Question 1

Potential GDP is the maximum output a firm is capable of producing.

Accepted Answer

A) True 
 B)False

Question 2

Technological advances generally result in

Accepted Answer

A)  decreased incomes. 
B)  increased life expectancy. 
C)  increased infant mortality rates. 
D)  increased average number of hours worked per day. 
A)  decreased incomes. 
B)  increased life expectancy. 
C)  increased infant mortality rates. 
D)  increased average number of hours worked per day.

Question 3

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

Accepted Answer

A)  the government deficit to fall by $80 billion. 
B)  household saving to rise by $80 billion. 
C)  household saving to rise by less than $80 billion. 
D)  household saving to fall by more than $80 billion. 
A)  the government deficit to fall by $80 billion. 
B)  household saving to rise by $80 billion. 
C)  household saving to rise by less than $80 billion. 
D)  household saving to fall by more than $80 billion.

Question 4

Briefly explain how the miserliness of Ebenezer Scrooge might actually be beneficial for economic growth.

Accepted Answer

Ebenezer Scrooge is known for his unwill

Question 5

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?

Accepted Answer

A)  Services have become a smaller fraction of GDP since the 1950s. 
B)  Unemployment insurance and other government transfer programs are more prevalent since the 1950s. 
C)  The government has become more reluctant to intervene when real GDP declines and unemployment rises since the 1950s. 
D)  both B and C 
A)  Services have become a smaller fraction of GDP since the 1950s. 
B)  Unemployment insurance and other government transfer programs are more prevalent since the 1950s. 
C)  The government has become more reluctant to intervene when real GDP declines and unemployment rises since the 1950s. 
D)  both B and C

Question 6

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 7

One difference between stocks and bonds is that

Accepted Answer

A)  stocks are financial securities, while bonds are labor market securities. 
B)  stocks are usually issued in electronic form, while bonds are usually issued in paper form. 
C)  stocks represent ownership in companies, while bonds represent ownership in banks. 
D)  stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond. 
A)  stocks are financial securities, while bonds are labor market securities. 
B)  stocks are usually issued in electronic form, while bonds are usually issued in paper form. 
C)  stocks represent ownership in companies, while bonds represent ownership in banks. 
D)  stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond.

Question 8

If labor productivity growth slows down in a country,this will

Accepted Answer

A)  accelerate the increase in real GDP per capita. 
B)  accelerate the increase in nominal GDP. 
C)  slow down the increase in real GDP per capita. 
D)  slow down the increase in nominal GDP. 
A)  accelerate the increase in real GDP per capita. 
B)  accelerate the increase in nominal GDP. 
C)  slow down the increase in real GDP per capita. 
D)  slow down the increase in nominal GDP.

Question 9

Refer to Scenario 21-1.Based on the information above,what is the level of public saving?

Accepted Answer

A)  $0 
B)  $1 trillion 
C)  $2 trillion 
D)  negative $1 trillion (a deficit of $1 trillion) 
A)  $0 
B)  $1 trillion 
C)  $2 trillion 
D)  negative $1 trillion (a deficit of $1 trillion)

Question 10

During the recession phase of the business cycle,

Accepted Answer

A)  production is usually rising. 
B)  interest rates are usually falling. 
C)  unemployment is usually falling. 
D)  income is usually rising. 
A)  production is usually rising. 
B)  interest rates are usually falling. 
C)  unemployment is usually falling. 
D)  income is usually rising.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  further decreases in consumer spending 
B)  increased spending on capital goods by firms 
C)  increasing interest rates 
D)  all of the above 
A)  further decreases in consumer spending 
B)  increased spending on capital goods by firms 
C)  increasing interest rates 
D)  all of the above

Question 13

Purchases of which of the following goods would be dramatically reduced during a recession?

Accepted Answer

A)  tomatoes 
B)  ink pens 
C)  gasoline 
D)  refrigerators 
A)  tomatoes 
B)  ink pens 
C)  gasoline 
D)  refrigerators

Question 14

The effect of a recession on a company like Boeing Aircraft is such that

Accepted Answer

A)  sales decline more sharply for Boeing 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 Boeing 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 15

In comparison to a government that runs a balanced budget,when the government runs a budget deficit,

Accepted Answer

A)  the equilibrium interest rate will fall. 
B)  business investment will fall. 
C)  household savings will fall. 
D)  none of the above 
A)  the equilibrium interest rate will fall. 
B)  business investment will fall. 
C)  household savings will fall. 
D)  none of the above

Question 16

During a recession,spending on ________ tends to fall more dramatically than spending on ________.

Accepted Answer

A)  necessities; luxuries 
B)  durable goods; nondurable goods 
C)  nondurable goods; durable goods 
D)  food; cars 
A)  necessities; luxuries 
B)  durable goods; nondurable goods 
C)  nondurable goods; durable goods 
D)  food; cars

Question 17

Which of the following would you expect to increase the equilibrium interest rate?

Accepted Answer

A)  an increase in the percentage of income after net taxes that households save 
B)  an increase in the budget deficit 
C)  a decrease in the profitability of investment projects firms are considering 
D)  a change from an income tax to a consumption tax 
A)  an increase in the percentage of income after net taxes that households save 
B)  an increase in the budget deficit 
C)  a decrease in the profitability of investment projects firms are considering 
D)  a change from an income tax to a consumption tax

Question 18

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 19

An increase in the demand for loanable funds will occur if there is

Accepted Answer

A)  an increase in the real interest rate. 
B)  a decrease in the real interest rate. 
C)  an increase in expected profits from firm investment projects. 
D)  an increase in the nominal interest rate accompanied by an equal increase in inflation. 
A)  an increase in the real interest rate. 
B)  a decrease in the real interest rate. 
C)  an increase in expected profits from firm investment projects. 
D)  an increase in the nominal interest rate accompanied by an equal increase in inflation.

Question 20

How would the equilibrium quantity of loanable funds respond to a change from an income tax to a consumption tax?

Accepted Answer

A)  The equilibrium quantity of loanable funds would rise. 
B)  The equilibrium quantity of loanable funds would fall. 
C)  The equilibrium quantity of loanable funds would be unaffected. 
D)  The equilibrium quantity of loanable funds may rise or fall based on whether household saving increases or decreases as a result of the change from an income tax to a consumption tax. 
A)  The equilibrium quantity of loanable funds would rise. 
B)  The equilibrium quantity of loanable funds would fall. 
C)  The equilibrium quantity of loanable funds would be unaffected. 
D)  The equilibrium quantity of loanable funds may rise or fall based on whether household saving increases or decreases as a result of the change from an income tax to a consumption tax.

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

Potential GDP is the maximum output a firm is capable of producing.

Technological advances generally result in

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

Briefly explain how the miserliness of Ebenezer Scrooge might actually be beneficial for economic growth.

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?

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

One difference between stocks and bonds is that

If labor productivity growth slows down in a country,this will

Refer to Scenario 21-1.Based on the information above,what is the level of public saving?

During the recession phase of the business cycle,

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

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

Purchases of which of the following goods would be dramatically reduced during a recession?

The effect of a recession on a company like Boeing Aircraft is such that

In comparison to a government that runs a balanced budget,when the government runs a budget deficit,

During a recession,spending on ________ tends to fall more dramatically than spending on ________.

Which of the following would you expect to increase the equilibrium interest rate?

What two factors are the keys to determining labor productivity?

An increase in the demand for loanable funds will occur if there is

How would the equilibrium quantity of loanable funds respond to a change from an income tax to a consumption tax?

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

During a recession,spending on tends to fall more dramatically than spending on .