Econ 1 Final Exam Study Guide

If the marginal propensity to save is small, it will: a. make the multiplier larger. b. increase the interest rate c. not affect the value of the multiplier. d. make the multiplier smaller.

a. make the multiplier larger.

To be officially unemployed, a person must: a. not have a job and must have looked for work in the past four weeks. b. be working fewer than 30 hours per week. c. be under 55 years old. d. be working fewer than 20 hours per week.

a. not have a job and must have looked for work in the past four weeks.

Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a: a. shift to the left. b. movement downward. c. shift to the right. d. movement upward.

a. shift to the left.

If the MPS = 0.1, then the multiplier equals: a. 9 b. 5 c. 10 d. 1

c. 10

In a closed economy, investment spending, I, must equal: a. GDP - C - G - X. b. GDP - [C * G]. c. GDP - C - G. d. GDP - C.

c. GDP - C - G.

A $50 million increase in investment spending will eventually cause equilibrium real GDP to: a. increase by $50 million. b. increase by less than $50 million. c. increase by more than $50 million. d. decrease by $50 million.

c. increase by more than $50 million.

The demand curve for loanable funds slopes: a. upward since it takes a higher rate of return to get more funds. b. upward because higher rates of return are necessary to cover higher costs. c. downward because more potential projects yield 10% than yield 5%. d. downward because quantity demanded is lower when the price to borrow money is higher.

d. downward because quantity demanded is lower when the price to borrow money is higher.

Which change would contribute to a nation's rapid long-run economic growth? a. lower levels of average human capital b. less physical capital per worker c. faster population growth d. faster technological progress

d. faster technological progress

If planned investment spending increases, the planned aggregate spending line: a. becomes steeper. b. becomes flatter. c. shifts down. d. shifts up.

d. shifts up.

If private savings increase, the _____ loanable funds will _____, interest rates will _____, and the amount of borrowing will _____. a. demand for; decrease; decrease; decrease b. demand for; increase; increase; increase c. supply of; decrease; increase; decrease d. supply of; increase; decrease; increase

d. supply of; increase; decrease; increase

If the actual inflation rate is less than the expected inflation rate: a. lenders gain and borrowers lose. b. everyone is worse off. c. borrowers gain and lenders lose. d. everyone benefits.

a. lenders gain and borrowers lose.

A survey reveals that, on a small island, initially 100 people have jobs, 25 people don't have jobs but are looking for jobs, and 45 people are neither working nor looking for work. Suppose that 15 of the 45 people who weren't looking for work now begin looking for work. There are now 40 people looking for work and 100 people working. The unemployment rate: a. rises to 28.6%. b. Nothing happens to the unemployment rate because these people weren't working before and they aren't working now. c. rises to 50%. d. falls to 20%.

a. rises to 28.6%.

The rate of unemployment when the economy is at full employment is: a. the natural rate. b. less than the full employment rate of unemployment. c. the structural rate. d. zero.

a. the natural rate.

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is: a. 2%. b. 5%. c. 9%. d. 7%.

b. 5%.

National savings is the sum of private savings and: a. government tax revenue. b. the budget balance. c. private consumption. d. trade surplus.

b. the budget balance.

Suppose that the consumption function is C = $500 + 0.8* YD, where YD is disposable income. The marginal propensity to consume is: a. 0 b. 0.2 c. 0.8 d. $500.

c. 0.8

When planned investment is less than actual investment, there must be: a. unplanned technological progress. b. unplanned inventory disinvestments. c. unplanned inventory investment. d. unplanned depreciation.

c. unplanned inventory investment.

Table: Loanable Funds I Rate QLD QLS 7% $20 $100 6% $40 $80 5% $60 $60 4% $80 $40 3%. $100. $20 Use Table: Loanable Funds. At what interest rate will the market for loanable funds be in equilibrium? a. 5% b. 7% c. 6% d. 4%

a. 5%

Assuming that A represents autonomous consumption and YDrepresents disposable income, for the economy as a whole: a. C = (A - MPS) + (MPC* YD). b. C = MPC + (A* YD). c. C = A + (MPC* YD). d. C = (A + MPC)* YD.

c. C = A + (MPC* YD).

Figure: Shift of the Aggregate Demand Curve Refer to Figure: Shift of the Aggregate Demand Curve. A movement from point C on AD2 to point A on AD1 may have been the result of: a. decreases in the taxes paid by businesses. b. an increase in investment spending following optimistic GDP forecasts. c. a decrease in investment spending following pessimistic GDP forecasts. d. lower interest rates.

c. a decrease in investment spending following pessimistic GDP forecasts.

Figure: The Market for Loanable Funds II Use Figure: The Market for Loanable Funds II. Other things being equal, if there is an increase in the interest rate above 8%, _____ quantity of loanable funds will be demanded. a. a larger b. the same c. a smaller d. at first a smaller and then a larger

c. a smaller

An increase in government transfers is an example of _____fiscal policy because it shifts the aggregate demand curve to the _____ aggregate output. a. expansionary; left, increasing b. contractionary; left, decreasing c. expansionary; right, increasing d. contractionary; right, decreasing

c. expansionary; right, increasing

Which item is included in the calculation of GDP? a. a retiree's monthly Social Security check b. buying a house built 10 years ago c. expenditure on new construction d. buying shares of Home Depot stock

c. expenditure on new construction

Structural unemployment CANNOT be caused by: a. minimum wages. b. labor unions. c. fluctuations in the business cycle. d. efficiency wages.

c. fluctuations in the business cycle.

A shift to the right of the short-run aggregate supply curve may be caused by a(n): a. increase in wages. b. decrease in productivity. c. increase in productivity. d. increase in the price of inputs.

c. increase in productivity.

According to the wealth effect, when prices decrease, the purchasing power of assets _____ and consumer spending _____. a. increases; decreases b. decreases; increases c. increases; increases d. decreases; decreases

c. increase; increases

Physical capital includes: a. money. b. shares of stock. c. machine tools. d. a worker's education or knowledge.

c. machine tools.

Don is a builder and in his free time he has built an addition to his own house. This transaction will: a. be included in GDP because building is Don's hobby. b. be included in GDP because Don is a professional builder. c. not be included in GDP because it is not produced for the marketplace. d. not be included in GDP because it is an intermediate good.

c. not be included in GDP because it is not produced for the marketplace.

The aggregate supply curve shows the relationship between the aggregate price level and the aggregate: a. employment. b. money supply. c. output supplied. d. unemployment rate.

c. output supplied.

The aggregate demand curve shows the relationship between the aggregate price level and (the) aggregate: a. productivity. b. quantity of output demanded by businesses only. c. quantity of output demanded by households, businesses, the government, and the rest of the world. d. unemployment rate.

c. quantity of output demanded by households, businesses, the government, and the rest of the world.

The key measure used to track economic growth is: a. nominal GDP. b. nominal GDP per capita. c. real GDP per capita. d. real GDP.

c. real GDP per capita.

Planned investment spending does NOT depend on: a. the rate of interest. b. the expected level of real GDP. c. real GDP. d. the productive capacity of the economy.

c. real GDP.

Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a: a. movement downward. b. shift to the right. c. shift to the left. d. movement upward.

c. shift to the left.

An example of an intermediate good is: a. vegetables purchased by your dinner b. electricity bills for your house c. steel purchased by aircraft manufacturers d. wages paid to an employee

c. steel purchased by aircraft manufacturers.

In the short run, wages and some prices are considered to be: a. unpredictable. b. extremely flexible. c. sticky. d. irrelevant.

c. sticky.

Which factor is NOT a tool of fiscal policy? a. government purchases of goods and services b. changing tax rates c. government transfers d. changes in the money supply

d. changes in the money supply

A contractionary fiscal policy either _____ government spending or _____ taxes. a. increases; increases b. increases; decreases c. decreases; decreases d. decreases; increases

d. decreases; increases

Aggregate demand will shift to the RIGHT if: a. the aggregate price level increases. b. the money supply shrinks. c. taxes go up. d. government purchases increase.

d. government purchases increase.

Net capital inflow equals: a. consumption plus government spending. b. national savings. c. consumption. d. imports minus exports.

d. imports minus exports.

A decrease in energy prices will: a. decrease aggregate demand. b. decrease the quantity of aggregate output supplied in the short run. c. decrease short-run aggregate supply. d. increase short-run aggregate supply.

d. increase short-run aggregate supply.

Which factor is the MOST widely accepted measure of economic growth over time? a. decline in real interest rates b. increases in the available labor supply c. inflation d. increases in real per capita GDP

d. increases in real per capita GDP

Table: Furniture Production Schedule Timber 100 Milled Wood 300 Finished Wood 600 Assembled Furniture 800 Retail Price to Consumer 1,200 Use Table: Furniture Production Schedule. What is the total value added of all stages of production of the furniture? a. $2,000 b. $1,200 c. $1,800 d. $800

b. $1,200

An increase in the minimum wage would likely cause an increase in short-run aggregate supply. a. True b. False

b. False

Double counting in the GDP can be avoided by including both final and intermediate production. a. True b. False

b. False

Frictional unemployment is a special type of structural unemployment. a. True b. False

b. False

If an economy has a real GDP per capita growth rate of 2%, it will take 14 years for GDP per capita to double. a. True b. False

b. False

If real GDP falls when nominal GDP increases, then prices have fallen. a. True b. False

b. False

If the price index in year 1 is 110 and the price index in year 2 is 115, then the inflation rate is exactly 5% from year 1 to year 2. a. True b. False

b. False

If you borrow money from a bank to buy a house, the mortgage (loan) is a financial asset for you and a liability for the bank. a. True b. False

b. False

The aggregate production function typically increases at an increasing rate with additions to capital. a. True b. False

b. False

The higher the existing physical capital stock, the higher is aggregate demand. a. True b. False

b. False

When the price level increases and people want to hold more money, interest rates decrease. a. True b. False

b. False

Rising high school graduation rates are an example of an increase in: a. population stock. b. human capital. c. fertility rates d. technological progress.

b. human capital.

If the actual output lies below potential output, then an appropriate fiscal policy would be to _____, which will shift the _____ curve to the _____. a. increase government purchases; AD; left b. increase government purchases; AD; right c. increase transfer payments; AS; right d. increase tax rates; AD; right

b. increase government purchases; AD; right

If the price level decreases, real income will: a. remain constant. b. increase. c. fluctuate randomly. d. decrease.

b. increase.

Suppose the equilibrium aggregate price level and the equilibrium level of real GDP are both rising. This is probably the effect of a(n) _____ in aggregate _____. a. decrease; demand b. increase; demand c. decrease; supply d. increase; supply

b. increase; demand

A cut in taxes _____, shifting the aggregate demand curve to the _____. a. decreases government transfers and consumption; right b. increases disposable income and consumption; right c. increases corporate profits and investment; left d. decreases the marginal propensity to save, increasing consumption; left

b. increases disposable income and consumption; right

Planned investment spending _____ the interest rate. a. moves in the same direction as b. is negatively related to c. is positively related to d. is independent of

b. is negatively related to

Income-expenditure equilibrium occurs when: a. real GDP equals unplanned aggregate expenditure. b. real GDP equals planned aggregate spending. c. consumption and investment are equal. d. real GDP equals actual aggregate spending.

b. real GDP equals planned aggregate spending.

From 2010 to 2011, nation A's real GDP increased from $100 billion to $106 billion and its population grew from 50 million to 51 million. As a result, real GDP per capita _____ because real GDP rose _____ than the population. a. increased; faster b. decreased; more slowly c. increased; more slowly d. decreased; faster

a. increased; faster

The short-run aggregate supply curve has a positive slope, showing that increases in the price level will increase the quantity of aggregate output supplied by firms. a. True b. False

a. True

The only government policy that has a DIRECT effect on the aggregate demand curve is: a. changing the level of government purchases of final goods and services. b. changing the quantity of money. c. changing the level of government transfers. d. raising or lowering the tax rate.

a. changing the level of government purchases of final goods and services.

Other things being equal, investment spending _____ when _____. a. increases; firms have excessive production capacity b. decreases; firms expect sales to fall c. decreases; the obsolete or worn out physical capital increases d. increases; the rate of growth of real GDP is low

a. increases; firms have excessive production capacity

Changes in _____ will not shift the aggregate demand curve. a. the price level b. wealth c. expectations d. the existing stock of physical capital

a. the price level

Table: Disposable Income and Consumption Disposable Income Consumer Spending $0 $100 $200. $220 $400. $340 $600 $460 $800 $580 $1000 $700 Use Table: Disposable Income and Consumption. Autonomous consumer spending is: a. $100. b. $200. c. $120. d. $0.

a. $100.

Use Table: Peanut Butter and Jelly Economy. In 2011, nominal GDP was _____ and real GDP was _____. a. $525; $450 b. $525; $400 c. $450; $575 d. $450; $400

a. $525; $450

In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and $160 in 2011. Based on this information and considering 2009 as the base year, inflation from 2009 to 2011 was: a. 23.07%. b. 14.28%. c. 7.69%. d. 7.14%.

a. 23.07%

Table: Labor Force Distribution Employed Adults 200 million Labor Force 208 million Unemployed Adults 8 million Adults not in labor force 30 million Non-adults (under 16) population 40 million Use Table: Labor Force Distribution. The total population is _____ million. a. 278 b. 486 c. 253 d. 283

a. 278

A rise in real GDP that is the same as the rate of population growth leaves the average standard of living unchanged. a. True b. False

a. True

If the cost of the market basket in the base year is $5,000 and the cost of the market basket in the current year is $5,100, the price index for the current year is 102. a. True b. False

a. True

Investment spending in a closed economy must equal GDP minus consumption minus government spending. a. True b. False

a. True

Renting a car to go on a vacation will result in more GDP than it will if you use your own car. a. True b. False

a. True

When Disney builds a new amusement park in the United States, it is counted as part of GDP. a. True b. False

a. True

Suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.8. Assuming no taxes and no trade, real GDP will _____ by _____. a. decrease; $500 billion b. increase; $400 billion c. decrease; $800 billion d. decrease; $200 billion

a. decrease; $500 billion

Unemployment that is due to the time workers spend in job search is _____ unemployment. a. frictional b. natural c. structural d. cyclical

a. frictional

Compared with bonds, stocks generally provide a _____ return and carry a _____ financial risk. a. higher; higher b. lower; higher c. lower; lower d. higher; lower

a. higher; higher

Figure: Aggregate Expenditures and Real GDP Use Figure: Aggregate Expenditures and Real GDP. At a real GDP of $9,000 billion: a. planned investment is less than actual investment. b. there will be no unplanned investment. c. planned investment equals actual investment. d. planned investment is greater than actual investment.

a. planned investment is less than actual investment.

Table: Measuring GDP. Personal consumption expenditures $500 Gross private domestic investment $200 Net Exports -$5 State and local government purchases of goods and services $100 Imports $15 Use Table: Measuring GDP. Exports are: a. $5 billion. b. $10 billion. c. -$5 billion. d. zero.

b. $10 billion.

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is investment spending? a. $3 trillion b. $2 trillion c. $3.5 trillion d. $2.5 trillion

b. $2 trillion

Table: South Korea's Real GDP per Capita 1960 $1,571 1970 $2,777 1980 $4,830 1990 $9,959 2000 $15,881 Use Table: South Korea's Real GDP per Capita. As a percentage of real GDP per capita in 2000, approximately how much did South Korea produce in 1960? a. 151% b. 10% c. 1,011% d. 15%

b. 10%

Use Figure: Technological Progress and Productivity Growth. If there is significant technological progress (all other factors remaining unchanged), it is BEST indicated by a move from: a. A to B. b. B to C. c. C to B. d. B to A.

b. B to C.

A high unemployment rate implies a high level of GDP. a. True b. False

b. False

The inflation rate for the current year is the price level in the current year minus the price level in the previous year. a. True b. False

b. False

To reduce risk through diversification, a person must invest in several assets with related, or dependent, risk of loss. a. True b. False

b. False

Which example illustrates consumption expenditure? a. Samantha bought an oven for her cooking show on Food Network. b. Stephanie bought a laptop for her brother. c. Jim purchased 200 shares of Google stock. d. Herman Smith spent $1,500 to buy a used car for his son.

b. Stephanie bought a laptop for her brother.

The natural level of unemployment contains no_____ unemployment. a. minority b. cyclical c. structural d. frictional

b. cyclical

Internet employment agencies have simplified the job search for the applicants. They have also led to a(n) _____ unemployment. a. increase in frictional b. decrease in frictional c. increase in cyclical d. decrease in structural

b. decrease in frictional

Financial markets spread the potential gains and losses of borrowing and lending operations among many individuals, therefore decreasing the overall uncertainty. This is an example of: a. reducing transaction costs. b. reducing risk. c. providing liquidity. d. guaranteeing rates of return.

b. reducing risk.

Positive unplanned inventory investment occurs when actual: a. sales are higher than expected. b. sales are less than expected. c. depreciation is more than expected. d. depreciation is less than expected.

b. sales are less than expected.

The budget balance equals: a. imports minus exports. b. taxes minus government spending. c. taxes plus government spending. d. consumption plus investment.

b. taxes minus government spending.

Which definition BEST describes GDP? a. the total value of all primary, intermediate, and final goods and services produced in the economy during a given year b. the total value of all final goods and services produced in the economy during a given year c. the total value of all goods and services produced in the economy during a given year d. the total value of all goods and services produced and sold in the economy during a given year

b. the total value of all final goods and services produced in the economy during a given year

Figure: Aggregate Expenditures I Use Figure: Aggregate Expenditures I. When real GDP is $700 billion, there will be a _____ in unplanned inventory investment. a. $200 million decline b. $125 million decline c. $125 million increase d. $200 million increase

c. $125 million increase

Figure: Consumption and Real GDP Use Figure: Consumption and Real GDP. If real GDP is $8 trillion, consumption is _____ trillion and savings is _____ trillion. a. $7; $1 b. $6; $2 c. $5; $3 d. $4; $4

c. $5; $3

Suppose that, in year 1, an economy produces 100 golf balls that sell for $3 each and 75 pizzas that sell for $8 each. The next year, the economy produces 110 golf balls that sell for $3.25 each and 80 pizzas that sell for $9 each. The value of nominal GDP in years 1 and 2, respectively, is: a. $180,000 and $257,400. b. $1,000 and $1,005. c. $900 and $1,077.50. d. $900 and $990.

c. $900 and $990.

Table: Investment Spending, Private Spending, and Capital Inflows Investment spending as a percentage of GDP N 25% S 30% Private savings as a percentage of GDP N 10% S 35% Capital inflow as a percentage of GDP N 5% S 05% Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia? a. 0% b. -10% c. 10% d. 20%

c. 10%

Use Figure: Productivity. An increase in physical capital per worker with everything else remaining unchanged is shown on the diagram as a movement from: a. B to A. b. A to C. c. A to B. d. B to C.

c. A to B.

Investment spending in macroeconomics refers to: a. buying newly issued shares of stock. b. buying stocks. c. adding to physical capital. d. adding to one's retirement account.

c. adding to physical capital.

The aggregate production function exhibits _____ returns to physical capital. a. negative b. constant c. diminishing d. increasing

c. diminishing

If we add up the consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of exports, then subtract the value of imports, we have measured the nation's: a. disposable income b. trade deficit c. gross domestic product d. budget deficit

c. gross domestic product

GDP does not exclude: a. the value of leisure b. damage to the environment c. the value of owner-occupied housing d. the value of housework

c. the value of owner-occupied housing.

If disposable income increases: a. the consumption function will shift upward. b. the consumption function will shift downward. c. there will be a rightward movement along the consumption function. d. there will be a leftward movement along the consumption function.

c. there will be a rightward movement along the consumption function.

In a simple, closed economy (no government or foreign sector), if disposable income increases by $1,000 and consumption increases by $600, the marginal propensity to consume is: a. $400. b. $1.67. c. $600. d. $0.60.

d. $0.60

Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year and that real GDP per capita of China is $4,000, and its annual growth rate is 7%. According to the rule of 70, how large will China's real GDP per capita be in 20 years? a. $5,600 b. $28,000 c. $8,000 d. $16,000

d. $16,000

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of private saving? a. $18 trillion b. -$7 trillion c. $43 trillion d. $7 trillion

d. $7 trillion

Table: GDP year 2011 (in billions of dollars) Consumption spending $65 Rental income $10 Interest $35 Profit $20 Investment Spending $15 Wages $29 Government purchases $18 Imports $7 Exports $3 According to the information in Table: GDP. GDP in the table is: a. $139 billion. b.$188 billion. c. $168 billion. d. $94 billion.

d. $94 billion.

Use the list below to answer the following questions:1. Improvements in technology2. Increases in the supply (stock) of capital goods3. Purchases of expanding output4. Obtaining the optimal combination of goods, each at least-cost production5. Increases in the quantity and quality of natural resources6. Increases in the quantity and quality of human resources Which set of items in the above list would shift an economy's production possibilities curve outward? a. 2, 4, 5, and 6 only b. 1, 3, 4 only c. 2, 5, and 6 only d. 1, 2, 5, and 6 only

d. 1, 2, 5, and 6 only

If real GDP per capita grows at 5% per year consistently over time, how many years will it take for it to double? a. 70 b. 10 c. 5 d. 14

d. 14

Suppose that the real interest rate is 2.1% and the nominal interest rate is 5.4%. The inflation rate is _____%. a. 7.5 b. -3.3 c. 2.1 d. 3.3

d. 3.3

Which statement is TRUE? a. The labor force is the same as the population. b. The unemployment rate is the number of people unemployed expressed as a percentage of the population. c. The number of people not working but who have looked for work in the past year is equal to the number of unemployed people. d. The labor force is the total number of people working plus those who are unemployed.

d. The labor force is the total number of people working plus those who are unemployed.

Which change will NOT increase the productivity of labor? a. an increase in the capital stock b. improvements in education c. technological improvements d. an increase in the size of the labor force

d. an increase in the size of the labor force

In an economy with no international trade, no government expenditure, no transfers, and no taxes, disposable income equals GDP. Therefore, it follows that: a. investment spending equals disposable income. b. consumption equals investment spending. c. as GDP increases, planned aggregate spending decreases. d. as GDP decreases, planned aggregate spending decreases.

d. as GDP decreases, planned aggregate spending decreases.

Which asset is the MOST liquid? a. checking account balance b. a townhouse c. stock in a publicly traded company d. currency

d. currency

Table: CPI II 2010 125 2011 120 Use Table: CPI II. Prices _____ between 2010 and 2011. a. increased by 5% b. fell by 5% c. increased by 4% d. fell by 4%

d. fell by 4%

The total of the values added at every stage of production for a good leads to the: a. total cost of the labor used to produce the good. b. prices of the factors of production used to produce the good. c. intermediate value of the good. d. final value of the good.

d. final value of the good.

A recent college graduate with a major in economics attends a job fair but has not yet found a job. This graduate is counted as a _____ unemployed worker. a. cyclically b. structurally c. seasonally d. frictionally

d. frictionally

Suppose that Jim just got a $20,000 loan from his credit union to buy a new car. The loan is a _____ for Jim and a _____ for the credit union. a. financial asset; financial asset b. financial asset; liability c. liability; physical asset d. liability; financial asset

d. liability; financial asset

If a country has a trade surplus, we can conclude that it also has a: a. net capital inflow. b. budget surplus. c. budget deficit d. net capital outflow.

d. net capital outflow.

The inflation rate is the: a. price level in the current year minus the price level in the previous year. b. price level in the current year plus the price level in the previous year. c. price level in the current year multiplied by the price level in the previous year. d. percentage change in the price level from one year to the next.

d. percentage change in the price level from one year to the next.

Figure: Supply of Loanable Funds Use Figure: Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the: a. supply of loanable funds rises by $20 billion. b. supply of loanable funds falls by $10 billion. c. quantity supplied of loanable funds falls by $20 billion. d. quantity supplied of loanable funds rises by $20 billion.

d. quantity supplied of loanable funds rises by $20 billion.

Figure: The Market for Loanable Funds II Use Figure: The Market for Loanable Funds II. An increase in government borrowing will shift the demand for loanable funds to the _____ and _____ the interest rate. a. right; decrease b. left; decrease c. left; increase d. right; increase

d. right; increase

Which factor is NOT included in investment spending in the national income accounts? a. spending on inventories b. new residential construction c. the purchase of machinery and other productive physical capital d. the purchase of stocks and bonds by a business

d. the purchase of stocks and bonds by a business

At the income-expenditure equilibrium, _____ is zero. a. inventory investment b. planned investment c. investment net of depreciation d. unplanned inventory investment

d. unplanned inventory investment