Question

5.

The Romer Model predicts that an increase in the level of capital in the economy (K) will

a. have an ambiguous effect on the growth rate of ideas.

b.increase the growth rate of ideas.

c. decrease the growth rate of ideas.

d. have no effect on the growth rate of ideas.

6.

Which of the following statements about unemployment is TRUE?

a. A more generous unemployment insurance program would likely increase the natural rate of unemployment since there will be a decrease in the rate of job finding.

b. Increasing the minimum wage is likely to reduce structural unemployment.

c. The efficiency wage theory states that union bargaining power leads to higher wages for union members but causes higher unemployment for non-union workers.

d. Frictional unemployment refers to the unemployment that exists due to real wages being set higher than the equilibrium real wage.

7.

According to the Foreign Exchange Market, if the government adopts a policy that lowers imports (such as an import quota), then that policy

a. raises the real exchange rate and increases net exports.

b. raises the real exchange rate and does not change net exports.

c. raises the real exchange rate and decreases net exports.

d. lowers the real exchange rate and increases net exports.

e. lowers the real exchange rate and does not change net exports.

Answer 1

Answer: 1

b) increases the growth rate of ideas.

Explanation:

: According to Roman Model Predict, economies grows relative to one where there is no capital at all because continious technology growth allows for continious capital growth.

: When a continiously grows these shift keep happening and so the steady state capital per person levels keep rising.

Answer: 2

d) Frictional unemployment refers to the unemployment that exist due to real wage being set higher than the equilibrium real wage.

Explanation:

: Frictional unemployment exist when both jobs and workers are hetrogenious ( payment,worktime, taste, location,skills and many other factors) can result between the characteritics of supply and demand.

: If wages and other inputs prices are set , the economy can experience relatively long periods of cyclical unemployment and policies will be needed to reduce the structural unemployment.

: Efficiency wage theory idea is to increase wage that can lead to increased labour productivity.

Answer: 3

d) Lower the real exchange rate and increase net export.

Explanation:

: As lowers import, the real exchange rate is low and net exports increases.

: When the real ecxhange rate is high, the relative price of goods at home is higher than the relatives price of goods abroad.