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

Explain and show graphically how an increase in government spending affects the equilibrium interest rate in the market for loanable funds.

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)

Since the 1950s,

Table 21-1 -Refer to Table 21-1.Using the table above,what is the approximate average annual growth rate from 2008 to 2011?

Explain how unemployment changes over the business cycle.Why do these changes occur?

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

Figure 21-1 -Refer to Figure 21-1.Which of the following is consistent with the graph depicted above?

If net taxes rise by $150 billion would you expect household saving to fall by $150 billion,by more than $150 billion,or by less than $150 billion?

Economists have not found a way to predict when recessions will begin and end.

At the end of World War II in 1945,many economists and business managers expected that the U.S.economy would enter a severe recession.At that time,Sears and Montgomery Ward were the two largest department store chains in the country.Sears CEO Robert Wood expected continuing prosperity and opened new stores.Montgomery Ward CEO Sewell Avery expected falling incomes and rising unemployment and closed a number of existing stores.The results of their actions were seen during the late 1940s,when