Question 1

Explain and show graphically how government deficits can "crowd out" private investment.

Accepted Answer

When the government runs a deficit publi

Question 2

What is human capital?

Accepted Answer

A)  a slang term for the underground labor market 
B)  manufactured goods that are used to produce other goods 
C)  accumulated knowledge and skills acquired by a worker 
D)  the manager or owner of a business 
A)  a slang term for the underground labor market 
B)  manufactured goods that are used to produce other goods 
C)  accumulated knowledge and skills acquired by a worker 
D)  the manager or owner of a business

Question 3

If, in a closed economy, real GDP is $30 billion, consumption is $20 billion, and government purchases are $5 billion, what is total saving in the economy?

Accepted Answer

A)  $5 billion 
B)  $15 billion 
C)  $45 billion 
D)  $55 billion 
A)  $5 billion 
B)  $15 billion 
C)  $45 billion 
D)  $55 billion

Question 4

If technological change increases the profitability of new investments for firms, then the ________ curve for loanable funds will shift to the ________.

Accepted Answer

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

Question 5

In a closed economy, public saving plus private saving is equal to

Accepted Answer

A)  investment. 
B)  taxes minus transfers. 
C)  the budget surplus. 
D)  the budget deficit. 
A)  investment. 
B)  taxes minus transfers. 
C)  the budget surplus. 
D)  the budget deficit.

Question 6

In a closed economy, public 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)  T - G - TR 
D)  Y - C - T + TR 
A)  Y - C - T 
B)  Y - G - T 
C)  T - G - TR 
D)  Y - C - T + TR

Question 7

From 1991 until 2001, the United States was in a period of

Accepted Answer

A)  expansion. 
B)  recession. 
C)  business cycle troughs. 
D)  business cycle peaks. 
A)  expansion. 
B)  recession. 
C)  business cycle troughs. 
D)  business cycle peaks.

Question 8

An increase in the real interest rate results in which of the following?

Accepted Answer

A)  an increase in the demand for loanable funds 
B)  a decrease in the demand for loanable funds 
C)  an increase in the quantity of loanable funds supplied 
D)  Both B and C will occur as a result of an increase in the real interest rate. 
A)  an increase in the demand for loanable funds 
B)  a decrease in the demand for loanable funds 
C)  an increase in the quantity of loanable funds supplied 
D)  Both B and C will occur as a result of an increase in the real interest rate.

Question 9

An increase in the government budget deficit 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 10

The best measure of the standard of living is

Accepted Answer

A)  nominal GDP. 
B)  real GDP. 
C)  nominal GDP per capita. 
D)  real GDP per capita. 
A)  nominal GDP. 
B)  real GDP. 
C)  nominal GDP per capita. 
D)  real GDP per capita.

Question 11

The effect of a recession on a company like Whirlpool Corporation is such that

Accepted Answer

A)  sales decline more sharply for Whirlpool as compared to firms that do not produce durable goods. 
B)  profits fall less sharply as compared to firms that do not produce durable goods. 
C)  the decline in sales is more short-lived as compared to firms that do not produce durable goods. 
D)  there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods. 
A)  sales decline more sharply for Whirlpool as compared to firms that do not produce durable goods. 
B)  profits fall less sharply as compared to firms that do not produce durable goods. 
C)  the decline in sales is more short-lived as compared to firms that do not produce durable goods. 
D)  there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods.

Question 12

A good measure of the standard of living is

Accepted Answer

A)  real GDP per capita. 
B)  nominal GDP per capita. 
C)  total real GDP. 
D)  total nominal GDP. 
A)  real GDP per capita. 
B)  nominal GDP per capita. 
C)  total real GDP. 
D)  total nominal GDP.

Question 13

When the government runs a budget deficit, we would expect to see that

Accepted Answer

A)  private saving will fall. 
B)  investment will fall. 
C)  G + TR < T. 
D)  public saving is positive. 
A)  private saving will fall. 
B)  investment will fall. 
C)  G + TR < T. 
D)  public saving is positive.

Question 14

Financial securities that represent promises to repay a fixed amount of funds are known as

Accepted Answer

A)  bonds. 
B)  stocks. 
C)  pension funds. 
D)  insurance premiums. 
A)  bonds. 
B)  stocks. 
C)  pension funds. 
D)  insurance premiums.

Question 15

________ are financial securities that represent promises to repay a fixed amount of funds.

Accepted Answer

A)  Stocks 
B)  Bonds 
C)  Interest rates 
D)  Mutual funds 
A)  Stocks 
B)  Bonds 
C)  Interest rates 
D)  Mutual funds

Question 16

If GDP grows at a rate of 3% per year, approximately how long will it take for GDP to double in size?

Accepted Answer

A)  12 years 
B)  21 years 
C)  23 years 
D)  35 years 
A)  12 years 
B)  21 years 
C)  23 years 
D)  35 years

Question 17

Figure 21-6  
-Refer to Figure 21-6. The loanable funds market is in equilibrium, as shown in the figure above. As a result of an increase in the government budget deficit, the ________ for loanable funds will ________, thereby ________ the equilibrium real interest rate and ________ the equilibrium quantity of loanable funds.

Accepted Answer

A)  demand; rise; increasing; decreasing 
B)  supply; rise; decreasing; increasing 
C)  demand; fall; decreasing; decreasing 
D)  supply; fall; increasing; decreasing 
A)  demand; rise; increasing; decreasing 
B)  supply; rise; decreasing; increasing 
C)  demand; fall; decreasing; decreasing 
D)  supply; fall; increasing; decreasing

Question 18

Economic growth depends more on technological change than on increases on capital per hour worked.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an example of human capital?

Accepted Answer

A)  a computer 
B)  a factory building 
C)  a college education 
D)  a software program 
A)  a computer 
B)  a factory building 
C)  a college education 
D)  a software program

Question 20

Since 1900, real GDP in the United States has grown

Accepted Answer

A)  more rapidly than the population. 
B)  more slowly than the population. 
C)  as rapidly as the population. 
D)  in a random unpredictable manner relative to the population. 
A)  more rapidly than the population. 
B)  more slowly than the population. 
C)  as rapidly as the population. 
D)  in a random unpredictable manner relative to the population.

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

Explain and show graphically how government deficits can "crowd out" private investment.

What is human capital?

If, in a closed economy, real GDP is $30 billion, consumption is $20 billion, and government purchases are $5 billion, what is total saving in the economy?

If technological change increases the profitability of new investments for firms, then the ________ curve for loanable funds will shift to the ________.

In a closed economy, public saving plus private saving is equal to

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

From 1991 until 2001, the United States was in a period of

An increase in the real interest rate results in which of the following?

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

The best measure of the standard of living is

The effect of a recession on a company like Whirlpool Corporation is such that

A good measure of the standard of living is

When the government runs a budget deficit, we would expect to see that

Financial securities that represent promises to repay a fixed amount of funds are known as

________ are financial securities that represent promises to repay a fixed amount of funds.

If GDP grows at a rate of 3% per year, approximately how long will it take for GDP to double in size?

Economic growth depends more on technological change than on increases on capital per hour worked.

Which of the following is an example of human capital?

Since 1900, real GDP in the United States has grown

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

If technological change increases the profitability of new investments for firms, then the curve for loanable funds will shift to the .

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