Question

24. Ceteris paribus, employees are now being automatically enrolled in programs that allow retirement savings. As a result of this change, what will happen to the real interest rate? What will happen to the amount of saving and investment? a.increase; increase b. increase; not change c. increase; decrease d. decrease; increase

25. Given the following data, what is average labor productivity:Real GDP/person= $60,000Population employed = 80% a. $45,000. b. $60,000. c. $62,500. d. $75,000

27. There is ongoing famine in Country A. Large numbers of citizens from Country A move to Country B in search of jobs to feed their families. Ceteris paribus, what would you expect to happen to the real wage rate in Country B? What would you expect to happen to the employment level in Country B?

a. increase, increase b. increase, decrease c. decrease, decrease d. decrease, increase

28. In this example, public saving = ? Receipts. Expenditures

Federal and Government 2,500. 2,000

State and Local Governments 1,200. 1,500

a. +3,700 b. +2,500 c. +200 d. –300

Answer 1

24. The supply of loanable funds comes from sources like savings of households while the demand for loanable funds accrues to capital requirements for business expansion,etc. When employees are being automatically enrolled in programs that allow retirement savings, the supply of loanable funds in the loanable funds market will increase and the supply curve will shift rightward. At the new intersection of demand for loanable funds and supply of loanable funds curve, the real interest rate will be lower and the amount of saving and investment will increase.

The correct answer is: (d) decrease, increase.

25. Labor productivity measures the hourly output of a country's economy.That is, it represents the amount of real gross domestic product (GDP) produced by an hour of labor. Real GDP per person equals average labor productivity times the share of population employed.

Thus average labor productivity= (60,000 X 100 )/ 80 = $75000

THe correct answer is (d) 75,000

26. As large number of citizens move from country A to country B, the supply of labor in country B increases and the supply curve shifts rightwards while the demand for labor remains unchanged. The rea wage rate will now decrease. The unemployment level in country B will increase.

The correct answer is (a) increase, increase

27. Total receipts: 2500 + 1200= 3700

Total expenditures: 2000 + 1500= 3500

A country's national saving is the sum of private and public saving. Revenue minus spending results in the public (governmental) saving.

Since receipts > expenditures by (3700- 3500) 200, the public savings are + 200.

The correct answer is (c) +200.