Exam 3 Online HW Qs

f the interest rate is 6.%, the present value of ​$225 paid one year from now equals ​$__________ If the ​$225 is received in two years ​(at the same interest rate​), the present value will equal ​$_________________

$212.26 $200.25

f the reserve ratio is 0.10 and a deposit of ​$250 is placed into a​ bank, that bank can lend out ​

$225

a. In an​ economy, the MPC is 0.50. Determine how far the aggregate demand curve shifts if government spending increases by ​$40 billion. The aggregate demand curve shifts to the right by ​$_________ billion b. In an​ economy, the MPC is 0.50 and the marginal propensity to import is 0.20. Determine how far the aggregate demand curve will shift to the right if government spending increases by ​$40 billion. The aggregate demand curve will shift to the right by ​$_________

1/(1-.5)=2 x 40= 80 billion

If the Fed set an interest rate on reserves close to the market interest rate on​ loans, A. banks would have little incentive to make loans. B. banks would have more incentive to borrow funds. C. banks would have more incentive to make loans. D. banks would be unnecessary.

A. banks would have little incentive to make loans.

Financial intermediaries reduce the risk of assets​ through: A. retained earnings. B. diversification. C. liquidity. D. deposit insurance.

B. diversification.

If autonomous consumptionautonomous consumption increasesincreases​, then the consumption function will A. not shiftnot shift. B. shift upwardshift upward. C. get steeperget steeper. D. shift downwardshift downward.

B. shift upwardshift upward.

At any point onon the 45 degree​ line, planned expenditures are A. less thanless than output or income. B. unrelated to output. C. equal toequal to output or income. D. greater thangreater than output or income.

C. equal toequal to output or income.

The production function illustrates the relationship between A. the natural rate of unemployment and full employment. B. output and the cost of production. C. factors of production and output. D. capital and labor.

C. factors of production and output.

Capital deepening comes to an end because of the A. principle of opportunity cost. B. marginal principle. C. principle of diminishing returns. D. reality principle.

C. principle of diminishing returns.

For most​ firms, the biggest cost of doing business is A. the cost of materials. B. energy cost. C. wages. D. interest cost.

C. wages.

Because investment spending moves in conjunction with​ GDP, investment spending​ is: A. volatile. B. ​counter-cyclical. C. risky. D. procyclical.

D. procyclical.

To decrease aggregate​ demand, a government can either______ spending or_______taxes.

Decrease, increase Government spending and taxes affect aggregate demand. Any decrease in government spending decreases aggregate demand.​ Also, if taxes increase disposable income and consumption decrease and​ consequently, aggregate demand decreases

Once we account for changes in the labor​ force_________ is the next biggest source of the growth of GDP in the United States.

Technological progress

If a customer withdrew ​$2,000 in cash from a bank and the reserve ratio was 0.20, by how much could the supply of money eventually be​ reduced? $______

The simple money multiplier is 1 divided by the reserve ratio. Changes in deposits impact the money supply by the amount of the change in deposits times the money multiplier. $10,000

The present value of lottery winnings paid over a​ 20-year period will____________ with an increase in interest rates.

decrease

Suppose inflation in the United States rose to around 8% a​ year; this would______ the demand for U.S. currency by foreigners.

decrease As the U.S. economy remains strong with low and stable​ inflation, foreigners demand to hold U.S. dollars. If inflation​ rose, the U.S. economy would not be considered as​ safe, and foreigners would hold fewer U.S. dollars.

The taxtax multiplier is________________ the government spending multiplier

less than

When the Federal Reserve makes a loan to a bank or financial​ institution, it requires the institution to specify certain assets the Federal Reserve can take possession of if the loan is not repaid. These assets are known as collateral. When the Federal Reserve made its​ $30 billion loan to​ JPMorgan, it allowed JPMorgan to use some of the assets of Bear Stearns as collateral. Why was this risky for the Federal​ Reserve? A. The quality of the collateralized assets of Bear Sterns was unknown. B. Investment firms believed JPMorgan was not financially viable. C. JPMorgan might not repay the loan. D. The stock price for JPMorgan was falling. Why was this a good deal for​ JPMorgan? A. JPMorgan could avoid payments on the collateralized loan. B. Other investment firms began pulling out their funds from Bear Stearns. C. The Fed accepted all the risk of the deal. D. JPMorgan did not have to offer as much of its​ own, more valuable assets as collateral.

A. The quality of the collateralized assets of Bear Sterns was unknown. D. JPMorgan did not have to offer as much of its​ own, more valuable assets as collateral.

If a project costs​ $100 and pays 107 next​ year, the maximum interest rate at which the present value of the investment exceeds its cost is_______________

7%

Which of the following appropriately describes the interceptintercept of the consumption​ function? A. Autonomous consumption.Autonomous consumption. B. Marginal propensity to save. C. Average propensity to consume. D. Marginal propensity to consume.

A. Autonomous consumption.

Use the simple​ income-expenditure model to analyze the following scenarios. a. Suppose clothing stores anticipate a good fashion season and add substantially to inventories in their stores. As a result of​ this, A. GDP will increase since planned increases in inventory adds to planned expenditures. B. GDP will not be affected since inventories are not part of production or expenditures. C. GDP will not increase until the inventories are sold. D. GDP will decrease because of the accumulation of inventories. b. Suppose economists see that inventories are suddenly increasing. Which of the following may be causing this increase in​ inventories? A. Decrease in demand for goods and services. B. Decrease in price of goods and services. C. Increase in price of goods and services. D. Increase in demand for goods and services.

A. GDP will increase since planned increases in inventory adds to planned expenditures. A. Decrease in demand for goods and services.

Gifts cards have grown in popularity as a mechanisms to give gifts. Cards are available for popular book stores and for coffee shops. Gift cards A. are not considered part of the money supply since they have a fixed value paid for in advance. B. are considered part of the money supply since they transmit funds from the checking account. C. are considered part of the money supply since they can be used for spending. D. are not considered part of the money supply since they have a variable value depending on the purchaser. Traveler's checks are sold by A. vendors but must be redeemed at a bank. B. vendors for purchases in their enterprise. C. banks and can be used for specific vendors. D. banks and​ non-banks and can be used for purchases in any enterprise.

A. are not considered part of the money supply since they have a fixed value paid for in advance. D. banks and​ non-banks and can be used for purchases in any enterprise.

In recent​ years, a number of members of Congress have sponsored bills that would subject the Fed to audits of its monetary policy. This is a form of intensive Congressional oversight. What are the pros and cons of more Congressional oversight of the​ Fed? Increased oversight can A. create pressure to help finance a​ country's government deficit by creating money. B. result in a merger of the executive and the congressional branches of government. C. result in financial default. D. add to a​ country's deficit since the oversight of the central bank is expensive.

A. create pressure to help finance a​ country's government deficit by creating money.

The Federal Open Market Committee​ (FOMC) votes​ on: A. monetary policy. B. the reserve requirement. C. discount loans. D. the discount rate.

A. monetary policy.

During the housing​ boom, overeager lenders were said to have made​ "ninja" loanslong dash—that ​is, loans to individuals with​ "no income,​ job, or​ assets." How did​ "ninja" loans contribute to the securitization crisis in financial markets in 2007 and​ 2008? A. Financial institutions were unable to make payments on the​ "ninja" loans. B. Some borrowers had limited ability to repay their mortgages and stopped making​ payments, causing the collapse of ​ repackaged, securitized mortgages. C. Some lenders had limited ability to securitize their​ mortgages, and so they stopped lending. D. Investors and financial firms realized these securitized investments were illegal.

B. Some borrowers had limited ability to repay their mortgages and stopped making​ payments, causing the collapse of ​ repackaged, securitized mortgages.

In​ 1973, several major companies went bankrupt and were not going to be able to pay interest on their​ short-term loans. This caused a crisis in the market. There was concern that the​ short-term credit market would​ collapse, and that even healthy corporations would not be able to borrow. How did the Fed handle this​ situation? A. The Fed took credit away from banks to punish them for making bad loans. B. The Fed extended additional credit to make sure the economy had plenty of liquidity. C. The Fed did nothing and let the market adjust on its own.

B. The Fed extended additional credit to make sure the economy had plenty of liquidity.

Money market mutual funds typically invest in government securities and other financial instruments that can be easily bought and sold. They are not subject to reserve requirements​ and, in​ fact, hold minimal reserves.​ Banks, on the other​ hand, make loans to businesses for investment purposes. Prior to​ 2008, banks did not normally earn interest on reserves. Suppose that banks still do not earn any interest on reserves. If there were no reserve requirements for​ banks, how do you think their reserve holdings would compare to money market mutual​ funds? A. The level of bank reserve holdings would be higher than those held by money market mutual funds since bank lending is riskier than investments of money market mutual funds. B. The level of bank reserve holdings would be similar to those held by money market mutual funds since banks can earn more money by keeping reserves at minimal levels. C. The level of bank reserve holdings would be lower than those held by money market mutual funds since banks can borrow from each other. D. The level of bank reserve holdings would still be higher than those held by money market mutual funds since banks have to provide funds to depositors

B. The level of bank reserve holdings would be similar to those held by money market mutual funds since banks can earn more money by keeping reserves at minimal levels.

he price of a stock can be thought of as the present value of​ future: A. interest payments. B. dividends. C. bond prices. D. tax deductions.

B. dividends.

Rely on the ideas of​ "animal spirits" to complete the following sentence. Changes in measures of consumer confidence would be correlated to consumer spending on durable goods because people would be A. rationally confident and therefore more willing to purchase durable goods such as food and clothing. B. irrationally confident and therefore more willing to purchase durable goods such as furniture and appliances. C. rationally confident and therefore less willing to purchase durable goods such as furniture and appliances. D. irrationally confident and therefore less willing to purchase durable goods such as food and clothing.

B. irrationally confident and therefore more willing to purchase durable goods such as furniture and appliances.

In​ 2010, interest rates on home mortgages were in the neighborhood of five percentlong dash—very low by historical standardslong dash—but many individuals did not wish to buy homes. Low interest rates did not entice new buyers because A. the inflation rate was high enough that the real interest rate was relatively high. B. the inflation rate was low enough that the real interest rate was relatively high. C. the inflation rate was low enough that the real interest rate was relatively low. D. the inflation rate was high enough that the real interest rate was relatively low.

B. the inflation rate was low enough that the real interest rate was relatively high.

Personal Debt and Tax Cuts. Suppose you had a large unpaid balance on your credit card and were paying a high rate of interest. You then received a​ one-time tax rebate from the government and decided to pay down the balance on your credit card. If there were many others like you in the​ economy, would the tax cut be an effective​ stimulus? A. ​No, since debt reduction can lower interest rates. B. ​No, since debt reduction would not stimulate consumption. C. ​Yes, since debt reduction will increase credit card use. D. ​Yes, since most people use credit cards for purchases.

B. ​No, since debt reduction would not stimulate consumption.

Traditionally, savings and loan institutions made loans only for home mortgages and held on to those mortgages. At one​ point, this was viewed as a safe way of doing business.​ However, this became a risky way of doing business for U.S. savings and loans in the 1970s. Why would making loans only for housing and holding on to the mortgages be very​ risky? A. Because diversification would create even more risk to lenders. B. Because the loans for mortgages tend to be shorter term. C. Because the lender would be very subject to risk and price movements of the real estate market. D. Because almost all mortgages go into default status. Why does this provide a rationale for institutions such as Fannie Mae and Freddy​ Mac? A. Because they borrow funds from other investors to move mortgaged securities around different markets. B. Because they take mortgages and separate them into assets that can be part of a diversified portfolio. C. Because they free up money for banks to be able to make even more mortgage loans. D. None of the above.

C. Because the lender would be very subject to risk and price movements of the real estate market. B. Because they take mortgages and separate them into assets that can be part of a diversified portfolio.

If the MPC decreasesdecreases​, the slope of the consumption function will A. not changenot change. B. increaseincrease. C. decreasedecrease. D. be equal to onebe equal to one.

C. decrease

Suppose the supply of money​ increases, causing output to exceed full employment. As a​ result, A. in the short​ run, prices will​ increase, but real output will​ fall; in the long​ run, both prices and real output will increase. B. in the short​ run, both prices and real output will​ increase; in the long​ run, prices will not change but real output will fall to the full employment level. C. in the short​ run, both prices and real output will increase and in the long​ run, prices will increase​ further, but real output will fall to the full employment level. D. prices will increase in both short and long​ runs, but output will always be fixed at the full employment level.

C. in the short​ run, both prices and real output will increase and in the long​ run, prices will increase​ further, but real output will fall to the full employment level.

Top athletes or entertainers would be more likely to change countries to reduce their taxes as compared to ordinary​ middle-class workers because A. their occupation requires that they move a lot. B. ordinary​ middle-class workers​ don't pay much in tax. C. these individuals can realize more tax savings than ordinary​ middle-class workers who have lower incomes. D. these individuals have more money and can move easily.

C. these individuals can realize more tax savings than ordinary​ middle-class workers who have lower incomes.

​Long-Run Deficit Projections. The Congressional Budget Office​ (CBO) makes​ long-run budget deficit projections. Although these projections are based on restrictive and often unrealistic​ assumptions, the CBO makes these projections A. to help guide future monetary policy. B. because they are required by law to make such projections. C. to help guide future fiscal policy. D. to help individuals plan their retirement.

C. to help guide future fiscal policy.

We have the following information for an​ economy: Consumption​ Function: C​ = 100 ​+ 0.50​(y−​T) ​Investment: I​ = 50 Government​ Spending: G​ = 50 ​Taxes: T​ = 40 Calculate the level of equilibrium income. Equilibrium Income​ = ​$____________ Calculate the level of savings when the economy is in equilibrium. Level of savings at​ equilibrium, S​ =_________

Calculate the value of the government spending multiplier. Government Spending Multiplier​ = 2 Savings, S​ = y−T−C. At​ equilibrium, y​ = ​$360 and T is given to be ​$40 ​Thus, we can calculate the corresponding level of​ consumption, C​ = 100 ​+ 0.50×​(360−40) ​= ​$260. Now the equilibrium level of​ savings, S​ = 360−40−260 ​= ​$60.

When reserves paidpaid ​interest, banks__________

Could keep reserves rather than make loans When banks earned no interest on either required or excess reserves it created an incentive for banks to keep minimal excess reserves and lend any extra funds they had. Once banks began to earn interest on excess​ reserves, they did not have to lend their funds out to earn interest.

Consumers in Country A have an MPS of 0.20. while consumers in Country B have an MPS of 0.40. Country___________ has the higher value for the multiplier.

Country A

Which of the following may influence technological​ progress? A. The scale of the market. B. Monopolies. C. Research and development spending. D. All of the above.

D. All of the above.

Growth in Japan and Germany after the war was higher than that in the United States because A. the United States increased the capital stock at a higher rate than Japan and Germany. B. Japan and Germany had higher employment than the United States. C. the United States had higher employment than Japan and Germany. D. Japan and Germany increased the capital stock at a higher rate than the United States.

D. Japan and Germany increased the capital stock at a higher rate than the United States.

In the simple​ income-expenditure model, the consumption function is given to be C​ = 100100 ​+ 0.750.75y. Initially the level of investment is ​$100100. Which of the following statements is not true if investment increases by ​$100100​? A. New equilibrium income is ​$1 comma 2001,200. B. At new​ equilibrium, y​ = C​ + I. C. Investment multiplier is 44. D. New equilibrium income is ​$900.

D. New equilibrium income is ​$900.

In an economy with no government sector or foreign​ sector, saving must equal investment because A. total income is equal to consumption and saving. B. total income is equal to total demand. C. total demand is equal to consumption and investment. D. all of the above. E. none of the above.

D. all of the above.

Following the Great​ Depression, the likelihood of​ "runs" on banks has been greatly reduced because of the creation​ of: A. tariffs. B. financial intermediaries. C. credit and debit cards. D. deposit insurance.

D. deposit insurance.

The planned expenditures line is shown by Cplus+I. As for the relationship between output and planned​ expenditures, when output falls short offalls short of the equilibrium​ output, A. expenditures exceedexceed output and output begins to fallfall. B. expenditures fall short offall short of output and output begins to riserise. C. expenditures fall short offall short of output and output begins to fallfall. D. expenditures exceedexceed output and output begins to riserise.

D. expenditures exceedexceed output and output begins to riserise.

Credit cards are not considered part of the money supply​ because: A. they are a unit of account. B. they make it easier to conduct business. C. they represent a store of value. D. they are a loan which you have to use money to pay for later.

D. they are a loan which you have to use money to pay for later.

The wages of which of the following groups will not adjust​ quickly? A. rock stars. B. contractors. C. self−employed financial consultants. D. union worker

D. union worker

Which of the following is not a component of aggregate​ demand? A. Net exportsNet exports. B. DepreciationDepreciation. C. Federal government expendituresFederal government expenditures. D. ConsumptionConsumption.

Depreciation

Proponents of solar energy point to the vast savings that come in the long run from using a free source of energy​ (the sun) rather than paying high prices for electricity.​ Unfortunately, solar energy systems typically have large​ up-front expenses to install the system. Using the concept of present​ value, solar energy systems are more likely to be profitable when interest rates are high T/F

False

The San Francisco Federal Reserve Bank is the only one in the West because San Francisco outbid San Diego to be its host. T/F

False

The classical school of thought came to its fruition during the 1960 T/F

False The term classical refers to a school of economics that believed that over a relatively short period of time wages and prices would adjust quickly and naturally to bring the economy back to full employment. The classical school of thought dominated economics until about the​ mid-1930s.

If interest rates decrease​, the present value of a fixed payment in the future will_____

Increase

The​ Q-theory of investment was developed by

James Tobin

In an open​ economy, increases in government spending can crowd out​ consumption, investment, or_____

Net exports Open economies have international trade. ​ Thus, for a fixed level of​ output, an increase in government spending will decrease​ consumption, investment,​ and/or net exports.

An expansionary expansionary fiscal policy shifts the aggregate demand curve to the_______, _______ prices, and_________ real GDP

Right, raises, increases

China has a higherhigher rate of technological progress than India. T/F

True

One reason a bank can invest in illiquid loans​ (say, lend​ depositors' savings to home buyers over 25​ years) and still provide liquid deposits​ (provide depositors with their savings when they ask for​ it) is because depositors typically do not withdraw all of their deposits at the same time. T/F

True

S0 much U.S. currency is in global circulation because it is a safe asset compared to assets denominated in foreign currency. T/F

True

Suppose the government said that they would not let the U.S. price for a barrel of oil fall below​ $50. They could do this by raising taxes on oil if the price fell below​ $50. By keeping the price of oil​ high, firms would have an incentive to invest in​ energy-saving technologies T/F

True

The typical European works less hours per year than the typical U.S. worker T/F

True

Walter Heller was a forceful advocate of active fiscal policy T/F

True Walter Heller was the chairman of the​ President's Council of Economic Advisers under John F. Kennedy. He was a forceful advocate of active fiscal policy.

During the Great​ Depression, banks held excess reserves because they were concerned that depositors might be more inclined to withdraw funds from their accounts. At one​ point, the Fed became concerned about the​ "excess" reserves and raised the reserve requirements for banks. a. Assuming that banks were holding excess reserves for precautionary​ purposes, would they continue to hold excess reserves even after reserve requirements were​ raised? Yes/No After the Fed raised the reserve​ requirement, the money supply would___________

Yes decrease

t any price​ level, the​ income-expenditure model determines the level of equilibrium output and the corresponding point on the___________________

aggregate demand curve

The Federal Reserve arranged for JPMorgan Chase​ & Co. to________ Bear Stearns during the financial crisis in 2008.

buy

Occasionally, some economists or politicians suggest that the Secretary of the Treasury become a member of the Federal Open Market Committee. This would most likely __________ the independence of the Federal Reserve.

decrease

Holding other factors​ constant, stock prices tend to fall when expected corporate earnings fall because lower expected corporate earnings________________ ​investors' expectations about future​ dividends,_________ the demand for stock and stock prices. When interest rates rise i, higher interest rates make borrowing_____________ ​expensive, _____________ the total level of investment. All other things being​ equal, when investment spending falls​, stock prices______ .

decrease decreasing more reducing fall

During the​ 1980s, U.S. banks made loans to South American countries. Many of these loans turned out to be worthless​ (they were not​ repaid). Because of these​ loans, banks saw their assets____________ , liabilities________, and owner's equity________

decrease remain the same decrease

During the​ 1970s, President Ford proposed a tax cut combined with a decrease in government spending by the same​ amount, so as not to increase the budget deficit. a. If taxes and government spending are both reduced by the same​ amount, GDP will_________________ President Ford was worried that a tax cut would increase the budget deficit.​ Thus, he matched the tax cut by an equal cut in government spending. Although the budget deficit did not​ worsen, the economy experienced_____________ in spite of a tax​ cut, and GDP__________ .

decrease by the same amount a contraction fell by the amount of the tax cut

In recent​ years, debit cards have become popular. Debit cards allow the holder of the card to pay a merchant for goods and services directly from a checking account. The introduction of debit cards most likely____________ the amount of currency in the economy.

decreased

The equilibrium quantity of labor decreases and​ therefore, output______ and the real wage______

decreases increases

In the short​ run, when prices are slow to adjust to changes in demand and​ supply, _______ determines production.

demand

Given the changes in the location of economic activity that have occurred since the founding of the Federal​ Reserve, how would the location of the regional banks change if they were allocated by economic​ activity? The locations of the banks and the branches would be_________ since economic activity has geographically shifted. here would probably be more banks in the____________ and the______________ district would be​ smaller, or have more banks.

different West San Francisco

A higher saving rate leads to a permanently higher rate of growthleads to a permanently higher rate of growth.

false

A decrease in the tax rate will____________ the government spending multiplier.

increase

Long-run average income is known as_____

permanent income

An increase in the amount of capital in the economy will shift the demand for labor curve to the______ ​, leading to higherhigher real wages and employment.

right

If a financial intermediary buys loans from a mortgage company and then packages them to sell in the financial​ markets, this is known as________

securitization

Economist Anil Kashyap of the University of Chicago found that prices of many items published in retail catalogs are considerably________________ but during periods of_____________________ ​, prices change more frequently because of increases in_________

sticky high inflation costs of production

The MPC in an economy is 0.50. The economy is currently experiencing a recession. The government wants to increase GDP by ​$180 billion. a. Calculate the amount of the increase in government spending that will be required to achieve the target. Government Spending must be increased by ​$_________ billion b. If instead of increasing its spending the government plans to cut​ taxes, calculate the amount of the tax cut that will be necessary to achieve the target. Taxes must be reduced by ​$___________ billion

1/(1-.5)=2 , 180/2=90 billion 180 billion

f the MPC is 0..50​, the simple multiplier will be equal to______________(Enter your response rounded to one decimal​ place.)

1/1-MPC=1/1-0.5=2

At a 7 percent annual growth rate in GDP per​ capita, it will take _______ years for GDP per capita to double. ​(Enter your response rounded to one decimal​ place.)

10 years

he United States has instituted many policies to attempt to increase savings rates in the United States. One such policy was the creation of Individual Retirement Accounts and other incentives for savings. An implication of the​ income-expenditure model is that an increase in the desire of consumers to save will not necessarily lead to higher savings. In​ fact, total savings will either remain the same or perhaps fall. This is known as the paradox of thrift. Suppose that in an​ economy, investment,​ I, is 4040 and the savings function is given by S​ = minus−8080 ​+ 0.100.10y. Now suppose consumers wish to increase their savings and the new savings function becomes S​ = minus−6060 ​+ 0.100.10y. Calculate the levels of equilibrium income before and after consumers plan to increase their saving. Also calculate the corresponding levels of saving before and after consumers want to save more. Initial equilibrium​ income, y*​ = _________ Equilibrium income after consumers plan to save​ more, y**​ = ​$_______ Initial​ saving, S*​ = ​$_______ Level of saving after consumers want to save​ more, S** ​ = ​$___________ Now assume that when consumers plan to save​ more, investment also decreases by 2020. Calculate the new level of equilibrium income and the corresponding level of saving. Equilibrium income when investment falls​ (but consumers still plan to save​ more), y***​ = ​$___________ Level of saving when consumers want to save more but investment​ declines, S***= ​$__________

1200 1000 40 40 800 20

If the multiplier for government spending is 1.60 and government spending is increased by ​$160​billion, calculate the amount by which the demand curve will ultimately shift. Shift of the demand curve​ = $_______ billion

256 billion YOU ARE GIVEN THE MULTIPLIER 1.6 x 160=256

The equation for the consumption function is given to​ be, C​ = Ca ​+ 0.90y. Calculate the amount by which equilibrium income will decrease if a shock decreases Ca by ​$20.00 billion. An economy has an MPC of 0.60. Calculate the amount by which equilibrium income will increase if government purchases increase by ​$30.00 billion. Equilibrium income will increase by ​$_____ Calculate the amount by which equilibrium income will decrease if taxes increase by ​30.00 billion. Equilibrium income will decrease by $_____ billion.

75 billion.... 2.5 x 30=75 45 billion

Future Generations. Some economists say that economic growth involves a​ trade-off between current generations and future generations. If a current generation raises its saving​ rate, what does it​ sacrifice? A. Current consumption. B. Human capital. C. Capital deepening. D. Both a and b. What will be gained for future​ generations? A. More output. B. More capital. C. Less inequality. D. Both a and b.

A. Current consumption. D. Both a and b.

Consumption or Investment Crowding​ Out? Suppose local governments in suburban communities around the country started building large community swimming pools. Identify what type of spending this might crowd​ out, and compare this to the effect of government spending on exploration of Mars. A. Government spending on large community swimming pools crowds out business​ investment, whereas government spending on exploration of Mars does not crowd out any spending. B. Government spending on large community swimming pools crowds out consumption and​ investment, whereas government spending on exploration of Mars crowds out only private investment. C. Government spending on large community swimming pools crowds out​ consumption, whereas government spending on exploration of Mars crowds out private investment. D. Both crowd out business investment.

A. Government spending on large community swimming pools crowds out business​ investment, whereas government spending on exploration of Mars does not crowd out any spending. Local governments around the country start building large community swimming pools. If they​ hadn't done​ this, private swim clubs may have sprung up to serve the market demand for pool swimming. Government is in competition with private swim clubs trying to borrow funds from the public to finance their investment plans. This increased competition from the government will make it more difficult and costly for private swim clubs to make those investments. As a​ result, business investment spending will decrease. In other​ words, government crowds out private investment. This is different than the effect of government spending on exploration of Mars because there are not many​ (or any) private businesses that will spend on this type of​ exploration, so no business investment will be crowded out.

If the​ labor-supply curve were​ horizontal, what would be the effects on​ wages, output, and​ employment? A. Wages would be​ unchanged, but output and employment would decrease. B. ​Wages, output, and employment would decrease. C. Wages would​ decrease, but output and employment would be unchanged. D. None of the above.

A. Wages would be​ unchanged, but output and employment would decrease. If the​ labor-supply curve were​ horizontal, then a shift in the​ labor-demand curve would decrease employment and therefore​ output, though wages would be unchanged. This is because workers would be extremely sensitive to wage changes.

If the​ labor-supply curve is​ vertical, what are the effects on real​ wages, output, and​ employment? A. Wages​ decrease, but output and employment are unchanged. B. Wages are​ unchanged, but output and employment decrease. C. ​Wages, output, and employment decrease. D. None of the above.

A. Wages​ decrease, but output and employment are unchanged. If the​ labor-supply curve is​ vertical, then a shift in the​ labor-demand curve leaves employment and therefore output​ unchanged, though wages decrease. This is because workers are not sensitive to wage changes.

How Do We Measure Technological​ Progress? If we cannot measure every invention or new​ idea, how can we possibly measure the contribution to growth of technological​ progress? A. We can measure the effects of technological progress indirectly using growth accounting methods. B. We can measure the effects of technological progress directly by tracking capital deepening. C. We can measure the effects of technological progress by measuring GDP convergence across countries. D. We can measure the effects of technological progress by comparing labor productivity over time.

A. We can measure the effects of technological progress indirectly using growth accounting methods.

Suppose foreign countries grow moremore rapidly than anticipated and U.S. exports to these countries also growgrow. As a​ result, A. income of the United States increasesincreases​, which leads to a rightwardrightward shift of the U.S. aggregate demand curve. B. planned expenditures and income in the U.S. will increaseincrease as predicted by the​ income-expenditures model, but since prices are​ fixed, aggregate demand will not be affected. C. aggregate demand curves of the foreign countries that are experiencing rapidrapid growth will shift to the rightright​, but the U.S. aggregate demand curve will not be affected. D. aggregate demand curves of the foreign countries that are experiencing rapidrapid growth will shift to the rightright​, but the U.S. aggregate demand curve will shift to the leftleft.

A. income of the United States increasesincreases​, which leads to a rightwardrightward shift of the U.S. aggregate demand curve.

In a recessionrecession​, real GDP falls short offalls short of potential GDP. This implies that A. unemployment has risenrisen​, driving wages downdown. This results in a rightwardrightward shift of the​ short-run aggregate supply curve. B. unemployment has risenrisen​, driving wages downdown. This results in a leftwardleftward shift of the​ short-run aggregate supply curve. C. unemployment has fallenfallen​, driving wages upup. This results in a leftwardleftward shift of the​ short-run aggregate supply curve. D. unemployment has fallenfallen​, driving wages upup. This results in a rightwardrightward shift of the​ short-run aggregate supply curve.

A. unemployment has risenrisen​, driving wages downdown. This results in a rightwardrightward shift of the​ short-run aggregate supply curve.

Timing and Cultural Explanations of Economic Growth. Some critics of cultural theories of economic growth note that some societies can suddenly start to grow very rapidly with no obvious accompanying cultural changes. How well does Professor Gregory​ Clark's theory fit the rapid growth in some East Asian economies in recent​ years? A. ​Clark's theory fits well with the rapid growth in East Asian economies since western values have become more acceptable. B. ​Clark's theory does not fit well with the rapid growth in East Asian economies since affluent families are not prevalent. C. ​Clark's theory fits well with the rapid growth in East Asian economies since population growth has been high in these economies. D. ​Clark's theory does not fit well with the rapid growth in East Asian economies since many of these are not really market economies.

A. ​Clark's theory fits well with the rapid growth in East Asian economies since western values have become more acceptable.

Here is one unusual fiscal​ policy: The government would issue​ time-dated debit cards to each person that had to be spent on goods and services produced only by U.S. firms within a fixed period​ (say, three​ months) or become worthless. Suppose the government was considering whether to issue​ $400 in​ time-dated debit cards to each household or give each household​ $400 in cash instead. Which of the following statements regarding the two plans is​ true? A. ​Time-dated debit cards would have greater immediate impact on consumption spending since they had to be spent within a specific period of time and the higher the value of the​ MPC, the greater the total impact on spending and income. B. Both programs would have the same impact on spending since they made payments of equal size and the value of the MPC would have no impact on spending. C. Cash payments would have greater impact on immediate and total spending but the lower the value of the​ MPC, the larger the impact on immediate consumption spending. D. Cash payments would have greater immediate impact on spending since they could be spent or invested and the higher the value of the​ MPC, the greater the initial spending as well as the total impact on spending and income.

A. ​Time-dated debit cards would have greater immediate impact on consumption spending since they had to be spent within a specific period of time and the higher the value of the​ MPC, the greater the total impact on spending and income.

The following information is available for the simple expenditure​ model: C​ = 100 ​+ 0.75y I​ = 100 Calculate the level of equilibrium output. Equilibrium output​ =_____

At​ equilibrium, output or income equals planned​ expenditures, i.e., y=C+I. Using the information on consumption and investment we​ get, y​ = 100 ​+ 0.75y ​ + 100

Policies That Promote Capital Deepening. Which of the following will promote economic growth through capital​ deepening? A. Increased imports to purchase new​ flat-screen TVs for consumers. B. Increased imports to purchase supercomputers for industry. C. Higher taxes used to finance universal health care.

B. Increased imports to purchase supercomputers for industry.

Diminishing​ Returns? An economy increased employment first from 10,000 to 20,000 and then from 20,000 to 30,000. The corresponding increases in output were 25,000 and 30,000 respectively. Nothing else changed during this period. Did this economy exhibit law of diminishing marginal​ returns? A. NoNo​, because changes in output and labor roserose. B. NoNo​, because changes in output roserose. C. NoNo​, because changes in labor roserose. D. There is not enough information to make this determination.

B. NoNo​, because changes in output roserose.

According to the paradox of​ thrift, when investment is autonomous and independent of​ income, policy makers cannot increase aggregate savings by affecting​ citizens' savings​ rates, because A. citizens are independent minded. B. at​ equilibrium, aggregate savings must be equal to aggregate investment. C. savings are not very sensitive to interest rates. D. usually incomes from savings are taxed at a very high rate.

B. at​ equilibrium, aggregate savings must be equal to aggregate investment.

Diminishing Returns to Capital and Real Wages. Consider this​ statement: Since capital is subject to diminishing​ returns, an increase in the supply of capital will reduce real wages. This statement is wrong because an increase in the supply of capital will A. increase the marginal benefit from employing labor and therefore decrease the demand for labor and real wages. B. increase the marginal benefit from employing labor and therefore increase the demand for labor and real wages. C. decrease the marginal benefit from employing labor and therefore decrease the demand for labor and real wages. D. decrease the marginal benefit from employing labor and therefore increase the demand for labor and real wages.

B. increase the marginal benefit from employing labor and therefore increase the demand for labor and real wages.

Technological Progress in Banking. Computers have revolutionized banking for consumers through the growth of ATMs and electronic bill paying capabilities. All of these improvements for consumers might not be counted as technological progress because technological progress A. occurs only in some sectors and not in others. B. is defined by economists as an increase in output with no additional increases in inputs. C. cannot be counted. D. is defined by economists as an increase in buildings and equipment.

B. is defined by economists as an increase in output with no additional increases in inputs. Technological progress is an increase in output with no additional increases in inputs. Not all technological innovations constitute technological progress. Some add convenience rather than the ability to increase output with no additional increases in inputs.

Unlike the U.S. federal​ government, virtually all states have requirements that they either plan for or maintain a balanced budget. If the national economy experiences a​ recession, A. state budgets go into deficits since states spend less to offset the increase in federal spending. B. state budgets go into deficits as tax revenues decline. C. state budgets do not get affected because all state budgets are always automatically balanced. D. state budgets do not get affected because the federal budget and state budgets are completely separate.

B. state budgets go into deficits as tax revenues decline.

Here is one unusual fiscal​ policy: The government would issue​ time-dated debit cards to each person that had to be spent on goods and services produced only by U.S. firms within a fixed period​ (say, three​ months) or become worthless. Suppose the government was considering whether to issue​ $400 in​ time-dated debit cards to each household or give each household​ $400 in cash instead. Suppose a family had large credit card​ debt, which it wished to reduce. Of the two​ plans, the family would prefer A. both of them​ equally, since they involved payments of equal size. B. the cash payments​ program, since cash could be used to pay off some of the credit card debt. C. the debit card​ program, since they did not need to use cash to buy goods and services. D. ​neither, since the credit card was fixed and was dependent on the interest rate.

B. the cash payments​ program, since cash could be used to pay off some of the credit card debt.

In the long​ run, if aggregate demand decreasesdecreases​, A. the price level will decreasedecrease and output or real GDP will decreasedecrease. B. the price level will decreasedecrease and output or real GDP will remain unchanged. C. both the price level and output or real GDP will remain unchanged. D. the price level will remain unchanged and output or real GDP will decreasedecrease.

B. the price level will decreasedecrease and output or real GDP will remain unchanged. The​ long-run aggregate supply curve is vertical. In the long​ run, there is full employment and output or real GDP is determined by factors of production. If aggregate demand decreasesdecreases​, the aggregate demand curve will shift to the leftleft and only the price level will decreasedecrease. The level of output or real GDP will remain unchanged at the full employment level.

Foreign Investment and Technological Progress. Many economists believe countries that open themselves to foreign investment of plant and equipment will benefit in terms of increased technological change because local companies will learn from the foreign companies. In the last several​ decades, China has been more open to foreign investment than India. This is consistent with the two​ countries' patterns of economic growth because A. China had positive growth in GDP whereas India had negative growth in GDP. B. ​China's growth in GDP was much higher than​ India's growth in GDP. C. the contributions from human capital for each country were similar. D. employment in China and India both grew at 2 percent per year in the last several decades.

B. ​China's growth in GDP was much higher than​ India's growth in GDP.

Marital Gifts and Savings. In​ Japan, it is a custom for the​ bride's family to give a gift having very large monetary value to the family of the groom. How might this affect the savings rate in this​ country? A. Families that anticipate receiving large marriage gifts will save less. B. Families that anticipate providing large marriage gifts will save more. C. Both a and b. D. None of the above.

C. Both a and b.

Cutting the Length of Patents. Suppose that a group of consumer activists claims that drug companies earn excessive profits because of the patents they have on drugs. The activists advocate cutting the length of time that a drug company can hold a patent to five years. They argue that this will lead to lower prices for drugs because competitors will enter the market after the​ five-year period. Do you see any drawbacks to this​ proposal? A. It will result in only induced innovation. B. It will promote​ "creative destruction," as outlined by Joseph Schumpeter. C. It will reduce the incentive for drug companies to invent new drugs. D. All of the above.

C. It will reduce the incentive for drug companies to invent new drugs.

The​ "Brain Drain" and Incentives for Education. Some economists are concerned about the​ "brain drain," the phenomenon in which highly educated workers leave developing countries to work in developed countries. Other economists have argued that​ "brain drain" could create incentives for others in the country to secure increased education and many of the newly educated might not emigrate. Explain why the​ "brain drain" could lead to increased education among the remaining residents. A. When highly educated workers​ leave, the direct​ out-of-pocket costs of education decrease. B. When highly educated workers​ leave, earnings forgone while in school decrease. C. When highly educated workers​ leave, more high paying jobs become available. D. All of the above. How would you test this​ theory? A. Compare labor productivity in developing countries with and without significant​ "brain drain." B. Compare wages in developing countries with and without significant​ "brain drain." C. Compare the types of jobs in developing countries with and without significant​ "brain drain." D. All of the above.

C. When highly educated workers​ leave, more high paying jobs become available. D. All of the above.

College Students and Tax Rebates. If the government distributes a rebate ​(as part of a temporary tax cut​) to tax​ payers, A. both the college student and the middle aged married man tend to save the​ rebate, because they base their current saving on current income. B. a college student who receives the tax rebate is likely to use the rebate to increase current​ consumption, since she bases her consumption on permanent​ income, but a middle aged married man is likely to save the​ rebate, since he bases his consumption on current income. C. a college student who receives the tax rebate is likely to use the rebate to increase current​ consumption, since she bases her consumption on current​ income, but a middle aged married man is likely to save the​ rebate, since he bases his consumption on permanent or​ long-term average income. D. a college student who receives the tax rebate is likely to save the​ rebate, since she bases her consumption on current​ income, but a middle aged married man is likely to spend the​ rebate, since he bases his consumption on permanent income.

C. a college student who receives the tax rebate is likely to use the rebate to increase current​ consumption, since she bases her consumption on current​ income, but a middle aged married man is likely to save the​ rebate, since he bases his consumption on permanent or​ long-term average income.

Although John Maynard Keynes is best known today for his book The General Theory of​ Employment, Interest, and Money​, he made other important contributions as well. Keynes A. praised peace treaty negotiators for requiring Germany to make payments to the Allies B. calculated the payments that Germany was required to make to the Allies C. condemned peace treaty negotiators for payments that Germany was required to make to the Allies D. negotiated at the Versailles Peace Conference on behalf of India and A. played a prominent role at the Bretton Woods Conference and opposed the creation of the International Monetary Fund and the World Bank. B. could not​ attend, but advised those who were at the Bretton Woods Conference. C. argued against the​ multibillion-dollar loan the United States granted to Britain for​ post-World War II rebuilding efforts. D. played a prominent role at the Bretton Woods Conference which established the postwar world monetary system.

C. condemned peace treaty negotiators for payments that Germany was required to make to the Allies D. played a prominent role at the Bretton Woods Conference which established the postwar world monetary system.

Export Markets. Suppose a foreign​ country, which originally prevented the U.S. from exporting to them comma opensoriginally prevented the U.S. from exporting to them, opens their market and U.S. firms start to make a considerable volume of salestheir market and U.S. firms start to make a considerable volume of sales. In this​ case, aggregate demand will A. increaseincrease because exports are part of aggregate supply. B. decreasedecrease because exports are indirectly related to shifts in aggregate demand. C. increaseincrease because exports are directly related to shifts in aggregate demand. D. not change since consumption expenditures will fall by an equal amount.

C. increaseincrease because exports are directly related to shifts in aggregate demand. Any change in demand from​ households, firms, or the foreign sector will also change aggregate demand. For​ example, if a foreign​ country, which originally prevented the U.S. from exporting to them comma opensoriginally prevented the U.S. from exporting to them, opens their market and U.S. firms start to make a considerable volume of salestheir market and U.S. firms start to make a considerable volume of sales​, U.S. aggregate demand will increaseincrease.

Economic models that assume that wages and prices adjust freely to changes in demand and supply are known as____ models

Classical

Height and Weight during Rapid Industrialization. Economic historians have found that the average height of individuals in both the United States and the United Kingdom fell during the​ mid-nineteenth century before rising again. This was a period of rapid industrialization as well as migration into urban areas. What factors do you think might account for this fall in​ height? A. Industrialization did little to reduce malnutrition. B. Resources were invested in physical capital instead of human capital. C. Health conditions in urban areas were worse than in rural areas. D. All of the above. How would you evaluate economic welfare during this​ period? A. Economic welfare remained unchanged. B. Economic welfare increased as measured by migration into urban areas. C. Economic welfare decreased as measured by average height. D. Economic welfare increased as measured by the number of new factories.

D. All of the above. C. Economic welfare decreased as measured by average height.

Suppose the United States adopted policies to reduce imports from Europe. As a consequence of​ this, A. European exports to the United States would be reduced and equilibrium income in the United States would be higher. B. European exports to the United States would be reduced and equilibrium income in the United States would be lower. C. European exports to the United States would be reduced and European equilibrium income would be higher. D. European exports to the United States would be reduced and European equilibrium income would be lower. b.​ Suppose, in response to U.S. policies of reducing imports from​ Europe, the Europeans decide to restrict imports from the United States. As a consequence of such a European​ policy, A. exports of the United States would decline and equilibrium income in the United States would be higher. B. exports of the United States would decline but equilibrium income in the United States would not be affected. C. imports to Europe would be lower and European income would be higher. D. exports of the United States would decline and equilibrium income in the United States would be lower. During the​ 1930s, many countries in the world—including the United States—tried to help their own countries by restricting imported goods. As a​ result, the volume of world trade________________ in the 1930s.

D. European exports to the United States would be reduced and European equilibrium income would be lower. D. exports of the United States would decline and equilibrium income in the United States would be lower. Fell

Which of the following is an entitlement​ program? A. Government investment spendingGovernment investment spending. B. Estate taxesEstate taxes. C. Spending on defenseSpending on defense. D. Social Security spendingSocial Security spending

D. Social Security spendingSocial Security spending

Economists believed the increase in housing prices after 2002 was related to the fall in household savings that was also observed during that period because increases in A. the marginal propensity to consume will decrease household savings. B. consumer income will cause an increase in autonomous consumption. C. consumer wealth will cause an increase in household savings. D. consumer wealth will cause an increase in autonomous consumption.

D. consumer wealth will cause an increase in autonomous consumption.

Dictatorships and Economic Growth. Consider this​ quote: ​"With a strong​ economy, dictators could raise more money for armies and police to help keep themselves in power.​ Therefore, dictators should welcome rapid economic​ growth." This quote is A. accurate because dictatorships can experience more technological growth than participatory institutions. B. inaccurate because dictatorships cannot raise much money. C. accurate because dictatorships can raise more money than participatory political institutions. D. inaccurate because economic growth typically requires participatory​ institutions, rather than a dictatorship.

D. inaccurate because economic growth typically requires participatory​ institutions, rather than a dictatorship.

Philippines and Emigration. Roughly 10 percent of the populations of the Phillipines works overseas. Suppose overseas Philippine workers returned to their home country. Relying on the linked figure LOADING... ​, this reverse flow of people on wages and employment will A. lower wages in the U.S. and lower wages in the Phillipines. B. raise wages in the U.S. and raise wages in the Phillipines. C. lower wages in the U.S. and raise wages in the Phillipines. D. raise wages in the U.S. and lower wages in the Phillipines.

D. raise wages in the U.S. and lower wages in the Phillipines. When overseas Philippine workers return to their home​ country, the supply of labor in the U.S. will​ fall, and the supply of labor in the Phillipines will rise. U.S. wages​ rise, while Phillipine wages fall.

To gauge living standards across countries with populations of different​ sizes, economists use A. the growth rate. B. technological progress. C. measures of human capital. D. real GDP per capita.

D. real GDP per capita.

Germany and the United States. ​Per-capita output is higher in the United States than in Germany. According to recent​ studies, the main cause for this is the difference in A. the age of the workforce. B. the amount of labor demanded by the market. C. ​workers' attitudes towards working. D. the amount of labor their workers supply to the market.

D. the amount of labor their workers supply to the market.

Coke and Pepsi. Soft drink companies spend a considerable amount of money on marketing. These expenditures could be considered a form of capital because A. it is their primary expenditure. B. these companies have significant revenue to use for marketing. C. television media is very expensive. D. this intangible capital is an important source of economic growth.

D. this intangible capital is an important source of economic growth.

Suppose gasoline prices increased sharply and consumers became fearful of owning too many expensive cars. As a​ consequence, they cut back on their purchases of new cars and decided to increase their savings. Assuming a​ short-run aggregate supply​ curve, this behavior shifts the aggregate demand curve to the A. ​left, leading to a large increase in output and a small increase in price. B. ​right, leading to a large decrease in output and a small decrease in price. C. ​right, leading to a large increase in output and a small increase in price. D. ​left, leading to a large decrease in output and a small decrease in price.

D. ​left, leading to a large decrease in output and a small decrease in price. When consumers became fearful and cut back on their purchases of new​ cars, and instead increased their​ savings, aggregate demand decreased. With a​ short-run aggregate supply​ curve, the decrease in aggregate demand leads to a large decrease in output but a small decrease in price.

Equilibrium output occurs where real output equals real expendituresoccurs where real output equals real expenditures T/F

FALSE Equilibrium output is the level of GDP at which planned expenditure equals the amount that is produced.​ Full-employment output is the level of output that results when the labor market is in equilibrium and the economy is producing at full employment.

Another term for potential output is

Full-employment output Full-employment output is the level of output that is produced when the economy is at full employment. This level of output is also known as potential output. This occurs when the labor market is in​ equilibrium, with the quantity of labor supplied equal to the quantity of labor demanded. Next Question

In​ 1999, the Internal Revenue Service began to mail out refund checks because of changes in the tax law in 1998. Assuming that taxpayers s did know that they would receive refunds and as consumers, based their spending spending decisions on their permanent incomes​, the result of the refund would be_________ in consumption expenditure.

Increase

Government​ Spending, Taxes, and Investment. Suppose a government places a 10 percent tax on incomes and spends 6060 percent of the money from taxes on investment and the rest on public consumption​ goods, such as military parades. Individuals save 1010 percent of their income and consume the rest. In this​ case, total investment​ (public and​ private)______

Increases Since the government invests a larger portion of the money than​ individuals, total investment increases.

When wages rise and the​ short-run aggregate supply curve shifts​ up, the result is​ "cost-push" inflation. If the economy was initially at​ full-employment and the aggregate demand curve was shifted to the​ right, the level of unemployment will be very________________ making it______________ for firms to recruit and retain workers and purchase needed raw materials and other inputs for production. There will be a tendency for both wages and prices to________ over time. This will shift the​ short-run aggregate supply curve _____ until the economy reaches the​ long-run equilibrium.

Low If the economy was initially at​ full-employment and the aggregate demand curve was shifted to the​ right, the level of unemployment would be very low. difficult increase upward

A negativenegative supply shock temporarily_________ output___________ full employment and____________ prices. After the negative supply​ shock, real GDP is_______ potential GDP. This implies that unemployment is____________ ​, driving wages____________ . This results in a_____________ shift of the​ short-run aggregate supply curve.

Lowers Below Raises lower than Rising down rightward or downward

In one​ year, a​ consumer's income increases by ​$200 and her savings increases by ​$60. Her marginal propensity to consume is equal to________ Her marginal propensity to save is equal to___________

MPC= change in C/ change in y Change in C= Change in y- Change in S 200-60/200=0.7 MPS=1-MPC=1-.7=0.30

A change in the price level will cause_________ the aggregate demand curve.

Movement along When the price level​ decreases, the demand for goods and services will increase due to wealth​ effect, interest rate​ effect, and international trade effect. This will result in higher planned expenditure and hence a higher level of equilibrium output on the AD curve.​ Thus, when the price level​ falls, equilibrium output will increase and there will be a movement downwards along the AD curve. The situation will be reversed if we have a price level​ increase, which will lead to a fall in equilibrium output and a movement upwards along the AD curve.

In​ 2000, the Chinese government mandated three​ one-week holidays throughout the year to stimulate consumer spending. The idea was that these extended vacations would induce the Chinese to spend more of their earnings while on vacation. Although consumption spending rose during the vacation​ period, the data show that consumption fell before and after the vacation by approximately the same amount as spending rose during the vacation. As a​ result, there was a _____________ change in aggregate demand change in aggregate demand and the overall policy of stimulating the economy through mandated vacations was_______ effective.

NO, NOt

In the​ U.S., virtually all states have requirements that they either plan for or maintain a balanced budget. If the national economy experiences a​ recession, states should___________ their spending and perhaps also_______ their taxes to balance their budgets.

Reduce, increase

____ and _____ are the two factors that determine how the stock of capital changes over time.

Saving and depreciation

New growth theory suggests that investment in comprehensive education in a developing countryinvestment in comprehensive education in a developing country will lead to permanent increasesincreases in the rate of technological progress.

True

An increase in the stock of capital shifts the production function______

Upward An increase in the stock of capital makes workers moremore ​productive, shifting the entire​ short-run production function upwardupward. Production functions have positive slopes but decreasing​ slopes, indicating output increases with​ labor, but at a diminishing rate.​ Further, when the capital stock increasesincreases​, the production function shifts upwardupward.

Since World War​ II, continuous use of automatic stabilizers has______________ . This has led the U.S. economy to become________ stable over the past 60 years.

increased more

Compared to other​ countries, the United Statesthe United States has a relatively_________ share of consumption spending in GDP.

large The United StatesThe United States consumes about 7070 percent of its GDP. This share is largelarge relative to many other countries. For​ example, France consumes 56 percent of its​ GDP, and ChinaChina consumes 3636 percent. Next Question

Suppose you are trying to decide whether to take a summer job at​ Clark's Camera Store that pays ​$2020 an​ hour, or work for your uncle as his graphic assistant for ​$1616 an hour. At​ Clark's Camera Store you would have to pay both income and social insurance taxes on your​ earnings, but if you work for your​ uncle, he will pay you in cash so you can avoid the tax. You will prefer to work for your uncle if the income and social insurance tax rate_______ than______%

more than 20% Your uncle will pay you ​$1616 an hour to be his graphic assistant. The income and social insurance taxes on the ​$2020 hourly earnings at​ Clark's Camera Store would have to be ​$44 to be equivalent. This would be an income and social insurance tax rate of 2020​%. If the income and social insurance tax rate is more thanis more than 2020​%, you will earn more working for your unclefor your uncle.

Basing your answer on the research reported in the​ text, India is A. less vulnerable now to increases in temperatures than it will be in twenty years because it is poorer country. B. less vulnerable now to increases in temperatures than it will be in twenty years because it is has opportunities to develop. C. more vulnerable now to increases in temperatures than it will be in twenty years because more development will allow the economy adapt to higher temperatures. D. more vulnerable now to increases in temperatures than it will be in twenty years because India has agricultural and light manufacturing goods sectors.

more vulnerable now to increases in temperatures than it will be in twenty years because more development will allow the economy adapt to higher temperatures.

An increase in labor force participation will shift the​ labor-supply curve to the_______ ​, leading to lowerlower real wages and higherhigher employment.

right