1- Suppose that Kristi is unsure about what to do with her life. Should she go t
ID: 2439664 • Letter: 1
Question
1-
Suppose that Kristi is unsure about what to do with her life. Should she go to graduate school now or wait until she decides what she wants to do?
Select one:
a. She should go now.
b. She should wait until she decides.
c. It doesn't matter.
d. Each choice is equally valid.
2-
When a U.S. air conditioner factory relocates to Mexico, the U.S. community experiences an initial negative shock plus:
Select one:
a. time bunching.
b. intertemporal substitutions.
c. irreversible investment uncertainty.
d. labor adjustment costs.
3-
The text refers to “labor adjustment costs” as the costs of:
Select one:
a. making an educated workforce.
c. increasing a nation's workforce through bringing in migrant workers from overseas.
d. shifting workers from one sector of the economy to another sector.
4-
When GDP is growing faster than trend, the employment-to-population ratio tends to grow:
Select one:
a. faster than trend.
b. more slowly than trend.
c. at its trend level.
d. unpredictably.
5-
During a recession, lending typically declines because:
Select one:
a. banks need to hold less as a cushion for themselves.
b. asset prices fall and therefore the net worth of firms declines as well, making them look riskier to banks.
c. there are fewer collateral shocks.
d. there is more demand for investment funding.
6-
Because of intertemporal substitution, a negative shock to aggregate demand could result in:
Select one:
a. a shift of the LRAS curve to the right.
b. a shift of the LRAS curve to the left.
c. an upward movement along the LRAS curve.
d. a downward movement along the LRAS curve.
7-
Intertemporal substitution:
Select one:
a. dampens economic shocks.
b. magnifies economic shocks.
c. does not affect economic shocks.
d. magnifies positive economic shocks and dampens negative economic shocks.
8-
If a real shock causes a particular sector of the economy to decline, associated labor adjustment costs will _____ the effect of the initial shock.
Select one:
a. amplify
c. not influence
d. eliminate
9-
Intertemporal substitution causes a positive productivity shock to:
Select one:
a. make the LRAS curve less steep.
b. make the LRAS curve steeper.
c. shift the LRAS curve farther to the right.
d. shift the LRAS curve farther to the left.
Explanation / Answer
1. b) She should wait until she decides
One should take into account earnings, job satisfaction, social value, skills & technology
2 d) Labour adjustment costs
When a negative shock its, workers must move to new areas, look for new jobs, and, change their wage expectations; this may lead to search related unemployment & when faced with uncertainty magnify the negative real shock
3 d) shifting workers from one sector of the economy to another sector
4 a) faster than the trend unless technological progress has been made, and, there is a shift in the growth curve
5 b) net worth of firms declines making them look riskier
6 b) shift of the LRAS curve to the left
Real GDP growth rate decreases for the given rates of inflation
7 b) magnifies economic shocks
LRAS curve moves to the left, or, the right depending on the negative shock, or, a positive shock respectively.
8 a) Amplify
Unemployed workers will have to look for jobs in another sector; it will induce search related unemployment; workers will have to wait, move to new areas; this will increase unemployment & magnify the real shock
9 c) Shift LRAS farther to the right
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