Macroeconomics Answers

Keynesian economic tools are not adequately effective when...
1) a trade-off exists between the rate of unemployment and the rate of inflation.
2) exports are greater than imports.
3) imports are greater than exports.
4) interest rates are high.

Suppose a bond's face value is $1000. Its maturity is 1 year from now. The bond's yield is currently 1.3%. How much is the price of the bond that is implied by this yield?

Suppose there are 2 countries, Home and Foreign. Each country can produce 2 goods, watches and hats. In Home, workers can make 10 watches a day and 20 hats a day. In Foreign, workers can make 20 watches a day and 30 hats a day. Which country has the absolute advantage in each good?

1. Company is operating on perfectly competitive markets and wants to maximize its profits. Assume that it uses the production function Y = A*L^α with A = 2 and α = 0.5. The real wage w is 4. What is the optimal value of labor L that should be employed?

L = ...?

The production function Y = AK^αL^β with A = 2, α = 0.4 and β = 0.6 exhibits the following
properties: (multiple answers can be correct)
(a) concavity in L
(b) convexity in L
(c) constant returns to scale in K and L (d) homogeneity of degree 1 (in K and L)
(e) increasing returns in K and L

Efficiency wages can hel to reduce unit labor costs when ... (multiple answers may be correct)
(a) the labor productivity nonlinearly depends on the wage.
(b) the labor productivity rises faster than the wage increment.
(c) the elasticity of productivity with respect to the wage is larger than unity.
(d) the elasticity of productivity with respect to the wage is positive but less than unity.

Aggregate supply curve ... (multiple answers may be correct)
(a) is vertical in the long run because, in the long term, expected prices are equal to the actual ones.
(b) is moved to the right if the potential output rises.
(c) shows a positive relationship between the price level and output in the short run.
(d) is not affected by the expectations formation processes.

Involuntary unemployment can be caused by ... (multiple answers can be correct)

(a) a minimum wage.
(b) introduction of higher taxes.
(c) lowering taxes.
(d) employment protection legislation.

The insider-outsider theory of unemployment says that .. (multiple answers can be correct)
(a) trade unions do not internalize sufficiently the well-being of the unemployed.
(b) trade unions can be a cause for involuntary unemployment.
(c) trade unions tend to increase wages above the competitive level.
(d) the position of trade unions should be bolstered in order to lower unemployment.

Efficiency wages ... (multiple answers could be correct)
(a) are irrelevant for low skilled workers.
(b) are higher than market clearing wage.
(c) do not cause unemployment.
(d) are sometimes paid by employers to reduce shirking or turnover costs.