CH10 MACRO

Refer to Scenario 10-1. Based on the information above, what is the level of private saving in

$3 trillion

What is investment in closed economy if you have the following economic data? Y= $10 trillion C= $5 trillion TR= $2 trillion G= $2 trillion

$3 trillion

Refer to Table 10-2. Using the table above, what is the approximate growth rate of real GDP from 2017 to 2018?

-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?

2.6%

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate

4.7%

If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2016, we would say that in the year 2016, the average American could buy _____ times as many goods and services as the average American in 1950.

8

Refer to Figure 10-5. "Crowding Out" of firm investment as a result of a budget deficit is illustrated by the movement from ____ in the graph above.

A to B

During the expansion phase of the business cycle, which of following eventually increases?

All of the above (employment, income, production)

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

An increase in the federal government surplus

The only way the standard of living of the average person in a country can increase is if ________ increases faster than ________.

production; population

A good measure of the standard of living is

real GDP per capita

The period between a business cycle peak and a business cycle trough is called

recession

Purchases of which of the following goods would be dramatically reduced during a recession?

refrigerators

Purchases of Huggies diapers should

remain fairly constant over the business cycle

One difference between stocks and bonds is that

stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond.

Refer to Figure 10-6. The loanable funds market is in the equilibrium, as shown in the figure above. As a result of an increase in the government budget deficit, the ______ for loanable funds will _______, thereby ________ the equilibrium real interest rate and ________ the equilibrium quantity of loanable funds.

supply; fall; increasing; decreasing

An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

supply; left; rise

What two factors are the keys to determining labor productivity?

technology and the quantity of capital per hour worked

What is the name of the organization that defines business cycle peaks and troughs in the United States?

the National Bureau of Economic Research

Human capital refers to which of the following?

the accumulated knowledge and skills workers acquire from education and training or from their life experiences

Liquidity refers to

the ease with which a financial security can be traded for cash.

Potential GDP refers to

the level of GDP attained when all firms are producing at capacity.

Under which of the following circumstances would the government be running a deficit

G = $5 trillion T = $5 trillion TR = $1 trillion

Refer to Figure 10-2. Which of the following is consistent with the graph depicted above?

New government regulations decrease the profitability of new investment.

There is a government surplus if

T-TR<G (Taxes- Transfers< Government purchases)

Refer to Figure 10-1. Which of the following is consistent with the graph depicted above?

Technological change increases the profitability of new investment

An increase in public saving has what impact on the market for loanable funds?

The supply of loanable funds increases.

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)

Y + TR - C - T

In a closed economy, which of the following equations reflects investment? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)

Y - C - G.

Which of the following financial securities is most liquid?

a $20 bill

Which of the following is an example of human capital?

a college education

An increase in the real interest rate results in which of the following?

a decrease in the demand for loanable funds

Which of the following is the most liquid?

a dollar bill

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase in future​ years, and these higher deficits might​ "pose a threat to the economy by crowding out business investment and threatening a spike in interest​ rates." This crowding out of business investment would be represented graphically by

a shift in the supply curve for loanable funds to the left.

If consumers decide to be more frugal and save more out of their income, then this will cause

a shift in the supply curve for loanable funds to the right

What is human capital?

accumulated knowledge and skills acquired by a worker

Which of the following would increase public saving?

an increase in taxes

Which of the following will increase the real interest rate?

an increase in the demand for loanable funds

In comparison to a government that runs a balanced budget, when the government runs a budget deficit

business investment will fall.

In comparison to the government that runs a balanced budget, when the government runs a budget deficit,

business investment will fall.

The total amount of physical capital available in a country is known as the country's

capital stock

The response of investment spending to an increase in the government budget deficit is called

crowding out

The demand for durable goods

declines by a greater percentage than does GDP during a recession.

Increasing the amount of consumption spending and reducing the amount of savings ________ investment expenditures, and ________ longrun economic growth in the economy.

decreases, decreases

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

demanders; suppliers

Actual real GDP will be above potential GDP if

firms are producing above capacity.

Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy?

growth in capital per hour accompanied by technological change

A decrease in the real interest rate will

increase consumption and investment

An increase in the demand for loanable funds will occur if there is

increase in expected profits from firm investment projects

Which of the following increases labor productivity?

inventions of new machinery, equipment, or software

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

investment.

If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is $8.3 billion, the growth rate of real GDP between 2015 and 2016

is 3.75%

Potential GDP was estimated to grow at a rate of 3.2% from 1949-2017 in the United States. Actual GDP in the U.S.

is the same as potential GDP if all firms in the economy were working at capacity.

A firm can fund an expansion of its operations by

issuing bonds

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

labor productivity

The demand for loanable funds has a downward sloping because the _______ the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of

lower; greater; greater

Refer to Scenario 10-1. Based on the information above, what is the level of public saving?

negative $1 trillion (a deficit of $1 trillion)

In a closed economy, which of the following components of GDP is not included?

net exports

Cutting costs at the beginning of a recession tends to make the most sense for a business that produces or provides

nondurable goods.

Long-run economic growth requires all of the following except

political instability

According to the "Rule of 70," how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is 5%?

14 years

Refer to Table 10-1. Using the table above, what is the approximate average annual growth rate from 2013 to 2016

2%