Question 1

Because Whirlpool produces durable goods, the demand for their goods

Accepted Answer

A)  is likely to increase during recession. 
B)  declines when incomes in the economy are rising. 
C)  is consistently high, regardless of the state of the economy. 
D)  tends to follow the business cycle. 
A)  is likely to increase during recession. 
B)  declines when incomes in the economy are rising. 
C)  is consistently high, regardless of the state of the economy. 
D)  tends to follow the business cycle.

Question 2

An increase in the government budget surplus will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

Accepted Answer

A)  supply; right; fall 
B)  supply; left; rise 
C)  demand; right; rise 
D)  demand; left; fall 
A)  supply; right; fall 
B)  supply; left; rise 
C)  demand; right; rise 
D)  demand; left; fall

Question 3

What two factors are the keys to determining labor productivity?

Accepted Answer

A)  the business cycle and the growth rate of real GDP 
B)  the growth rate of real GDP and the interest rate 
C)  technology and the quantity of capital per hour worked 
D)  the average level of education of the workforce and the price level 
A)  the business cycle and the growth rate of real GDP 
B)  the growth rate of real GDP and the interest rate 
C)  technology and the quantity of capital per hour worked 
D)  the average level of education of the workforce and the price level

Question 4

According to the National Bureau of Economic Research, the United States has experienced ________ recessions since 1950.

Accepted Answer

A)  4 
B)  7 
C)  10 
D)  15 
A)  4 
B)  7 
C)  10 
D)  15

Question 5

A firm can fund an expansion of its operations by

Accepted Answer

A)  issuing bonds. 
B)  buying stock. 
C)  paying dividends. 
D)  loaning money. 
A)  issuing bonds. 
B)  buying stock. 
C)  paying dividends. 
D)  loaning money.

Question 6

Centrally-planned economies tend to grow more quickly than market economies.

Accepted Answer

A) True 
 B)False

Question 7

Figure 21-6  
-Refer to Figure 21-6. The market is in equilibrium. If the government budget deficit rises, which of the following would you expect to see?

Accepted Answer

A)  The quantity of loanable funds demanded by firms will rise above $120 million. 
B)  The quantity of loanable funds demanded by firms will fall below $120 million. 
C)  The budget deficit will have no impact on the quantity of loanable funds demanded by firms. 
D)  The interest rate will fall below 4 percent. 
A)  The quantity of loanable funds demanded by firms will rise above $120 million. 
B)  The quantity of loanable funds demanded by firms will fall below $120 million. 
C)  The budget deficit will have no impact on the quantity of loanable funds demanded by firms. 
D)  The interest rate will fall below 4 percent.

Question 8

If there is public dissaving, investment spending in the economy will decline, holding everything else constant.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Consider the following data for a closed economy:
a. Y = $12 trillion
b. C = $8 trillion
c. I= $3 trillion
d. TR = $2 trillion
e. T = $3 trillion
Use the data provided to calculate the level of private saving and the level of public saving and demonstrate their relationship to investment.

Accepted Answer

Private saving is equal to Y + TR - C -

Question 11

Labor productivity will increase if the ________ increases and ________.

Accepted Answer

A)  quantity of capital per hour worked; technology improves 
B)  quantity of labor per unit of capital; technology improves 
C)  quantity of capital per hour worked; immigration increases while capital is fixed 
D)  quantity of labor per unit of capital; immigration increases while capital is fixed 
A)  quantity of capital per hour worked; technology improves 
B)  quantity of labor per unit of capital; technology improves 
C)  quantity of capital per hour worked; immigration increases while capital is fixed 
D)  quantity of labor per unit of capital; immigration increases while capital is fixed

Question 12

Under which of the following circumstances would the government be running a deficit?

Accepted Answer

A)  G = $5 trillion T = $5 trillion
TR = $1 trillion 
B)  G = $5 trillion T = $7 trillion
TR = $1 trillion 
C)  G = $7 trillion T = $7 trillion
TR = $0 
D)  G = $7 trillion T = $10 trillion
TR = $3 trillion 
A)  G = $5 trillion T = $5 trillion
TR = $1 trillion 
B)  G = $5 trillion T = $7 trillion
TR = $1 trillion 
C)  G = $7 trillion T = $7 trillion
TR = $0 
D)  G = $7 trillion T = $10 trillion
TR = $3 trillion

Question 13

If you spend more of your income on consumption goods, which of the following will occur?

Accepted Answer

A)  The production of investment goods will fall. 
B)  Economic growth will be stimulated. 
C)  Investments in education will rise. 
D)  For every dollar you spend on consumption, real GDP will fall by a dollar. 
A)  The production of investment goods will fall. 
B)  Economic growth will be stimulated. 
C)  Investments in education will rise. 
D)  For every dollar you spend on consumption, real GDP will fall by a dollar.

Question 14

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 private saving in the economy?

Accepted Answer

A)  $3 trillion 
B)  $4 trillion 
C)  $5 trillion 
D)  $8 trillion 
A)  $3 trillion 
B)  $4 trillion 
C)  $5 trillion 
D)  $8 trillion

Question 15

Figure 21-3  
-Refer to Figure 21-3. Which of the following is consistent with the graph depicted above?

Accepted Answer

A)  Taxes are changed so that real interest income is taxed rather than nominal interest income. 
B)  An expected recession decreases the profitability of new investment. 
C)  The government runs a budget deficit. 
D)  Technological change increases the profitability of new investment. 
A)  Taxes are changed so that real interest income is taxed rather than nominal interest income. 
B)  An expected recession decreases the profitability of new investment. 
C)  The government runs a budget deficit. 
D)  Technological change increases the profitability of new investment.

Question 16

Suppose you are a famous international economic advisor. You have been asked to asses the possibilities for growth in an African country. It is a country abundant in labor and some natural resources. The capital to labor ratio is low. It has a free market economy. You have found that this country does not have a very strong and healthy banking system, however the political system is stable and the government does a good job protecting property rights. Assess this country's prospects for growth. Recommend two things that would enhance the country's growth.

Accepted Answer

The prospects for this country's growth

Question 17

What factors increase potential GDP? Include a definition of potential GDP in your answer.

Accepted Answer

Potential GDP is the level of GDP attain

Question 18

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

Accepted Answer

A)  Stocks 
B)  Bonds 
C)  Treasury bills 
D)  Certificates of deposit 
A)  Stocks 
B)  Bonds 
C)  Treasury bills 
D)  Certificates of deposit

Question 19

When the government runs a deficit, which of the following is true?

Accepted Answer

A) T > TR - G B) G > T + TR C) G > TR - T D) T < G + TR A) T > TR - G B) G > T + TR C) G > TR - T D) T < G + TR

Question 20

A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds.

Accepted Answer

A)  savers; borrower 
B)  borrower; savers 
C)  governments; households 
D)  firms; insurance companies 
A)  savers; borrower 
B)  borrower; savers 
C)  governments; households 
D)  firms; insurance companies

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

Because Whirlpool produces durable goods, the demand for their goods

An increase in the government budget surplus will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

What two factors are the keys to determining labor productivity?

According to the National Bureau of Economic Research, the United States has experienced ________ recessions since 1950.

A firm can fund an expansion of its operations by

Centrally-planned economies tend to grow more quickly than market economies.

Figure 21-6 -Refer to Figure 21-6. The market is in equilibrium. If the government budget deficit rises, which of the following would you expect to see?

If there is public dissaving, investment spending in the economy will decline, holding everything else constant.

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

Consider the following data for a closed economy: a. Y = $12 trillion b. C = $8 trillion c. I= $3 trillion d. TR = $2 trillion e. T = $3 trillion Use the data provided to calculate the level of private saving and the level of public saving and demonstrate their relationship to investment.

Labor productivity will increase if the ________ increases and ________.

Under which of the following circumstances would the government be running a deficit?

If you spend more of your income on consumption goods, which of the following will occur?

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 private saving in the economy?

Figure 21-3 -Refer to Figure 21-3. Which of the following is consistent with the graph depicted above?

What factors increase potential GDP? Include a definition of potential GDP in your answer.

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

When the government runs a deficit, which of the following is true?

A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

An increase in the government budget surplus will shift the curve for loanable funds to the and the equilibrium real interest rate will .

Labor productivity will increase if the increases and .

A financial intermediary's main function is to match with excess funds to with a shortage of funds.