ECON TEST 2

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 capital inflow?

$2 trillion

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 private saving?

$3.5 trillion

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?

$4 trillion

If a country has a population of 1,000 an area of 100 square miles, and a GDP of $5 million, then it's GDP per capita is:

$5,000

Menu costs of inflation are the:

costs created when businesses must frequently change prices

Technological progress allows workers to produce more:

even when the amount of physical capital and labor do not change

If the level of physical capital is growing in the U.S. economy, the result must be an increase in productivity

false

Long-run economic growth is:

higher in countries with a strong property rights and political stability

Over the past year, John has been working very hard. His employer has been taken notice and is giving John a 6% raise in salary. During this past year, overall prices in the economy have increased by 4%. Given this information, John's real wage has:

increased by 2%

When inflation rises quickly and unexpectedly:

lenders will be hurt and borrowers will benefit

As an investor, you may chose to purchase a bond or a share of stock. If you chose to purchase the bond, you are likely to receive a _____ return in exchange for a _____ level of risk.

lower; lower

The threat of future unexpected inflation:

makes banks reluctant to lend money for long periods

Productivity declines when:

population growth exceeds real GDP growth.

If productivity is growing by 1% per year and the employment to population ratio is falling by 0.5% yearly, then:

real GDP per capita is growing, but slowly

Suppose banks are issuing personal loans at an interest rate of 9%. if expected inflation is 3%, then the:

real interest rate is 6% and the nominal interest rate is 9%

Crowding out negatively affects the economy by:

reducing investment spending

An increase in the amount of Federal government borrowing will typically:

shift the loanable funds demand curve to the right and increase interest rates

Real GDP per capita, growing at a constant rate over a 35-year period, doubles in size at the end of that period. What must the annual growth rate of real GDP per capita be for this economy?

2%

Which of the following annual rates of inflation would most likely be called hyperinflation?

2,000%

Suppose a panel of economists predicts that a nation's real GDP per capita will have an average annual growth rate of 2%. Based upon the rule of 70, how many years will it take for this nation's real GDP per capita to double

35

Suppose the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is equal to:

4%

The government saves when it runs a budget deficit?

False

Deflation is a(n):

a decrease in the average level of prices

A bond is:

a promise to pay interest each year and to repay the principal on a specified date, and a liquid asset

A share of stock represents:

a share of ownership in company that issues stock

In periods of unexpected inflation:

borrowers benefit since they repay their loans in dollars with lower real value

Diminishing returns to physical capital means that when labor and technology are held fixed, each additional increase in the amount of physical capita per worker leads to:

smaller and smaller increases in productivity

Among the following, the financial assets with the highest risk are:

stocks

Human capital refers to:

the education and knowledge of the workforce

Inflation can be measured by:

the percentage change in the CPI