Aplia Q&a For Exam 1

Front 1

According to the article, "Too Much Productivity" factories are using 8% fewer labor hours than a decade ago. During this time what has happened to factory output?

Back 1

It has increased by 41%.

Front 2

Which of the following statements is false regarding too much productivity?

Back 2

There is no historical evidence linking higher productivity growth to higher living standards in the U.S.

Front 3

The percentage of the American workforce employed in farming has fallen from 40% in 1900 to less than 3% today. What does the article state as the reason for this?

Back 3

An increase in farm productivity

Front 4

Which of the following is not a determinant of productivity?

Back 4

Consumption

Front 5

Consider the following statements from the article, Too Much Productivity", "Improving productivity growth is the only way to increase the economy's speed limit. It doesn't guarantee the economy will run at the limit." Which of the following best explains these statements?

Back 5

Improving productivity growth increases the ability of the economy to produce goods and services, but it does not guarantee that there will be sufficient aggregate demand for the economy to be at full employment with actual output equal to potential output.

Front 6

According to the article, "Too Much Productivity" which of the following is a potential cost of faster productivity growth?

Back 6

More job loss

Front 7

According to the accompanying news article, per capita GDP in EU member countries is equal to what fraction of GDP per capita in the United States?

Back 7

72%

Front 8

According to the accompanying news article, "Economic Growht in the EU" what is the target employment rate for the EU for the year 2005?

Back 8

67%

Front 9

True or False: An increase in the employment rate, with no change in productivity and no change in the fraction of the population that is of working age, will increase GDP per capita.

Back 9

True

Front 10

True or False: If there is no increase in the employment rate in the EU, there will be no growth in GDP per capita in the EU region.

Back 10

False

Front 11

Assume that government pension policy encourages all workers over the age of 65 to retire. Consider what would happen if the share of a nation's population that is of working age (15 to 65) decreases because people live longer, causing the fraction of people over age 65 to increase.

True or False: In this case, if labor productivity and the employment rate remain constant, GDP per capita will decline.

Back 11

False

Front 12

True or False: Productivity growth rates in the EU are below the U.S. productivity growth rate.

Back 12

True

Front 13

Which of the following statements correctly describes the relationship between the level of GDP per capita and economic growth?

Back 13

None of these statements are correct.

Front 14

From the article: The Federal Reserve System and Interest Rates (Jan. 30th Meeting)

The press release on FOMC decisions follows a standard form. The first paragraph states the decision. The next few paragraphs summarize the Fed's economic outlook, interpret the decision, and give the main reasons behind it.

The key decision is whether to change the target for the federal funds rate. Changes are described in basis points. There are 100 basis points in one percentage point. This means, for example, that if the FOMC increased its target interest rate from 1% to 1.25%, there would be an increase of 25 basis points, or one-quarter of a percentage point.

According to the press release, the FOMC:

Back 14

Decreased its target interest rate 50 basis points to a new level of 3%

Front 15

From the article: The Federal Reserve System and Interest Rates (Jan. 30th Meeting)

A relatively high target federal funds rate corresponds to a firm, or tight, monetary policy stance by the Fed. Loose, or accommodative, monetary policy involves a relatively low federal funds rate target.

The Fed pursues firm monetary policy when actual output exceeds potential output and causes inflation. The Fed would also tighten monetary policy if it felt that, in the absence of higher interest rates, actual output would rise beyond potential output and cause inflation. Tightening monetary policy combats rising inflation or the risk of rising inflation.

The Fed pursues loose monetary policy when actual output is below potential and causing slow growth or recession. The Fed would also loosen monetary policy if it felt that, in the absence of lower interest rates, actual output would fall below potential and cause a recession. Loosening monetary policy combats a recession or the risk of a recession.

How would you classify the Fed's current policy action?

Back 15

The Fed saw downside risks to economic growth and decided to loosen monetary policy in order to prevent the economic downturn that could result from housing and financial market turmoil.

Front 16

The FOMC faces two policy challenges: stabilizing output and maintaining a low, stable rate of inflation. Even when the risk of recession is high, the FOMC keeps a close eye on inflation.

In the press release, the FOMC indicates that it expects inflation to:

Back 16

Moderate in coming quarters

Front 17

The second paragraph of the FOMC statement cites restricted credit, the housing contraction, and "softening in labor markets" in support of its decision to change the target federal funds rate. The current uncertainty in financial markets makes creditors reluctant to lend. Falling house prices reduce household wealth and make homeowners reluctant to borrow and spend. Firms typically respond to a fall in spending by scaling back output. The labor market will show signs of softening as the demand for labor falls and some firms lay off workers.

The FOMC moved aggressively to change the target federal funds rate in meetings on January 22 and January 30. Which of the following events would most likely cause the FOMC to decrease the target federal funds rate in future meetings?

Back 17

Rising unemployment and continued weakness in consumption and investment expenditures

Front 18

Assume that in this imaginary country, it's currently June.


Based on the information in the graph, what policy decision will the central bank most likely make in its June meeting?

Back 18

Because actual output is below potential output, the central bank will decide to maintain an accommodative policy stance.

Front 19

Now assume six months have passed and it's December.

Based on the information in the graph, what policy decision will the central bank most likely make in its December meeting?

Back 19

Because actual output has caught back up with potential output, the central bank will decide to return policy to a neutral stance.

Front 20

Based on the press release, which of these graphs is most likely to illustrate the FOMC's view of the U.S. economy if it had NOT moved aggressively to cut the federal funds rate target during the month of January?

Back 20

Graph II