset; liability 5. flow; flow 2. liability; asset 4. stock; flow 5. A higher real rate of interest _____ the reward for saving and ______ the amount people need to save to reach a given target. 1. increases; increases 2. increases; does not change 3. increases; decreases* 4. decreases; decreases 5. decreases; increases 1
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6. Holding other factors constant, a technological improvement that increases the marginal product of capital will: 1. increase national saving 2. decrease national saving 3. increase investment 4. increase private saving 5. increase investment.* 7. A decrease in the government's budget deficit ______ the real interest rate and ______the equilibrium quantity of national saving. 1. increases; decreases 2. decreases; increases* 3. increases; does not change 4. decreases; decreases 5. increases; increases 8. As the real interest rate increases, the quantity of saving supplied ______ and the quantity of saving demanded ______. 1. decreases; decreases 2. decreases; increases 3. does not change; does not change 4. increases; decreases* 5. increases; increases 9. An increase in net taxes (i.e. taxes paid by the private sector to the government less transfer payments and interest payments made by the government to the private sector) will: 1. increase private saving 2. reduce investment in new capital equipment 3. decrease public saving.
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