Macroeconomics Mankiw - Assignment Essays

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A nation's standard of living is best measured by

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real GDP per person.

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Productivity is the

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key determinant of living standards, and growth in productivity is the key determinant of growth in living standards.

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Which of the following is a correct way to measure productivity?

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Divide the quantity of output by the number of hours worked

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Human capital is the

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knowledge and skills that workers acquire through education, training, and experience.

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Which of the following is human capital?

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understanding how to use a company's accounting software

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One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch. It requires that society

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sacrifice consumption goods and services now in order to enjoy more consumption in the future.

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Other things the same, a country that increases its savings rate will have

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higher future capital and higher future real GDP per person.

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Institutions that help to match one person's saving with another person's investment are collectively called the

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financial system

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When a large, well-known corporation wishes to borrow directly from the public, it can

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sell bonds.

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Which of the following statements about the term of a bond is correct?

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Interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

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The economy's two most important financial markets are

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the bond market and the stock market.

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Two of the economy's most important financial intermediaries are

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banks and mutual funds

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We associate the term debt finance with

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the bond market, and we associate the term equity finance with the stock market.

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Northwest Wholesale Foods sells common stock. The company is using

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equity financing and the return shareholders earn depends on how profitable the company is.

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If the tax revenue of the federal government exceeds spending, then the government necessarily

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runs a budget surplus.

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The source of the supply of loanable funds

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is saving and the source of demand for loanable funds is investment

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What would happen in the market for loanable funds if the government were to increase the tax on interest income?

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Interest rates would rise

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If Congress increased the tax rate on interest income, investment

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and saving would decrease

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Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate

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would decrease and investment would increase

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If Congress instituted an investment tax credit, the equilibrium quantity of loanable funds would

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rise.

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A larger budget surplus

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reduces the interest rate and raises investment

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An increase in the budget deficit

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makes investment spending fall.

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Crowding out occurs when investment declines because

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a budget deficit makes interest rates rise.

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A person who is not employed and claims to be trying hard to find a job but really is not trying hard to find a job

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is counted as unemployed but should be counted as out of the labor force.

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Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is

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never zero.

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If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is

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cyclical unemployment amounting to 0.5 percent of the labor force.

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Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called

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frictional unemployment.

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Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called

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structural unemployment.

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Frictional unemployment results from

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job searching. It is often thought to explain relatively short spells of unemployment

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Frictional unemployment is

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inevitable, because at any given time, jobs are being created in some firms and destroyed in other firms.

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People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as

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structurally unemployed.

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The natural unemployment rate includes

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both frictional and structural unemployment.

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Frictional unemployment can be the consequence of

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workers leaving existing jobs to find ones they like better.
one industry declining while another is growing.
changes in the working conditions offered by competing firms

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Economists use the term "money" to refer to

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those types of wealth that are regularly accepted by sellers in exchange for goods and services.

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Which of the following is a function of money?

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a unit of account
a store of value
medium of exchange

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You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

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medium of exchange

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Any item that people can use to transfer purchasing power from the present to the future is called

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a store of value

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Liquidity refers to

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the ease with which an asset is converted to the medium of exchange

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Which list ranks assets from most to least liquid?

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money, bonds, cars, houses

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When we measure and record economic value, we use money as the

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unit of account.

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Commodity money is

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money with intrinsic value.

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Fiat money

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has no intrinsic value

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M1 includes

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currency.
demand deposits.
traveler's checks.

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Which of the following does the Federal Reserve not do?

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convert Federal Reserve Notes into gold

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The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of

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the FOMC.

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When conducting an open-market sale, the Fed

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sells government bonds, and in so doing decreases the money supply.

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An open-market purchase

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increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.

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If a bank has a reserve ratio of 8 percent, then

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the bank keeps 8 percent of its deposits as reserves and loans out the rest.

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If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

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increase by $100 while wealth does not change.

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The money multiplier equals

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1/R, where R represents the reserve ratio for all banks in the economy.

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If the reserve ratio is 10 percent, the money multiplier is

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10.

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As the reserve ratio increases, the money multiplier

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decreases.

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If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to

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$20,000 of new money.

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When the Fed makes open-market purchases, bank

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deposits and lending increase.

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The discount rate is the interest rate that

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the Fed charges banks for loans.

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If the discount rate is lowered, banks borrow

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