Question 1

If GDP grew 3% in 1970,2.2% in 1971 and 2.5% in 1972 then,what is the average annual growth rate over this period?

Accepted Answer

A) 5% 
B) 4% 
C) 2.6% 
D) -2.2% 
A) 5% 
B) 4% 
C) 2.6% 
D) -2.2% C

Question 2

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 A

Question 3

Which of the following will increase investment spending in the economy,holding everything else constant?

Accepted Answer

A) an increase in the federal government surplus 
B) an increase in the budget deficit 
C) an increase in consumer dissavings 
D) an increase in transfer payments 
A) an increase in the federal government surplus 
B) an increase in the budget deficit 
C) an increase in consumer dissavings 
D) an increase in transfer payments A

Question 4

Figure 21-6  
-Refer to Figure 21-6.The loanable funds market is in equilibrium,as shown in the figure above.An increase in the supply of loanable funds could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium?

Accepted Answer

A) The real interest rate is 5 percent,and the quantity of loanable funds is $150 million. 
B) The real interest rate is 5 percent,and the quantity of loanable funds is $90 million. 
C) The real interest rate is 3 percent,and the quantity of loanable funds is $150 million. 
D) The real interest rate is 3 percent,and the quantity of loanable funds is $90 million. 
A) The real interest rate is 5 percent,and the quantity of loanable funds is $150 million. 
B) The real interest rate is 5 percent,and the quantity of loanable funds is $90 million. 
C) The real interest rate is 3 percent,and the quantity of loanable funds is $150 million. 
D) The real interest rate is 3 percent,and the quantity of loanable funds is $90 million.

Question 5

Explain why a centrally-planned economy might not grow as rapidly as a market economy.

Accepted Answer

Technological change is very important f

Question 6

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 7

How has economist Robert Fogel explained that economic growth is connected to life expectancy? Based on this connection,in what country would you expect to have a longer life expectancy,the United States or India? Explain.

Accepted Answer

According to Robert Fogel's research,cou

Question 8

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 9

During the expansion phase of the business cycle

Accepted Answer

A) production increases. 
B) employment decreases. 
C) income decreases. 
D) unemployment increases. 
A) production increases. 
B) employment decreases. 
C) income decreases. 
D) unemployment increases.

Question 10

The demand for durable goods

Accepted Answer

A) has decreased over time. 
B) declines by a greater percentage than does GDP during a recession. 
C) declines by a smaller percentage than does GDP during a recession. 
D) rises by a greater percentage than does GDP during a recession. 
A) has decreased over time. 
B) declines by a greater percentage than does GDP during a recession. 
C) declines by a smaller percentage than does GDP during a recession. 
D) rises by a greater percentage than does GDP during a recession.

Question 11

Potential GDP is estimated to grow at a rate of 3.2% in the United States.Actual GDP in the U.S.

Accepted Answer

A) always grows at a slower rate than potential GDP. 
B) always grows at a faster rate than potential GDP. 
C) always grows at the same rate as potential GDP. 
D) is the same as potential GDP if all firms in the economy were working at capacity. 
A) always grows at a slower rate than potential GDP. 
B) always grows at a faster rate than potential GDP. 
C) always grows at the same rate as potential GDP. 
D) is the same as potential GDP if all firms in the economy were working at capacity.

Question 12

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 13

Because Corning 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 14

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 15

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

Accepted Answer

Any two of the following three reasons a

Question 16

Figure 21-2  
-Refer to Figure 21-2.Which of the following is consistent with the graph depicted above?

Accepted Answer

A) An expected expansion increases the profitability of new investment. 
B) The government runs a budget surplus. 
C) There is a shift from an income tax to a consumption tax. 
D) New government regulations decrease the profitability of new investment. 
A) An expected expansion increases the profitability of new investment. 
B) The government runs a budget surplus. 
C) There is a shift from an income tax to a consumption tax. 
D) New government regulations decrease the profitability of new investment.

Question 17

Which of the following is most liquid?

Accepted Answer

A) a mutual fund share 
B) a government bond 
C) a corporate bond 
D) a dollar bill 
A) a mutual fund share 
B) a government bond 
C) a corporate bond 
D) a dollar bill

Question 18

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

Accepted Answer

When government spending increases,gover

Question 19

________ is the ease with which a financial security can be exchanged for money.

Accepted Answer

A) Risk 
B) The face value 
C) Liquidity 
D) The rate of return 
A) Risk 
B) The face value 
C) Liquidity 
D) The rate of return

Question 20

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.

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

If GDP grew 3% in 1970,2.2% in 1971 and 2.5% in 1972 then,what is the average annual growth rate over this period?

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?

Which of the following will increase investment spending in the economy,holding everything else constant?

Figure 21-6 -Refer to Figure 21-6.The loanable funds market is in equilibrium,as shown in the figure above.An increase in the supply of loanable funds could result in which of the following combinations of the real interest rate and quantity of loanable funds at a new equilibrium?

Explain why a centrally-planned economy might not grow as rapidly as a market economy.

Which of the following will increase the real interest rate?

How has economist Robert Fogel explained that economic growth is connected to life expectancy? Based on this connection,in what country would you expect to have a longer life expectancy,the United States or India? Explain.

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

During the expansion phase of the business cycle

The demand for durable goods

Potential GDP is estimated to grow at a rate of 3.2% in the United States.Actual GDP in the U.S.

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

Because Corning produces durable goods,the demand for their goods

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

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

Figure 21-2 -Refer to Figure 21-2.Which of the following is consistent with the graph depicted above?

Which of the following is most liquid?

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

________ is the ease with which a financial security can be exchanged for money.

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

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

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