Econ 110 – Fall 2024
Bonus Problem Set
Due Date: December 30, 2024
1) Suppose the government launches a successful advertising campaign that convinces
workers with high school degrees to quit their jobs and become full time university students.
This would cause
A) the unemployment rate to decrease.
B) the labor force participation rate to decrease.
C) the number of discouraged workers increases.
D) no change in the unemployment rate.
2) Ali hasbeen unemployed for over a year. He hasn't looked for a job in the last three
months, but he's just started looking for work again. Because Ali started looking for a new job
A) the unemployment rate increased.
B) the labor force participation rate decreased.
C) the unemployment rate decreased.
D) the working-age population increased.
3) Ifthe number of unemployed workers is 200 thousand, the number of employed workers is
300 thousand, and the working-age population is 800 thousand, what is the labor force
participation rate?
A) 12.5%
B) 37.5%
C) 40%
D) 62.5%
4) Ayşe just received a promotion at work and now works 50 hours per week instead of 35. As
a result,
A) the unemployment rate increased.
B) the unemployment rate decreased.
C) neither the unemployment rate nor the labor force participation rate changed.
D) the labor force participation rate increased.
GDP Population
Country (billions of dollars) (millions of people)
Sweden $3.85 9.05
Ireland 2.23 4.21
5) Based on the table above, which country has a higher standard of living and why?
A) Sweden has a higher standard of living because their GDP is higher.
B) Ireland has a higher standard of living because their GDP per capita is higher.
C) Sweden has a higher standard of living because their GDP per capita is higher.
D) Ireland has a higher standard of living because growth in GDP is greater in Ireland than in
Sweden.
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Due in part to a lackluster economy, Mexico is experiencing an exodus of some of its brightest
and most educated citizens. More than 20 percent of Mexicans with bachelor's degrees are
living in the United States, 28 percent working on higher education degrees are doing so in the
United States, and 27 percent of Mexicans with doctorates are working in the United States.
The three main reasons given for this exodus are money, politics, and safety. Pay gaps are wide
between university positions in the two countries, scholarship money is scarce in Mexico and
is subject to political bureaucracy and nepotism, and a 2014 study from Mexico's National
Autonomous University reported that 76 percent of high-skilled workers stated that violence
was a reason for their departure from the country.
Source: Christopher Woody, "'Not nostalgic about their country': Latin America's brain drain is
accelerating," Business Insider, August 24, 2015.
6) Refer to the Article summary above. If, after the outflow of educated workers in Mexico, it
now takes more capital per hour worked to get the same amount of GDP per hour worked, this
indicates ________ the per-worker production function in Mexico.
A) a downward shift of
B) a movement down
C) an upward shift of
D) a movement up
7) According to Joseph Schumpeter, the theory of creative destruction describes a process by
which
A) some new products unleash a gale of destruction that drive other new products out of the
market.
B) new products unleash a gale of destruction that drives old products out of the market.
C) new products are created by the destruction of capital.
D) the creation of new products never involves the destruction of old products.
8) The "new economy" that emerged in the mid-1990s is based on
A) manufacturing.
B) financial services.
C) information technology.
D) retail sales.
9) If the economy is currently in equilibrium at a level of GDP that is above potential GDP,
which of the following would move the economy back to potential GDP?
A) a decrease in wealth
B) a decrease in interest rates
C) an increase in business confidence
D) a decrease in the value of the dollar relative to other currencies
10) If an increase in autonomous consumption spending of $10 million results in a $50
million increase in equilibrium real GDP, then
A) the MPC is 0.5.
B) the MPC is 0.75.
C) the MPC is 0.8.
D) the MPC is 0.9.
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11) Autonomous expenditure is a type of expenditure that does not depend on
A) wealth.
B) expectations.
C) interest rates.
D) GDP.
12) The National Restaurant Association states that the restaurant industry has an economic
effect of more than $1.7 trillion annually in the United States, with every dollar spent in
restaurants generating an estimated total of $2.05 in spending in the economy. This indicates
that the spending multiplier for the restaurant industry is equal to
A) 1.21.
B) 1.70.
C) 2.05.
D) 4.25.
13) When the economy enters into a recession, your employer is ________ to reduce your
wages because ________.
A) unlikely; output and input prices generally fall during recession
B) unlikely; lower wages reduce productivity and morale
C) likely; output prices always fall during recession
D) likely; aggregate demand is vertical in the long run
14) Because of the slope of the aggregate demand curve, we can say that
A) a decrease in the price level leads to a lower level of real GDP demanded.
B) an increase in the price level leads to no change in the level of real GDP demanded.
C) a decrease in the price level leads to a higher level of real GDP demanded.
D) an increase in the price level leads to a higher level of real GDP demanded.
15) The international trade effect states that
A) an increase in the price level will lower net exports.
B) an increase in the price level will raise net exports.
C) an increase in the price level will raise exports.
D) an increase in the price level will lower imports.
16) The impact of Kahramanmaraş Earthquake on consumers in the economy was to make
them very pessimistic about their future incomes. How does this increased pessimism affect
the aggregate demand curve?
A) This will move the economy up along a stationary aggregate demand curve.
B) This will move the economy down along a stationary aggregate demand curve.
C) This will shift the aggregate demand curve to the left.
D) This will shift the aggregate demand curve to the right.
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17) Following the 2007-2009 financial crisis, many people feared that Greece might leave the
euro and resume using the drachma. If that happened, the drachma might be worth less than
the euro. When using fiat money like the drachma, the key to acceptance is that households
and firms have confidence that if they accept drachma in exchange for goods and services, the
drachma will not lose much value during the time they hold them. If sellers were not willing
to accept the drachma in exchange for goods and services, the drachma would not serve as
A) a unit of account.
B) fiat money.
C) legal tender.
D) a medium of exchange.
18) Liquidity is defined as
A) the ease with which a given asset can be converted to a store of value.
B) the ease with which a given asset can be converted to a unit of account.
C) the ease with which a given asset can be converted to a medium of exchange.
D) the ease with which a given asset can be converted to a standard of deferred payment.
19) A decrease in the discount rate ________ bank reserves and ________ the money supply
if banks respond appropriately to the change in the rate.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
20) To increase the money supply, the Federal Reserve could
A) raise the discount rate.
B) decrease income taxes.
C) raise the required reserve ratio.
D) conduct an open market purchase of Treasury securities.
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