Econ 2020 Exam 2

A surplus of labor is eliminated by ________ in the real wage rate and a shortage of labor is eliminated by ________ in the real wage rate.

a decrease; an increase

In the loanable funds market, an increase in ________.

expected profit increases the demand for loanable funds

A rise in the price level brings a ________ in the buying power of money that ________ consumption expenditures and causes the quantity of real GDP demanded to ________.

fall; decreases; decrease

A rise in the price level brings a ________ in the real wage rate that ________ profits which leads to ________ production.

fall; increases; increasing

If real GDP is less than potential GDP, then the money wage rate ________, aggregate supply ________ so that the price level ________.

falls; increases; falls

According to the new growth theory, which of the following promote economic growth? i) discoveries that bring profit ii) choices that expand human capital iii) random events that create technology change

i and ii

Which of the following are predicted by the classical growth theory? i) Population growth will end economic growth. ii) Real GDP per person will return to the subsistence level. iii) Technology drives persistent economic growth.

i and ii

Which of the following are required for economic growth? i) more goods and services produced per hour of work ii) an increase in the average hours of labor per person iii) an increase in prices

i and ii

If New Zealand is operating at potential GDP, which of the following is true? i) New Zealand only has frictional and structural unemployment. ii) There is no inflation in New Zealand. iii) New Zealand has positive net exports.

i only

If Turkey wants to promote faster economic growth, it will need to

promote incentive systems to encourage saving, research and development, increased trade and improved education.

Economic growth is a sustained expansion of production possibilities, as measured by the increase in ________ over time.

real GDP

The demand for labor curve shows the relationship between _________, and the supply of labor is the relationship between __________.

the quantity of labor businesses are willing to hire and the real wage rate; the real wage rate and the quantity of labor supplied

________ reflects a use of loanable funds, while ________ reflects a supply of loanable funds.

The government budget deficit; private saving

When the U.S. price level rises relative to other nations' price levels, then

U.S. exports decrease, U.S. imports increase, and there is a movement upward along the aggregate demand curve.

The demand for loanable funds curve illustrates_______, and the supply of loanable funds schedule shows that the________.

the quantity of loanable funds demanded at any given level of the real interest rate; higher the real interest rate, the greater the quantity of loanable funds supplied

According to the Keynesian macroeconomic model, which of the following was responsible for starting the Great Depression?

too little private spending

The supply of loanable funds increases ________.

when disposable income increases or wealth decreases

U.S. real GDP in 2007 was $13.25 trillion and U.S. real GDP in 2008 was $13.31 trillion. What was the economic growth rate of the United States during this period?

0.45 percent

Diminishing returns means that

each additional unit of labor produces successively less real GDP.

The production function is a relationship between the amount of labor employed and

the maximum quantity of real GDP that can be produced.

Households' labor supply decisions are influenced by all of the following except _______.

the number of full-time jobs available

The increase in real GDP per hour of labor that results from an increase in capital per hour of labor ________.

is larger at a small quantity of capital than at a large quantity of capital

When the real interest rate ________ the equilibrium real interest rate, there is a ________ of loanable funds and the real interest rate ________.

is less than; shortage; rises

In the new growth theory, the source of economic growth is ______.

the persistent want for a higher standard of living

If real GDP is $1,200 billion, the population is 60 million, and aggregate hours are 80 billion, labor productivity is

$15.00 an hour.

Suppose the exchange rate in the year 2010 was 4 yuan per dollar and in 2011 the exchange rate fell to 3 yuan per dollar. If the price of a Chinese sweater was 120 yuan in both years, the new dollar price in 2011 would be ________ and imports of Chinese sweaters would ________.

$40; decrease

The Zomano company started last year with $10 million of capital on hand and invested $15 million in new capital throughout the year. At the end of the year, the company's capital stock was $17 million. Hence, for the year, depreciation equaled ________ and net investment equaled ________.

$8 million; $7 million

On January 1, Derek had CD recording devices valued at $30,000. During the year, the value of Derek's devices depreciated by $20,000. He spent $30,000 on new devices. Derek's net investment was ________ and at the end of the year Derek had capital valued at ________.

$10,000; $40,000

If the population growth rate is 2 percent, real GDP per person will double in 7 years if real GDP grows by ______ percent per year.

12

If real GDP increases from $5 billion to $5.25 billion and the population increases from 2 million to 2.02 million, real GDP per person increases by ___ percent.

4.0

In this year, Country A has a real GDP per person that is 4 times greater than that of Country B. Country B's growth rate of real GDP per person is 3.5 percent per year. How many years will it take for Country B's real GDP per person to reach the same level that Country A had this year?

40 years

Approximately how long will it take Ethiopia to double its real GDP per person of $100 if its growth rate of real GDP per person is 0.9 percent?

77.7 years

Which of the following is true?

At full employment, aggregate supply is equal to potential GDP.

The Bubby Gum factory produces bubble gum. Joanne is one of the employees, and she produces 10 packs of bubble gum per hour. Joanne's money wage rate is $12 per hour. If a packet of bubble gum sells for $1.00, then

Joanne is creating a $2.00 per hour loss for the firm.

The classical growth theory is that real GDP per person ______.

only temporarily rises and then returns to the subsistence level

Suppose that an Intel worker rearranges existing machines and labor and increases the quantity of chips Intel can produce. Using the productivity curve graphed, this innovation would be described as

a shift of the curve upward.

Job rationing occurs when the real wage is ________ the equilibrium level and there is a ________ of labor, and it ________.

above; surplus; increases the natural unemployment rate

All of the following increase labor productivity except _________.

an increase in consumption

An efficiency wage results in all of the following except _________.

an increase in the full-employment quantity of labor

An economy can achieve faster economic growth without ______.

an increase in the population growth rate

If there is a rise in the price level, there is ________ in the quantity of real GDP supplied and a movement ________ along the AS curve.

an increase; upward

When the macroeconomic equilibrium is such that real GDP exceeds potential real GDP, the economy is suffering from ________, and the government policy to eliminate this gap will ________ real GDP and to ________ the price level.

an inflationary gap; decrease; decrease

If the economy is above full employment, there is ________ gap and as the economy adjusts toward full employment the price level ________.

an inflationary; rises

If Country A's real GDP is growing at 6 percent per year and Country B's real GDP is growing at 6 percent per year, then the standard of living is

changing at the same rate in Country A and Country B only if the rate of population growth is the same in both countries.

If the government raises income taxes, then the equilibrium amount of employment ________ and potential GDP ________.

decreases; decreases

An increase in the real wage rate ________ the quantity of labor demanded and ________ the quantity of labor supplied.

decreases; increases

The amount of real GDP produced at any one time depends on i) a fixed amount of capital. ii) a fixed level of technology. iii) decisions people make about leisure versus working.

i, ii and iii

The full-employment quantity of labor _______.

increases if labor becomes more productive

The natural unemployment rate _______.

increases if unemployment benefits become more generous

The demand for loanable funds_________, and the supply of loanable funds_________.

increases in an expansion and decreases in a recession; increases when people's expected future incomes fall

An increase in the government budget deficit _______.

increases private saving and decreases investment

A government budget surplus _______.

increases the supply of loanable funds

An increase government budget surplus _______, and an increase in the government budget deficit _______.

increases the supply of loanable funds; increases private saving and decreases investment

When wealth ________, saving supply ________, and the supply of loanable funds curve shifts ________.

increases; decreases; leftward

An increase in expected profit _______ the real interest rate and ________ the quantity of loanable funds.

increases; increases

Aggregate demand ________ and shifts the AD curve ________ when ________.

increases; rightward; government expenditure increases

The global economy enters an economic expansion, and real GDP in the rest of the world increases. As a result, in the United States, _________; if the aggregate supply curve does not shift, then aggregate demand will ________, real GDP will ________, and the price level will ________.

level of exports will increase; increase; increase; increase

Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of an investment. As a result, the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________.

might rise, fall, or remain unchanged; increases

Financial capital is the ___________.

money used to buy physical capital

The increase in real GDP per hour of labor that results from an advance in technology makes labor _______ productive ________.

more; at all quantities of capital

A change in any component of aggregate demand creates a larger change in overall aggregate demand. This is the ________ effect, and it means, for example, that a ________ in consumption will cause an even larger ________ in AD.

multiplier; decrease; decrease

The money wage rate is constant when moving along

only the aggregate supply curve.

Suppose Germany's economy is experiencing full employment. This means that, in Germany,

real GDP is equal to potential GDP.

The productivity curve is a relationship between ________ and ________.

real GDP per hour of labor; capital per hour of labor

Real GDP in the country of Oz is growing at 5 percent and its population is growing at 2 percent. In the country of Lilliput, real GDP is growing at 4 percent and its population is growing at 0.5 percent. Thus,

real GDP per person in Lilliput is growing at a faster rate than in Oz.

Moving along the AS curve, when the price level increases, the

real wage rate falls, and there is an increase in the quantity of real GDP supplied.

The real wage rate definitely falls if the money wage rate ________ and the price level ________.

remains constant; rises

An increase in ________ increases potential GDP and ________ aggregate supply.

technology; increases

Macroeconomic equilibrium occurs when

the aggregate quantity demanded is equal to the aggregate quantity supplied.

Crowding out occurs when ______.

the government budget is in deficit and the real interest rate rises