Question

00000000 LELOGUCCO in the short run unemployment and output are pretty tightly linked According Okun's Lew a) One extra point of unemployment costs two percent of GOT b) Two extra points of unemployment costs three percent of GDP c) Three extra point of unemployment costs mine percent of OOP d) Five extra points of unemployment costs five percent of GDP The shadow banking System nearly died in 2002 Then the system was 20-years old it had grown because of a greater regulation of banks in the United States Like banks most members of this system borrowed very short-term and in liquid ways were more highly leveraged than banks and typically would lend and invest into more illiquid and long term instruments. Of the following possibilities below which institutions were not then and are not now members of the shadow system of financial intermediation? a) Broker-dealers and hedge funds b.) Private equity groups and structured investment vehicles and conduits C.) Arbitrage specialists and non-bank foreign-exchange dealers d) Money market funds and non-bank mortgage lenders. 14. W ow The banking view of the Great Recession: a) is in agreement with the Mian and Sufi view that levered-losses were the root cause of the liquidity crisis of 2007-2009 b.) asserts that a breakdown in financial intermediation was the root cause of the crisis. c.) argues that the key culprits in the financial crisis were overly indebted households. Too many bad mortgage loans were made by the banking system in the United States to these households d.) The monetary policy of the Federal Reserve did not meet in 2007 the necessary and sufficiency conditions for the recurrence of a long-run boom of the business cycle and hence monetary policy was the actual root cause of the Great Recession of 2007-2009 15 Concerning the liquidity trap, which one of the following four propositions below is true? a) The public is prepared, at a given interest rate, to hold whatever amount of money is supplied. An increasing demand of money accompanies an increasing supply for money (Cases 1 and 3 occur together and, in Case 3, the hoarding of new money is 100 percent) b.) The LM curve is vertical. Changes in fiscal policy do not shift it. c.) On the other hand monetary policy carried out through open market operations in the liquidity trap will change the interest rate and the level of income. d.) An increase in government spending will have no effect Monetary policy aimed at stimulating investment spending will be extremely effective, significantly affecting the available amount of liquidity

Answer 1

For question 12 -

Statement - In the short run, unemployment and output are pretty tightly linked. According to Okun's Law:

Answer - a) One extra point of unemployment costs two percent of GDP

Explanation - Okun's law corresponds to the relationship between the unemployment rate and GDP. However, it only holds true for the case of United States and only applies when the unemployment rate is between 3% and 7.5%.

According to Okun's law, a percentage increase in unemployment causes a 2% fall in GDP.