Question 1

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?

Accepted Answer

A)  Real GDP is falling. 
B)  Incomes are growing at a slower rate than the population. 
C)  Real GDP per capita is rising. 
D)  Living standards are falling. 
A)  Real GDP is falling. 
B)  Incomes are growing at a slower rate than the population. 
C)  Real GDP per capita is rising. 
D)  Living standards are falling.

Question 2

Countries with high rates of economic growth tend to have

Accepted Answer

A)  a labor force that is more productive. 
B)  a lower life expectancy at birth. 
C)  low rates of technological advancement. 
D)  a declining incidence of business cycle fluctuations. 
A)  a labor force that is more productive. 
B)  a lower life expectancy at birth. 
C)  low rates of technological advancement. 
D)  a declining incidence of business cycle fluctuations.

Question 3

Use the rule of 70 to illustrate how small differences in growth rates can have a large impact on how rapidly the standard of living in a country increases.

Accepted Answer

The rule of 70 refers to a calculation t

Question 4

The growth rate of real GDP in the United States rises from 4.2% to 4.4%. Explain and calculate how this increase in the growth rate of real GDP affects the number of years it will take for real GDP to double.

Accepted Answer

The "Rule of 70" states that the number

Question 5

Give three reasons why the U.S. economy is more stable since 1950.

Accepted Answer

Any two of the following three reasons a

Question 6

Which of the following will result in an increase in labor productivity?

Accepted Answer

A)  a decrease in the number of people attending institutions of higher education 
B)  a decline in the amount of human capital per worker 
C)  an increase in technology 
D)  a decline in the capital stock per hour worked 
A)  a decrease in the number of people attending institutions of higher education 
B)  a decline in the amount of human capital per worker 
C)  an increase in technology 
D)  a decline in the capital stock per hour worked

Question 7

If government saving is negative, then

Accepted Answer

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

Question 8

Which of the following will increase the real interest rate?

Accepted Answer

A)  an increase in the supply of loanable funds 
B)  an increase in household saving 
C)  an increase in the demand for loanable funds 
D)  an increase in the budget surplus 
A)  an increase in the supply of loanable funds 
B)  an increase in household saving 
C)  an increase in the demand for loanable funds 
D)  an increase in the budget surplus

Question 9

The response of investment spending to an increase in the government budget deficit is called

Accepted Answer

A)  expansionary investment. 
B)  private dissaving. 
C)  crowding out. 
D)  income minus net taxes. 
A)  expansionary investment. 
B)  private dissaving. 
C)  crowding out. 
D)  income minus net taxes.

Question 10

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A decrease in household saving decreases

Question 12

Public saving in the economy can be increased by

Accepted Answer

A)  lowering taxes. 
B)  raising government spending. 
C)  raising taxes. 
D)  raising transfer payments. 
A)  lowering taxes. 
B)  raising government spending. 
C)  raising taxes. 
D)  raising transfer payments.

Question 13

Potential GDP is defined as

Accepted Answer

A)  the maximum of GDP that the economy can produce. 
B)  the amount of GDP produced if there is no frictional unemployment. 
C)  the level of GDP attained when all firms are producing at capacity. 
D)  the amount of GDP produced if there is no structural unemployment. 
A)  the maximum of GDP that the economy can produce. 
B)  the amount of GDP produced if there is no frictional unemployment. 
C)  the level of GDP attained when all firms are producing at capacity. 
D)  the amount of GDP produced if there is no structural unemployment.

Question 14

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

Accepted Answer

A)  increases; increase 
B)  decreases; increase 
C)  decreases; decrease 
D)  increases; decrease 
A)  increases; increase 
B)  decreases; increase 
C)  decreases; decrease 
D)  increases; decrease

Question 15

In a closed economy, private saving is equal to which of the following? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)

Accepted Answer

A)  Y - C - T 
B)  Y - G - T 
C)  Y - G - T + TR 
D)  Y + TR - C - T 
A)  Y - C - T 
B)  Y - G - T 
C)  Y - G - T + TR 
D)  Y + TR - C - T

Question 16

The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.

Accepted Answer

A)  lower; greater; greater 
B)  lower; smaller; greater 
C)  greater; greater; greater 
D)  greater; smaller; greater 
A)  lower; greater; greater 
B)  lower; smaller; greater 
C)  greater; greater; greater 
D)  greater; smaller; greater

Question 17

The demand for loanable funds has a ________ slope because the lower the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of loanable funds demanded.

Accepted Answer

A)  negative; greater; greater 
B)  negative; greater; lesser 
C)  negative; lesser; greater 
D)  positive; lesser; lesser 
A)  negative; greater; greater 
B)  negative; greater; lesser 
C)  negative; lesser; greater 
D)  positive; lesser; lesser

Question 18

Potential GDP in the United States

Accepted Answer

A)  does not change over time. 
B)  grows as the economy grows. 
C)  changes over a given business cycle. 
D)  declines over time. 
A)  does not change over time. 
B)  grows as the economy grows. 
C)  changes over a given business cycle. 
D)  declines over time.

Question 19

The NBER's Business Cycle Dating Committee defines a recession as at least two consecutive quarters of falling real GDP.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would occur if the United States switched from income taxes to consumption taxes?

Accepted Answer

A)  Consumption would increase. 
B)  The supply of loanable funds would decrease. 
C)  Saving would increase. 
D)  Tax revenues would rise. 
A)  Consumption would increase. 
B)  The supply of loanable funds would decrease. 
C)  Saving would increase. 
D)  Tax revenues would rise.

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

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?

Countries with high rates of economic growth tend to have

Use the rule of 70 to illustrate how small differences in growth rates can have a large impact on how rapidly the standard of living in a country increases.

The growth rate of real GDP in the United States rises from 4.2% to 4.4%. Explain and calculate how this increase in the growth rate of real GDP affects the number of years it will take for real GDP to double.

Give three reasons why the U.S. economy is more stable since 1950.

Which of the following will result in an increase in labor productivity?

If government saving is negative, then

Which of the following will increase the real interest rate?

The response of investment spending to an increase in the government budget deficit is called

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

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

Public saving in the economy can be increased by

Potential GDP is defined as

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

In a closed economy, private saving is equal to which of the following? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)

The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.

The demand for loanable funds has a ________ slope because the lower the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of loanable funds demanded.

Potential GDP in the United States

The NBER's Business Cycle Dating Committee defines a recession as at least two consecutive quarters of falling real GDP.

Which of the following would occur if the United States switched from income taxes to consumption taxes?

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

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

The demand for loanable funds is downward sloping because the the interest rate, the the number of profitable investment projects a firm can undertake, and the the quantity demanded of loanable funds.

The demand for loanable funds has a slope because the lower the interest rate, the number of investment projects are profitable, and the the quantity of loanable funds demanded.