Question Details

We would expect more modest productivity gains 



1. "The fact that economic performance strengthened as inflation subsided should not have been surprising, given that risk premiums and economic disincentives to ______ diminish as product prices become more stable." The blank is best filled with 
a) employ more people b) purchase consumer durables 
c) invest in productive capital d) undertake fiscal fine-tuning 
2. "We should expect that after a couple of years of very robust gains in productivity (1.7% last year and 1.9% the year before, a substantial improvement on the 1% annual average over the 1974-95 period), productivity gains would be more moderate." We would expect more modest productivity gains because 
a) capacity constraints have been reached b) consumption demand should accelerate 
c) unemployment will likely be above the natural rate 
d) it takes time for investment to augment the capital stock 
3. "A couple of years ago, economists would have considered such low unemployment a sure sign that prices were about to rise. Today they point to productivity as the reason why that might not happen." Productivity could avoid price rises by 
a) discouraging workers b) stimulating the demand for labor 
c) increasing the natural rate of unemployment 
d) allowing wage increases without requiring price increases to maintain profitability 
4. "The Labor Department reported that output rose at a 3.9% annual rate, while hours worked were up 1.2%. The higher output, analysts said, was largely a result of businesses 40 
working their employees longer rather than adding to payrolls." During the third quarter productivity rose at an annual rate of 
a) 2.7% if no new workers were hired b) 3.9% if no new workers were hired 
c) 2.7% regardless of how many new workers were hired 
d) slightly below 3.9% depending on how many new workers were hired 
5. "Fed chairman Allan Greenspan worries that new Treasury borrowings could cause some crowding out and keep long rates _______ and economic growth _______ than normal." Fill in the blanks. 
a) high; higher b) high; lower c) low; higher d) low; lower



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