In the Phillips curve equation, which of the following will NOT cause an increase in the current inflation rate?
A a reduction in the unemployment rate
B an increase in the markup of prices over wages
C a decrease in the strength of the effect of unemployment on the wage, α.
D an increase in the expected inflation rate
E a decrease in the catch-all variable z
22.Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. According to Solow model without technological progress, we know that in the long run
A the growth rate of output per capita will be greater in B than in A.
B the growth rate of output per capita will be the same in both countries.
C more information is needed to answer this question.
D the capital-labor ratios (K/N) will be the same in both countries.
E the growth rate of output per capita will be greater in A than in B.
Why do banks maintain a certain level of bank capital?
A These precautionary funds are held against the illiquidity risks of loans and bonds.
B These funds are set aside for taxation purposes.
C These are funds to be invested in emerging market economies.
D These funds are reserved as salary bonuses for top management.
E These funds are required to satisfy shareholders in annual statements.
Q) The correct option is E i.e. a decrease in the catch all variable z.
Q22) The correct option is E. The growth rate of output per worker is greater in Country A than in country B.
Solow model shows that the saving rate is the key determinant of the steady-state capital stock. Higher saving rate will have a higher level of output in the steady state and vice versa.
Q) Why do banks maintain a certain level of bank capital?
The correct option is A. These Precautionary funds are held against the illiquidity risks of bonds and loans.
Get Answers For Free
Most questions answered within 1 hours.