According to the paradox of thrift, if households intend to save more, they will:
a) ultimately spend more.
b) cause an increase in jobs because investment will increase.
c) ultimately cause job losses.
d) cause the GDP to increase because inflation will decrease.
Answer: c) ultimately cause job losses.
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The unemployment rate is calculated as:
A) (number of unemployed) ÷ (number of employed + number of unemployed). B) (number of unemployed) ÷ (number of employed). C) (number of employed + number of unemployed) ÷ (labor force). D) (labor force) ÷ (number of unemployed).
A key assumption of new growth theory is that
A) all technological change is the result of luck. B) higher incomes lead to a higher birth rate. C) a successful innovator has the opportunity to earn a temporary, above-average profit. D) the population growth rate is lower than the real interest rate.
The law of diminishing returns implies that, with the quantity of capital fixed, as the use of labor rises
A) total product will fall eventually. B) the marginal product of labor will fall eventually. C) the total product of labor will fall below the marginal product of labor. D) the production process will become technologically inefficient eventually.
Which of the two features of the IMF Articles of Agreement helped promote flexibility in external adjustment?
A) IMF members helped countries maintain full employment. B) IMF allowed countries to attain internal balance. C) New countries would enter the agreement if they fixed their exchange rate. D) IMF members contributed their currency to form a pool of resources that IMF could lend to countries in need and parities in the exchange rate against the dollar could be adjusted with agreement of IMF. E) IMF members argued against the use of floating exchange rates.