Question

In: Economics

The "headline" unemployment rate (U-3) does not include which of the following

		discouraged workers
		other marginally attached workers
		those working part-time for economic reasons
		all of the above

The demand for loanable funds is negatively related to the real interest rate because

		higher real interest rates generate more saving
		higher real interest rates raise the cost of capital
		higher real interest rates are caused by monetary policy
		higher real interest rates lower the cost of capital

QUESTION 37

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

a.
$2.5 trillion and $1.5 trillion, respectively

b.
$2.5 trillion and $2.5 trillion, respectively

c.
$1.5 trillion and $2.5 trillion, respectively

d.
$1.5 trillion and $1.5 trillion, respectively

Since the Great Recession, real interest rates have been at historically low levels. Which of the following is NOT a possible reason for the low rates?

		baby boomers are a large share of the population and are at the life stage when their savings is high
		higher income inequality creates more savings because more wealthy households save more
		low productivity growth has lowered demand for investments
		increased internet access has created better information for consumers

Expert Solution

(1) Discouraged workers are not the part of headline unemployment rate (U3). It is included in U4 and U6.

Answer: Option (a)

(2) The demand for loanable funds is negatively related to the real interest rate because higher interest rate raises the cost of capital.

Answer: Option (b)

(3) Y = $11 trillion

C = $7 trillion

T = $2.5 trillion

T - G = $1 trillion (Surplus)

Private saving = Y - C -T

Private saving = $11 trillion - $7 trillion - $2.5 trillion

Private saving = $1.5 trillion.

Public saving = T-G

Public Saving = $1 trillion.

National Saving = Private saving + Public Saving

National Saving = $1.5 Trillion + $1 Trillion

National Saving = $2.5 trillion. .

Answer: Option (C)

(4) Increased internet access has created better information for consumers is not a possible reason for the low interest rates.

Answer: Option (D)

Rahul Sunny answered 2 years ago

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