Question 1

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

Question 2

The supply of loanable funds has a ________ slope because the greater the interest rate, the ________ the reward to saving, and the ________ the quantity of loanable funds supplied.

Accepted Answer

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

Question 3

Using equations for public and private saving, show that saving must equal investment in a closed economy. Begin with the expression for total saving in the economy.

Accepted Answer

Start with the expression of total savin...

Question 4

________ are financial securities that represent partial ownership of a firm.

Accepted Answer

A)   Stocks
B)   Bonds
C)   Treasury bills
D)   Certificates of deposit

Question 5

When potential GDP increases, is it necessarily the case that real GDP increases as well? Explain.

Accepted Answer

An increase in potential GDP is a result...

Question 6

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

Question 7

A firm can fund an expansion of its operations by

Accepted Answer

A)   issuing bonds.
B)   buying stock.
C)   paying dividends.
D)   loaning money.

Question 8

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.

Question 9

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

Accepted Answer

An increase in household saving increase...

Question 10

Typically, as an economy begins to emerge from a recessionary phase of the business cycle

Accepted Answer

A)   unemployment falls immediately.
B)   unemployment continues to rise.
C)   inflation begins to fall.
D)   investment begins to fall.

Question 11

If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment?

Accepted Answer

A)   $10 billion
B)   $30 billion
C)   $40 billion
D)   $70 billion

Question 12

Market economies tend to grow more quickly than centrally-planned economies.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following explains why employment only rises at a slow pace at the end of a recession?

Accepted Answer

A)   Firms are hesitant to rehire laid off workers as they continue to operate below capacity.
B)   Firms rapidly hire new workers at the first sign of an increase in demand for their goods.
C)   Discouraged workers return to the labor force, and this makes the unemployment rate fall.
D)   Discouraged workers leave the labor force, and this makes the unemployment rate rise.

Question 14

In an open economy, the country interacts with other economies through both trading of goods and services and borrowing and lending.

Accepted Answer

A) True 
 B)False

Question 15

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 public saving?

Accepted Answer

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

Question 16

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.

Question 17

Human capital refers to which of the following?

Accepted Answer

A)   the quantity of goods and services that can be produced by one worker or by one hour of work
B)   the accumulated knowledge and skills workers acquire from education and training or from their life experiences
C)   manufactured goods that are used to produce other goods and services
D)   physical equipment that is made by human laborers, not machines

Question 18

Inflation usually increases during a recession and decreases during an expansion.

Accepted Answer

A) True 
 B)False

Question 19

Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

Technological advances generally result in

Correct AnswerverifiedShow Answer

In an open economy, the country interacts with other economies through both trading of goods and services and borrowing and lending.

Correct AnswerverifiedShow Answer

The supply of loanable funds has a ________ slope because the greater the interest rate, the ________ the reward to saving, and the ________ the quantity of loanable funds supplied.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 public saving?

Correct AnswerverifiedShow Answer

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

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A firm can fund an expansion of its operations by

Correct AnswerverifiedShow Answer

Typically, as an economy begins to emerge from a recessionary phase of the business cycle

Correct AnswerverifiedShow Answer

Human capital refers to which of the following?

Correct AnswerverifiedShow Answer

Using equations for public and private saving, show that saving must equal investment in a closed economy. Begin with the expression for total saving in the economy.

Correct AnswerverifiedStart with the expression of total savin...View AnswerShow Answer

Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

Correct AnswerverifiedShow Answer

Market economies tend to grow more quickly than centrally-planned economies.

Correct AnswerverifiedShow Answer

Inflation usually increases during a recession and decreases during an expansion.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedAn increase in household saving increase...View AnswerShow Answer

Which of the following explains why employment only rises at a slow pace at the end of a recession?

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If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment?

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________ are financial securities that represent partial ownership of a firm.

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When potential GDP increases, is it necessarily the case that real GDP increases as well? Explain.

Correct AnswerverifiedAn increase in potential GDP is a result...View AnswerShow Answer

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

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A good measure of the standard of living is

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Correct Answer
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Correct Answer
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The supply of loanable funds has a slope because the greater the interest rate, the the reward to saving, and the the quantity of loanable funds supplied.

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Start with the expression of total savin...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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An increase in household saving increase...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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An increase in potential GDP is a result...
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Correct Answer
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