Exam 21: Economic Growth, the Financial System, and Business Cycles

Scenario 21-1 Consider the following data for a closed economy: Y = $12 trillion C = $8 trillion I = $2 trillion G = $2 trillion TR = $2 trillion T = $3 trillion -Refer to Scenario 21-1. Based on the information above, what is the level of public saving?

If net taxes fall by $80 billion, we would expect

The supply of loanable funds has a ________ slope because the greater the interest rate, the ________ the reward to saving, and the ________ the quantity of loanable funds supplied.

When potential GDP increases, is it necessarily the case that real GDP increases as well? Explain.

A firm can fund an expansion of its operations by

Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

Market economies tend to grow more quickly than centrally-planned economies.

A good measure of the standard of living is

Using equations for public and private saving, show that saving must equal investment in a closed economy. Begin with the expression for total saving in the economy.

Inflation usually increases during a recession and decreases during an expansion.

Because ________ in the government budget deficit increase the real interest rate, budget deficits can ________ firm investment.

Human capital refers to which of the following?

As the economy nears the end of a recession, which of the following do we typically see?

In an open economy, the country interacts with other economies through both trading of goods and services and borrowing and lending.

If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment?

________ are financial securities that represent partial ownership of a firm.

Technological advances generally result in

Explain and show graphically how an increase in household saving affects the equilibrium interest rate and the equilibrium quantity of loanable funds.

Typically, as an economy begins to emerge from a recessionary phase of the business cycle

Which of the following explains why employment only rises at a slow pace at the end of a recession?