ECON5002_Macroeconomics_2007 Semester 2_Quiz 4

shifts the AS curve upward, but has no effect on the AD curve shifts the AS curve upward, and the AD curve leftward shifts the AS curve upward and the AD curve rightward shifts the AS curve downward and the AD curve rightward shifts the AS curve downward, and has an ambiguous effect on the AD curve

Question 2 1 points Save Assuming the nominal interest rate is greater than 0, rank the following three sequences of payments according to their present value:

Sequence \"A\": $90, $100, $110 Sequence \"B\": $100, $100, $100 Sequence \"C\": $110, $100, $90

A > B > C A > C > B C > B > A C > A > B B > A > C

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Question 3 If the production function is Y = AN, where N is the number of workers, Y is output and A measures the level of technology, then labour productivity is:

A AN A/N Y/A

none of the above

1 points Save Question 4 For this question, ignore differences in risk between different bonds. If there is arbitrage between one-year bonds and two-year bonds, we know that the rate of return on one-year bonds:

must be identical to the expected rate of return from holding a two- year bond for one year

must be identical to the expected rate of return from holding a two-year bond for two years

must be larger than the expected rate of return from holding a two-year bond for one year

must be smaller than the expected rate of return from holding a two-year bond for one year

will be exactly half the rate of return on two-year bonds

Question 5 In the medium run, lower money growth is associated with:

1 points Save lower real interest rates and lower nominal interest rates lower real interest rates and higher nominal interest rates higher real interest rates and higher nominal interest rates higher real interest rates and lower nominal interest rates none of the above

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Question 6 If the nominal interest rate is zero, then the present discounted value of a sequence of future payments is:

zero undefined

equal to the last of the payments equal to the sum of all payments

equal to the square of the sum of all payments

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Question 7 Based on our understanding of the price setting equation, which of the following

will NOT cause an increase the price level?

an increase in productivity an increase in the nominal wage an increase in the markup all of the above none of the above

Question 8 1 points Save The slowdown of growth in the rich countries since 1973 has probably been

caused by:

a low savings rate. low capital accumulation.

a decrease in the rate of technological progress. all of the above none of the above

1 points Save Question 9 Suppose the nominal interest rate is going to be 10% per year for the next two

years. The present discounted value of $500 to be received in two years is:

$480.00 $490.00 $350.00 $413.22 $454.45

Question 10 1 points Save Suppose there is an increase in the saving rate. We know that this will cause

an increase in which of the following in the steady state?

growth rate of output level of output

growth rate of capital per worker growth rate of output per effective worker none of the above

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Question 11 Suppose the current one-year interest rate is 2%, and financial markets expect the one-year interest rate next year to be 6%. Given this information, the yield to maturity on a two-year bond will be approximately:

4% 6.66% 7.5% 8% 10%

Question 12 1 points Save Assume that the rate of depreciation is 10% per year, the population growth rate is 3% per year, and the growth rate of technology is 1% per year. Then

the steady-state growth rate of output per worker in this economy is:

1%

3% 4% 10% 14%

1 points Save Question 13 In the IS-LM model, a decrease in expected inflation will cause:

a decrease in output

a decrease in the nominal interest rate an increase in the real interest rate all of the above none of the above

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Question 14 Assume that the rate of depreciation is 10% per year, the population growth rate is 3% per year, and the growth rate of technology is 1% per year. Then

the level of investment needed to maintain a constant capital stock (K) in this economy is:

0.01K 0.03K 0.04K 0.10K 0.14K

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Question 15 An increase in productivity is most likely to shift the AD curve leftward when it

results from:

a major technological breakthrough an increase in output an increase in human capital

government subsidies for higher education

a reorganization of production designed to reduce costs with existing technology

Question 16 1 points Save Based on our understanding of the price-setting equation, we know that an

increase in productivity will:

increase the prices set by firms increase the real wage paid by firms

increase the markup set by firms all of the above none of the above

1 points Save Question 17

Which of the following represents a dimension of technological progress? larger quantities of output for given quantities of capital and labour better products

a larger variety of products new products all of the above

Question 18 1 points Save One reason that long-term interest rates change less than short-term rates is

that:

the mathematical calculations are more difficult for analysts in the case of long-term bonds

long-term rates are always lower than short-term rates, so there is less room for them to change

financial markets assume that, in the future, the central bank will reverse part of any change in short-term rates

financial markets assume that the central bank will be passive as interest rates rise or fall

financial markets are often swept up by bubbles and fads

1 points Save Question 19 Suppose the yield curve is initially upward sloping. If financial market participants now expect a monetary contraction in one year from now, we know with certainty that now:

the yield curve will become flatter the yield curve will become horizontal the yield curve will become downward sloping the yield curve will become steeper

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Question 20

The idea that technological progress leads to increasing unemployment in the

medium run is:

supported by economic theory, but contradicted by the evidence supported by both theory and evidence

supported by the evidence, but contradicted by theory supported by neither theory nor evidence none of the above