Econ_102_Test_3_Review_Questions_S09_-_A

Econ_102_Test_3_Review_Questions_S09_-_A - 1 1 Explain why...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
f65fb32ceaffb69e3f6bee2ea9f78d2e0f8e3470.doc 1 1. Explain why the demand for loanable funds slopes downward and the supply of loanable  funds slopes upward. When the interest rate rises investment spending becomes more expensive, so people  invest less. As the interest rate rises saving becomes more rewarding, so people want to  save more. The inverse relation between interest and borrowing is reflected in the downward  slope of the demand for loanable funds curve. The positive relation between interest and  saving is reflected in the upward slope of the supply of loanable funds curve. 2. Identify each of the following acts as representing either saving or investment. Fred uses some of his income to buy government bonds. Julie takes some of her income and buys mutual funds. Alex purchases a new truck for his delivery business using borrowed funds. Elaine uses some of her income to buy stock in a major corporation. Henrietta hires a builder to construct a new home using borrowed funds. Fred is saving. Julie is saving. Alex is investing. Elaine is saving. Henrietta is investing. 3.   Table 1 uses data for the year 2000 provided by Statistics Canada and adjusted to be  comparable to U.S. data. All values are in millions. Fill in the blank entries in the table.  Table 1 Country Adult Population Labor Force Employed Unemploye d Unemployment Rate Labor-Force Participation Rate Japan 108.12 66.99 63.79 3.20 4.78 percent 61.96 percent France 46.06 25.98 23.53 2.45 9.43 percent 56.4 percent Germany 69.17 39.75 36.54 3.21 8.08 percent 57.47 percent 4. What the four types of unemployment and how do they change over the business cycle? The four types of unemployment are: Frictional Structural
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
f65fb32ceaffb69e3f6bee2ea9f78d2e0f8e3470.doc 2 Seasonal Cyclical The first three types of unemployment (frictional, structural, seasonal) have no strong relationship with the business cycle.  The fourth type, cyclical unemployment however is the result of the business cycle.   When the economy is in a recession and people lose their jobs as a the unemployed workers are cyclically unemployed.  Therefore, cyclical unemployment rises when the economy is in a recession.  Conversely, when the economy is in an expansion unemployed workers become  re-employed and the cyclical unemployment rate decreases. 5. Why is there unemployment even when the economy is at full-employment? Unemployment exists even when the economy is at full-employment because there will always be frictional and structural unemployment present.  Frictional unemployment is a natural occurrence in every economy that occurs when high school graduates or college graduates first enter the labour force.  Structural unemployment is also inevitable
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern