ECN 102 Exam 1 Questions With Complete Solutions
actively managed mutual fund Correct Answers aims to buy
only the best stocks, has higher expenses than index funds
(EMH implies these returns do not exceed returns on index
funds)
budget deficit Correct Answers T - G < 0
budget surplus Correct Answers T - G > 0
compounding Correct Answers the accumulation of a sum of
money where the interest earned on the sum earns additional
interest
-rule of 70 --> 70/growth rate = doubling time
Consumer Price Index (CPI) Correct Answers measure of the
overall level of prices and cost of goods and services bought by
a typical customer
CPI equation Correct Answers 100 x (cost of basket in current
year/cost of basket in base year)
CPI inflation rate Correct Answers ((CPI this year - CPI last
year)/CPI last year) x 100
CPI problem: introduction of new goods Correct Answers the
introduction of new goods increases variety, allowing consumers
to find products that more closely meet their needs
, CPI problem: substitution bias Correct Answers over time some
prices rise faster than others and consumers substitute toward
goods that become relatively cheaper, mitigating the effects of
price increases
CPI problem: unmeasured quality change Correct Answers
improvements in the quality of goods in the basket increase the
value of each dollar
CPI problems in effect... Correct Answers overstate the cost of
living increases
crowding out Correct Answers a budget deficit causes fall in
investment because the government borrows to finance its debt,
leaving less funs available for investment
cyclical unemployment Correct Answers -the deviation of
unemployment from its natural rate
-associated with business cycles
cyclical unemployment: frictional Correct Answers occurs
when workers spend their time search for the jobs that best suit
their skills and tastes (short term)
cyclical unemployment: structural Correct Answers occurs
when there are fewer jobs than workers (long temr)
demand curve Correct Answers a fall in the interest rate reduces
the cost of borrowing, which increases the quantity of loanable
funds demanded
actively managed mutual fund Correct Answers aims to buy
only the best stocks, has higher expenses than index funds
(EMH implies these returns do not exceed returns on index
funds)
budget deficit Correct Answers T - G < 0
budget surplus Correct Answers T - G > 0
compounding Correct Answers the accumulation of a sum of
money where the interest earned on the sum earns additional
interest
-rule of 70 --> 70/growth rate = doubling time
Consumer Price Index (CPI) Correct Answers measure of the
overall level of prices and cost of goods and services bought by
a typical customer
CPI equation Correct Answers 100 x (cost of basket in current
year/cost of basket in base year)
CPI inflation rate Correct Answers ((CPI this year - CPI last
year)/CPI last year) x 100
CPI problem: introduction of new goods Correct Answers the
introduction of new goods increases variety, allowing consumers
to find products that more closely meet their needs
, CPI problem: substitution bias Correct Answers over time some
prices rise faster than others and consumers substitute toward
goods that become relatively cheaper, mitigating the effects of
price increases
CPI problem: unmeasured quality change Correct Answers
improvements in the quality of goods in the basket increase the
value of each dollar
CPI problems in effect... Correct Answers overstate the cost of
living increases
crowding out Correct Answers a budget deficit causes fall in
investment because the government borrows to finance its debt,
leaving less funs available for investment
cyclical unemployment Correct Answers -the deviation of
unemployment from its natural rate
-associated with business cycles
cyclical unemployment: frictional Correct Answers occurs
when workers spend their time search for the jobs that best suit
their skills and tastes (short term)
cyclical unemployment: structural Correct Answers occurs
when there are fewer jobs than workers (long temr)
demand curve Correct Answers a fall in the interest rate reduces
the cost of borrowing, which increases the quantity of loanable
funds demanded
