macro 2

a government that collects more in taxes than it spends experiences

a budget surplus

which of the following change does not cause an increase in the quantity of goods and services that can be produced by one worker

an increase in the number of workers.

when firms expand during recessions they

cannot be certain when recovery will occur and know they could experience prolonged losses

what is the general relation between the business cycle and unemployment and inflation

during an expansion, unemployment falls and inflation increases

the financial system of a country is important for long run economic growth because

firms need the financial system to acquire funds from households.

businesses demand loanable funds because of the

firms need to borrow funds for new projects, such as building new factories.

which of the following equals the amount of public saving

government tax revenue minus the sum of government purchases and transfer payments to households

crowding out occurs when

governments must borrow funds which causes interest rates to rise and thus private investment is reduced.

potential GDP

increases over time as the labor force grows and as technological change occurs.

households supply loanable funds because of the

interest income received from the borrowers

rule of 70

is a mathematical formula used to calculate the number of years it takes real GDP per capita or any other variable to double

the real interest rate

is equal to the nominal minus the inflation rate

inflation can affect the distribution of income because

people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by decreasing purchasing power.

which of the following is the best measure of the standard of living of the typical person in a country

real GDP per person.

which of the following is a loanable fund

real state

a more cautious approach might be advisable in particular industries where

sales are cyclical

which of the following changes will ensure that an economy experiences sustained econ growth

technological change

the difference between the nominal interest rate and the real interest rate is

the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest minus the inflation rate.

if the economy is experiencing deflation

the nominal interest rate will be lower than the real interest rate

if inflation is expected to increase

the nominal interest rate will increase

two key factors that cause labor productivity to increase over time are

the quantity of capital per hour worked and the level of technology.

the type of inflation that is greater problem to society

unanticipated inflation, since it causes greater distribution of income between those making payments and those awaiting payments in the future