SOLUTION MANUAL FOR ECON 320 EXAM
1 STUDY GUIDE QUESTIONS AND
VERIFIED ANSWER
29: Most spells of unemployment are _____ term, and most
weeks of unemployment are attributable to _____ term
unemployment.
a) short; short
b) short; long
c) long; long
d) long; short - correct answer- b) short; long
A policy that decreases the job separation rate _____ the natural
rate of unemployment.
a) will increase
b) will decrease
c) will not change
d) could either increase or decrease - correct answer- b) will
decrease
,A policy that increases the job-finding rate _____ the natural
rate of unemployment.
a) will increase
b) will decrease
c) will not change
d) could either increase or decrease - correct answer- b) will
decrease
According to the Bureau of the Labor Statistics, the following
table consist of the U.S. Consumer Price Index. What is the
inflation rate in 2020?
Year U.S. Consumer Price Index
2019 255.7
2020 258.8
a) 1.50%
b) 1.21%
c) 1.05%
d) 0.18% - correct answer- b) 1.21%
,According to the quantity theory of money, a 5 percent increase
in money growth increases inflation by ___ percent. According
to the Fisher equation, a 5 percent increase in the rate of
inflation increases the nominal interest rate by ____ percent.
a) 1; 5
b) 5; 1
c) 1; 1
d) 5; 5 - correct answer- d) 5; 5
According to quantity theory of money, at given real GDP &
velocity of money:
% of change in money supply = inflation rate
=> Inflation rate = 5%.
& from the Fisher Equation, at given real interest:
% of change in nominal Interest = inflation rate = 5%
All of these actions increase government purchases of goods and
services EXCEPT the:
a) federal government sending a Social Security check to a
retired firefighter.
, b) federal government sending a paycheck to the president of
the United States.
c) federal government buying weapons.
d) city of Boston buying a library book - correct answer- a)
federal government sending a Social Security check to a retired
firefighter.
Assume GDP (Y) = 6,000
C is given by the equation C = 600 + 0.6(Y - T)
I is given by the equation I = 2,000 - 100r, where r = real rate of
interest (%)
T = 500; G = 500
A) What are the equilibrium values of C, I, and r?
B) What are the values of private saving, public saving, and
national saving?
C) If government spending rises to 1,000, what are the new
equilibrium values of C, I, and r?
D) What are the new equilibrium values of private saving, public
saving, and national saving? - correct answer- A) C = 600 +
0.6(Y - T) = 600 + 0.6(6,000 - 500) = 600 + 3600 - 300 = 3900
Y = C + I + G, 6,000 = 3900 + I + 500, I = 1600
I = 2000 - 100r, 1600 = 2000 - 100r, -400 = 100r, 4% = r
1 STUDY GUIDE QUESTIONS AND
VERIFIED ANSWER
29: Most spells of unemployment are _____ term, and most
weeks of unemployment are attributable to _____ term
unemployment.
a) short; short
b) short; long
c) long; long
d) long; short - correct answer- b) short; long
A policy that decreases the job separation rate _____ the natural
rate of unemployment.
a) will increase
b) will decrease
c) will not change
d) could either increase or decrease - correct answer- b) will
decrease
,A policy that increases the job-finding rate _____ the natural
rate of unemployment.
a) will increase
b) will decrease
c) will not change
d) could either increase or decrease - correct answer- b) will
decrease
According to the Bureau of the Labor Statistics, the following
table consist of the U.S. Consumer Price Index. What is the
inflation rate in 2020?
Year U.S. Consumer Price Index
2019 255.7
2020 258.8
a) 1.50%
b) 1.21%
c) 1.05%
d) 0.18% - correct answer- b) 1.21%
,According to the quantity theory of money, a 5 percent increase
in money growth increases inflation by ___ percent. According
to the Fisher equation, a 5 percent increase in the rate of
inflation increases the nominal interest rate by ____ percent.
a) 1; 5
b) 5; 1
c) 1; 1
d) 5; 5 - correct answer- d) 5; 5
According to quantity theory of money, at given real GDP &
velocity of money:
% of change in money supply = inflation rate
=> Inflation rate = 5%.
& from the Fisher Equation, at given real interest:
% of change in nominal Interest = inflation rate = 5%
All of these actions increase government purchases of goods and
services EXCEPT the:
a) federal government sending a Social Security check to a
retired firefighter.
, b) federal government sending a paycheck to the president of
the United States.
c) federal government buying weapons.
d) city of Boston buying a library book - correct answer- a)
federal government sending a Social Security check to a retired
firefighter.
Assume GDP (Y) = 6,000
C is given by the equation C = 600 + 0.6(Y - T)
I is given by the equation I = 2,000 - 100r, where r = real rate of
interest (%)
T = 500; G = 500
A) What are the equilibrium values of C, I, and r?
B) What are the values of private saving, public saving, and
national saving?
C) If government spending rises to 1,000, what are the new
equilibrium values of C, I, and r?
D) What are the new equilibrium values of private saving, public
saving, and national saving? - correct answer- A) C = 600 +
0.6(Y - T) = 600 + 0.6(6,000 - 500) = 600 + 3600 - 300 = 3900
Y = C + I + G, 6,000 = 3900 + I + 500, I = 1600
I = 2000 - 100r, 1600 = 2000 - 100r, -400 = 100r, 4% = r
