Topic 7&8

If in the economy, business saving equals $240 billion, household saving equals $15 billion and government saving equals -$150 billion, what is the value of national saving? Select one: a. $415 billion b. $265 billion c. $250 billion d. $105 billion

$105 billion

Sydney purchases a newly issued, two-year government bond with a principal amount of $10,000 and a coupon rate of 6% paid annually. One year before the bonds matures (and after receiving the coupon payment for the first year), Sydney sells the bond in the bond market. What price (rounded to the nearest dollar) will Sydney receive for his bond if newly issued one-year government bonds are paying a 5% coupon rate? Select one: a. $9,906 b. $10,000 c. $10,095 d. $10,600

10,095

Suppose that average labor productivity in Country C is $6,000, and that Countries C and A have the same real GDP per capita. Based on the information in the table, what must be the average labor productivity in Country A? Select one: a. $1,800 b. $2,400 c. $5,000 d. $7,200

5,000

Which of the following is an example of an investment in physical capital? Select one: a. A firm trains workers to operate new machinery. b. A firm pays for workers to take college classes. c. A chemical firm employs chemists to develop new chemicals. d. A firm purchases new equipment for a manufacturing process.

A firm purchases new equipment for a manufacturing process.

Which of the following policies would be expected to increase private saving? Select one: a. Replacing the income tax with a consumption tax b. Increasing the tax rate on capital gains c. Providing more generous Social Security retirement benefits d. Reducing the size of down payments needed to buy a house

Replacing the income tax with a consumption tax

Real GDP per person in Westland is $30,000, while real GDP in Eastland is $10,000, Westland's real GDP per person is growing at 3percent per year and Eastland's real GDP per person is growing at 3 percent per year. If these growth rates persist indefinitely, then: Select one: a. Eastland's real GDP per person will rise until it equals Westland's real GDP per person. b. Westland's real GDP per person will always be at least $20,000 greater than Eastland's. c. Eastland's real GDP per person will always be exactly $20,000 less than Westland's. d. Eastland's real GDP per person will eventually be greater than Westland's.

Westland's real GDP per person will always be at least $20,000 greater than Eastland's.

In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must equal: Select one: a. Y/N×N/POP. b. N/Y×POP/N. c. Y/POP×N/POP d. N/Y×N/POP

Y/NxN/POP

At the time it collapsed in 1991, the Soviet Union possessed all of the factors that promote increases in economic growth except: Select one: a. a highly educated worker force. b. a large stock of capital. c. abundant natural resources. d. a political and legal environment that promoted economic productivity

a political and legal environment that promoted economic productivity.

In the United States from 1960 to 2010, the largest positive contribution to national saving was from: Select one: a. the public sector. b. the government budget deficit. c. business saving. d. household saving.

business saving.

Holding other factors constant, an increase in the tax rate on revenue generated by capital will: Select one: a. increase national saving. b. decrease national saving. c. increase investment. d. decrease investment.

decrease investment.

National saving is done by: Select one: a. only households. b. only businesses. c. only governments. d. households, businesses, and governments.

households, businesses, and governments.

In order to promote growth, the poorest countries-in contrast to the middle-level and rich countries-need most to: Select one: a. invest in human capital. b. improve their infrastructure. c. improve their legal and political environments. d. increase their capital stock.

improve their legal and political environments.

A worldwide slowdown in productivity growth occurred: Select one: a. before 1950. b. in the 1950s and 1960s. c. in the 1960s and 1970s. d. in the 1970s and 1980s

in the 1970s and 1980s.

High rates of saving and investing in the private sector promote economic growth by: Select one: a. increasing human capital. b. improving the social and legal environment. c. increasing physical capital. d. improving technology.

increasing physical capital.

From a macroeconomic perspective, the problem of low household saving has probably been overstated because: Select one: a. household saving is not related at all to an economy's ability to accumulate new capital. b. household saving has been increasing steadily over the last three decades. c. it is national saving, not household saving, that allows an economy to accumulate new capital. d. household saving represents a smaller share of national saving than does public saving.

it is national saving, not household saving, that allows an economy to accumulate new capital.

Government policies that increase the long-term economic growth rate by a small amount result in ______ in average living standards. Select one: a. large increases b. small increases c. small decreases d. no change

large increase

Empirical evidence indicates that higher real interest rates lead to ______ in savings. Select one: a. modest increases b. substantial increases c. no change in d. modest decreases

modest increases

Total taxes minus transfer payments minus government interest payments is called: Select one: a. a budget surplus. b. net taxes. c. a budget deficit. d. national saving.

net taxes

If government spending increases by $1 million while net taxes are unchanged, then: Select one: a. public saving increases. b. public saving decreases. c. public saving does not change. d. private saving increases.

public saving decreases.

Joe's Taco Hut can purchase a delivery truck for $20,000 and Joe estimates it will generate a net income (after taxes, maintenance and operating costs) of $4,000 per year. His other option is to go to work for someone else earning net income of $3,000 per year. He should: Select one: a. purchase the truck if the real interest rate is less than 15%. b. not purchase the truck if the real interest rate is greater than 1%. c. purchase the truck if the real interest rate is greater than 5%. d. purchase the truck if the real interest rate is less than 5%.

purchase the truck if the real interest rate is less than 5%.