ECON Final
The marginal propensity to consume is 0.8, the marginal tax rate is 0.25, and the marginal propensity to import is 0.2. The autonomous tax multiplier is _______.
-1.33
On January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000. During 2014, Sophie's bought 3 new beds at a total cost of $10,000. At the end of the year, the market value of all of Sophie's beds was $27,000. Calculate Sophie's gross investment and depreciation during 2014. Sophie's gross investment during 2014 was $_______ Sophie's depreciation during 2014 was $________
10,000 3,000
The table provides some data on real GDP and the population of Pacifica in 2008 and 2009. Year, Real GDP (billions $), Population (billions) 2008; 140,000; 350 2009; 157,504; 368 What is the growth rate of real GDP in Pacifica in 2009? What is the growth rate of real GDP per person in Pacifica in 2009?
13% 7.4%
Click on the icon to study Economics in the News. Then answer the following questions. Jobs Growth in Recovery US Adds 209,000 Jobs as Hiring Slows... To keep pace with a growing population, approximately _______ jobs must be created each month. We would expect an increase in the growth rate of real GDP to _______ jobs and _______ unemployment.
200,000 increase; decrease
In an economy without taxes and imports, an increase in investment of $50 billion increases equilibrium expenditure by $250 billion. What are the values of the multiplier and the slope of the AE curve? The multiplier is ____ and the slope of the AE curve is ____
5.0 0.8
Which of the following correctly describes how price adjustments eliminate a shortage?
As the price rises, the quantity demanded decreases while the quantity supplied increases.
Consider the following statements and decide which is\are true I. Global saving glut is an increased saving in lower-income countries such as China and other developing countries II. As a result of global saving glut U.S.A became a net lender to many lower countries III. Global saving glut lead to a fall in global long-term interest rate IV. As a result of global saving glut China and other developing countries became net borrowers Which of the above sentences are true
I and III are true
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.
I and IV are changes in supply and II and III are changes in the quantity supplied.
In 2014, flow D was $2 trillion, flow E was negative $ 1 trillion, flow A was $10 trillion, and flow C was $4 trillion. Calculate consumption expenditure.
In 2014, consumption expenditure is $5 trillion.
The BLS reported that in July 2012, employment decreased by 195,000 to 142,220,000 and the unemployment rate increased from 8.2 percent to 8.3 percent. About 3.4 million people were marginally attached workers and 0.9 million of them were discouraged. Calculate the change in unemployment in July 2012. With 3.4 million marginally attached workers and 0.9 million of them discouraged workers, what are the characteristics of the other 2.5 million marginally attached workers? The other 2.5 million marginally attached workers _______.
In July 2012, the number of unemployed changed by 151,528. have stopped looking for work for reasons other than their inability to find a job
Starting from a monetary equilibrium condition, an increase in money supply
Increases the bond price and decreases the interest rate
Choose the statements concerning neoclassical growth theory that are true. 1. Neoclassical growth theory states that growth in real GDP per person can persist indefinitely. nothing 2. Technological change results from the choices people make in the pursuit of profit. nothing 3. Economic growth will stop if technology stops advancing. nothing 4. The rate of technological change influences the economic growth rate but economic growth does not influence the pace of technological change.
Statements 3 and 4 are correct.
Choose the statement that is incorrect. A. The Lucas wedge accumulated to $400,000 per person by 2013. B. The Lucas wedge arises from the slowdown of productivity growth that began during the 1970s. C. The Lucas wedge equals real GDP minus potential GDP. Your answer is correct.D. The Lucas wedge is the dollar value of the accumulated gap between what real GDP per person would have been if the 1960s growth rate had persisted and what real GDP per person turned out to be.
The Lucas wedge equals real GDP minus potential GDP.
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand? A. At an average price of $80 per text book, I plan to buy 5 text books per semester. B. I can't afford as many textbooks because my rent has increased. C. The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many. Your answer is correct.D. For me, a good course website is a substitute for a textbook.
The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many.
Which of the following will hold true if the market for cameras is in equilibrium at a price of $40?
The quantity of cameras produced will equal the quantity of cameras bought in the market.
Choose the statement that is incorrect. A. The employment-to-population ratio fluctuates less than the labor force participation rate. B. The labor force participation rate and the employment-to-population ratio fluctuate with the business cycle. .C. The trend in the labor force participation rate and the employment-to-population ratio is upward before 2000 and downward after 2000. D. The employment-to-population ratio falls during a recession and increases during an expansion.
The employment-to-population ratio fluctuates less than the labor force participation rate.
According to the quantity theory of money, in the long run an increase in the quantity of money of 5 percent, brings _____ in the price level.
a 5 percent increase
Suppose people buy more of good 1 when the price of good 2 falls. These goods are
complements.
In January of 2012 comma the exchange rate falls from 84 yen per U.S. dollar to 71 yen per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to sell in the foreign exchange market? The quantity of U.S. dollars that people plan to sell in the foreign exchange market _______.
decreases and a movement down along the supply curve of U.S. dollars occurs
The Ricardo-Barro effect __________ crowding out
eliminates
An increase in labor productivity increases potential GDP because ______.
employment increases and a given amount of employment produces more real GDP
The natural unemployment rate ______.
fluctuates because the frictions and the amount of structural change fluctuate
The basic economic problem of scarcity
has always existed and will continue to exist.
An increase in U.S. demand for imports ______ the supply of U.S. dollars. A fall in the U.S. interest rate differential ______ the supply of U.S. dollars. A fall in the expected future exchange rate ______ the supply of U.S. dollars. Upper A decrease in the world demand for U.S. exports ______ the supply of U.S. dollars.
increase; increases increases; does not change
In the short run, the quantity of real money and real GDP are given and the ______ adjusts to achieve equilibrium. In the long run, supply and demand in the loanable funds market determines the ______. In the long run, ___________ adjusts to make the quantity of real money supplied equal the quantity demanded.
interest rate; real interest rate the price level
The cost incurred from the production of an additional unit of a product
is a marginal cost to the firm.
Money serves as a ______.
medium of exchange, which means that it is generally accepted in exchange for goods and services
When the market for a commodity is in equilibrium:
no economic agent will want to change their behavior.
The key idea of classical growth theory that leads to the dismal outcome is that ______.
no matter how much technological change occurs, real GDP per person is always pushed back toward the subsistence level
Depository institutions balance risk and return by _______.
placing some funds into safe low interest-earning assets and other funds into high-interest risky assets
The output gap is real GDP minus _____ expressed as a percentage of _____.
potential GDP; potential GDP
Between 1914 and 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this period, ______ grew at a faster rate than ______.
real GDP; the population
If the price of a candy bar is $1 and the price of a fast food meal is $5, then the
relative price of a fast food meal is 5 candy bars.
A means of payment is a method of _____ a debt.
settling
One of the Fed's main policy tools is ______.
the last resort loan, which means that if a bank is short of reserves, it can borrow from the Fed
When cyclical unemployment increases and other things remain the same, ______.
the natural unemployment rate does not change
An open market operation is ______.
the purchase or sale of securities by the Federal Reserve System in the loanable funds market
The supply of loanable funds is the relationship between _____ supplied and the _____ when all other influences on lending plans remain the same.
the quantity of loanable funds; real interest rate
The United Nations' Human Development Index (HDI) is based on real GDP per person, life expectancy at birth, and indicators of the quality and quantity of education. 1)The HDI might be better than real GDP as a measure of economic welfare because the HDI ______. The HDI includes measurements of ______, which are not measured in real GDP. 2) If the HDI is expanded to include items such as pollution, resource depletion, and political freedom ______. 3) Other influences on economic welfare that could be included in a comprehensive measure include all of the following except ______.
1) includes real GDP, but also includes other factors that influence our standard of living; health, life expectancy, and education 2) it would be difficult to measure 3) the beauty of local scenery
The table gives information about the U.S. labor market in 2013. What is the number of people employed? Labor Force - 155.4 Million Not in Labor Force - 90.3 Million Unemployed - 11.5 Million
143.9
You plan to go to school this summer. If you do, you won't be able to take your usual summer job that pays $12,000 for the summer. The cost of tuition is $3,000 and textbooks cost $200. You live with your family, which covers your living expenses of $1,900. What is your opportunity cost of going to school this summer?
15,200
During a year, a firm's depreciation is $1,000 and gross investment is $5,000. The firm's net investment is ______.
4,000
Ivan runs a custom jewelry shop in Sparkle City. He is debating whether he should extend his hours of operation. Ivan figures that his sales revenue will depend on the number of hours the jewelry shop is open as shown in the table to the right. He would have to hire a worker for those hours at a wage rate of $25 per hour. hr total revenue $ 1 $275 2 $375 3 $450 4 $500 5 $530 6 $550 Using marginal analysis, determine how many hours should Ivan extend his hours of operations?
5 hours
The table gives information reported by the Bureau of Labor Statistics for March, 2014. Labor Force - 156 Million Employment - 146 Million Working-age-population - 247 Million What is the unemployment rate?
6.4
Read the news clip, then answer the following question. Hardworking Americans Should Not Be Living in Poverty The federal minimum wage has remained frozen for the past three years at $7.25 an hour, while the prices of gas and milk have risen steadily. Over this three-year period, the real value of the minimum wage has fallen to $6.77 per hour. Source: CNN, July 25, 2012 The CPI increased by ______ percent over these three years.
6.6
On January 1, 2014, Sophie's Sunlounge owned 4 tanning beds valued at $20,000. During 2014, Sophie's bought 3 new beds at a total cost of $14,000, and at the end of the year the market value of all of Sophie's beds was $27,000. What was Sophie's net investment?
7,000
Choose the statement that is incorrect. A. In normal times comma a bank keeps about a half of one percent of deposits as reserves. B. A benefit of a money market mutual fund is that shareholders can write checks on their accounts with no restrictions. C. Liquid assets are overnight loans to other banks comma U.S. government Treasury bills comma and commercial bills. D. Securities are U.S. government bonds and other bonds such as mortgage dash backed securities.
A benefit of a money market mutual fund is that shareholders can write checks on their accounts with no restrictions.
Consider the figure showing supply curves for soft drinks. Suppose the economy is at point
A movement to point d would be the result of
________ behavioral assumption about humans was that people usually act in a rational, selfminusinterested way.
Adam Smith's
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market? A. If peanuts were less expensive, I'd buy them more often. B. At a price of $1 per pack, I plan to buy 2 packs of peanuts per week. Your answer is correct.C. I eat peanuts to complement cola. D. I'll stop eating peanuts when I can afford to buy walnuts.
At a price of $1 per pack, I plan to buy 2 packs of peanuts per week.
Read the news clip, then answer the following question. U.S. Workers World's Most Productive Americans work longer hours than those in most other rich nations. Americans also produce more per person during the year, but only part of the U.S. productivity growth can be explained by the longer hours Americans work. Americans also create more wealth per hour of work. U.S. employees worked an average of 1,804 hours in 2006, compared to 1,564.4 for the French, but far less than the 2,200 hours that Asians worked. But the Asian countries the average labor productivity is lower. Using the news clip's definition of productivity, choose the statement that is incorrect. A. Changing the number of hours employed changes the growth of productivity. B. Productivity is a level. Your answer is not correct.C. Changing the number of hours employed changes the level of productivity. D. Productivity increases if real GDP increases or the number of people employed decreases.
Changing the number of hours employed changes the growth of productivity.
Choose the statement that is incorrect. A. Classical growth theory is sometimes called Malthusian theory. B. Classical growth theory is the view that the growth of real GDP per person is temporary and that when it rises above the subsistence level, a population explosion eventually brings it back to the subsistence level. C. Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely. Your answer is correct.D. Modern-day Malthusians point to global warming and climate change as reasons to believe that eventually real GDP per person will decrease.
Classical growth theory tells us that technological change induces a level of saving and investment that makes capital per hour of labor grow indefinitely.
Markets A. facilitate trade. B. allow traders to enjoy gains from trade. C. coordinate price information between buyers and sellers. D. All of the above answers are correct.
D. All of the above answers are correct.
Which of the following is an example of a final good or service? A. Dan bought a Toyota Camry. Your answer is correct.B. Dell buys Intel chips. C. PCL construction company buys Lafarge cement. D. GM buys Firestone tires.
Dan bought a Toyota Camry.
If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps, then the difference of $300 is the marginal cost of producing the 5th lamp.
False
Read the news clip, then answer the following question. Treasury Yields Fall to Two-Week Low Treasury bond prices rose on Monday, pushing interest rates down. The interest rate on 10-year bonds fell 4 basis points to 1.65%. Source: The Wall Street Journal, August 27, 2012 Choose the statement that is incorrect. A. If the demand for Treasury bonds increases, the interest rate on the Treasury bond rises. This is the correct answer.B. The interest rate is a percentage of the price of the Treasury bond. C. If the price of a Treasury bond rises, other things remaining the same, the interest rate falls because the interest payment is a smaller percentage of the Treasury bond price. D. The price of a Treasury bond and the interest rate on a Treasury bond are determined simultaneously.
If the demand for Treasury bonds increases, the interest rate on the Treasury bond rises.
The table shows the amounts held as the various components of M1 and M2. (in billions) Saving deposits - 375 Checking deposits - 100 Time deposits - 270 Money market mutual funds & other deposits - 240 Currency & traveler's checks What are the values of M1 and M2?
M1 - 190 M2 - 1,075
USe the data reported by the Current Population Survey in July 2014 to answer the following question. The Current Population Survey reported the following situations in July 2014t: -Sarah works 10 hours a week at McDonald's. She is available to work more hours but hasn't looked for extra work. -Kevin spent the first six months of 2014 actively searching for a job but he didn't get hired. He believes there are no jobs, so he has given up looking. -Pat quit the job he had for the past two years and is actively looking for a better paying job. He is available to work and is still searching for a job. -Mary is a new graduate who was hired while she was a student to start a job in August. bullet Johnnie quit his band in June, has no job in July, and is not looking for work. Who does the BLS classify as being unemployed, a part-time worker, an employed person, a discouraged worker, and not in the labor force? Explain your classification. ______ are unemployed, ______ is a part-time worker, _____ is a discouraged worker, and _____ is not in the labor force. How will the labor force change if the following events occur? 1. Sarah starts a second job 2. Pat finds a good job and is hired. 3. Mary takes a job at McDonald's while she waits to start her new job.
Pat and Mary; Sarah; Kevin; Johnie Events 1, 2, and 3 will not change the labor force.
In developing countries with less developed capital markets, which of the following monetary policy rule works the best
Ruired reserve ratios
Which of the following is an example of an intermediate good or service? A. Mike bought Puma shoes. B. United buys Boeing aircrafts. C. Sarah bought a Sony HDTV. D. Samsung buys compressors for manufacturing refrigerators.
Samsung buys compressors for manufacturing refrigerators.
Choose the statement that is incorrect. A. The introduction of new goods introduces an upward bias into the CPI and its inflation rate. B. The commodity substitution bias injects an upward bias into the CPI. C. The outlet substitution bias injects an upward bias into the CPI. D. The CPI calculation assumes that everyone shops at discount stores and no one shops at convenience stores.
The CPI calculation assumes that everyone shops at discount stores and no one shops at convenience stores.
How can the change in U.S. wealth differ from U.S. saving?
The change in wealth includes changes in the prices of assets owned and saving excludes these items.
Every week, Sally plays guitar for two hours, and her grade on each psych test is 75 percent. Last week, after playing guitar for two hours, Sally considered playing for another hour. She decided to play for another hour and cut her study time by one hour. But last week, her psych grade fell to 70 percent. Given that Sally spent a third hour playing guitar, what can you conclude about the marginal benefit and marginal cost of the second hour of playing guitar?
The marginal benefit of the second hour of playing guitar exceeded its marginal cost.
Choose the statement that is incorrect. A. The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money. .B. The real interest rate is the opportunity cost of loanable funds. C. The nominal interest rate is the number of dollars that a borrower pays and a lender receives in interest in a year expressed as a percentage of the number of dollars borrowed and lent. D. The real interest rate is approximately equal to the nominal interest rate minus the inflation rate.
The nominal interest rate is the real interest rate adjusted to remove the effects of inflation on the buying power of money.
Mitsubishi Heavy Industries makes the wings of the new Boeing 787 Dreamliner in Japan. Toyota assembles cars for the U.S. market in Kentucky. Choose the correct statement. A. The wings appear as a positive entry in calculating U.S. GDP. B. The wings appear as investment in U.S. GDP. C. The wings appear as imports in U.S. GDP. Your answer is correct.D. The wings appear as exports in U.S. GDP. Choose the statement that is incorrect. A. If any parts for the cars come from Japan, they are U.S. imports. B. Expenditure made by Toyota on building the assembly plant in Kentucky is recorded as investment. C. Household expenditure on the cars is part of consumption expenditure in calculating U.S. GDP. D. If any parts for the cars come from Japan, they are recorded as a positive entry in calculating U.S. GDP.
The wings appear as imports in U.S. GDP. If any parts for the cars come from Japan, they are recorded as a positive entry in calculating U.S. GDP.
Which of the following best describes an assumption economists make about human behavior? A. They assume that individuals act randomly. B. They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. Your answer is correct.C. They assume that people take into account the question of fairness in all decisions they make. D. They assume that individuals act rationally all the time in all circumstances.
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
Which of the following statements is false? A. Trademinusoffs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale. Your answer is correct.B. Economics is a social science that studies the trademinusoffs we are forced to make because of scarcity. C. Anytime you have to decide which action to take you are facing an economic trademinusoff. D. Every individual, no matter how rich or poor, is faced with making trademinusoffs.
Trademinusoffs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale.
Orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this effect?
a decrease in the price of orange juice processing
Classify each of the following items as a final good or service or an intermediate good or service and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. The purchase of a new security system for Congress Item 2. Jet engines bought by Boeing Item 3. Upper A new bridge across the creek in the Augusta National Golf Club Item 4. Banking services bought by a student Item 1 is ______ and item 2 is ______. Item 3 is ______ and item 4 is ______.
a final good which is government expenditure; an intermediate good a final good that is investment; a final good that is consumption expenditure
To make total income equal to GDP we ______ indirect taxes less subsidies and ______ depreciation.
add; add
An economy is at full employment when ______.
all unemployment is frictional and structural
Which of the following shifts the demand curve for hot dogs leftward?
an increase in the price of a hot dog bun
If the marginal cost of producing a television is constant at $200, then a firm should produce this item
as long as the marginal benefit it receives is just equal to or greater than $200.
The law of demand implies that, other things remaining the same,
as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.
Ted quits his $60,000 -a- year job to be a stay-at-home dad. What is the opportunity cost of his decision?
at least $60,000
A problem with using a commodity as money is ______.
a commodity's value changes over time
The total amount spent _____ is called gross investment.
both buying new capital and replacing depreciated capital
A person has a comparative advantage in an activity whenever he or she
can perform the activity at a lower opportunity cost than can anyone else.
The expenditure approach to measuring GDP sums together ______, and the largest component is ______.
consumption expenditure, investment, government expenditure on goods and services, and net exports; consumption expenditure
To increase the quantity of money, the Fed might do any of the following except_______.
decrease the money multiplier
An increase in current income taxes ______ the supply of loanable funds today because it ______. An increase in expected future income ______.
decreases; decreases disposable income, which decreases saving decreases the supply of loanable funds today because households with larger expected future income will save less today
Potential GDP is ______.
determined by the full-employment quantity of labor
Jane produces only corn and cloth. Taking account of her preferences for corn and cloth
does not affect her production possibilities frontier.
A system of property rights
encourages economic growth by creating incentives to invest in capital and to be innovative.
Households make saving decisions by considering all of the following factors except _______.
expected profit
Gross domestic product can be measured in two ways: By the total ______ or the total ______. Aggregate income earned is equal to the total amount paid for ______ to produce final goods and services. Aggregate expenditure is equal to ______. And because firms pay out as incomes everything they receive from the sale of their output, aggregate income equals aggregate expenditure.
expenditure on goods and services; income earned producing goods and services the factors of production used; C + I + G + (X-M) True
Allocative efficiency is achieved when
firms produce the goods and services that consumers value most.
An open market operation is the purchase or sale of _____ - _____ - by the _____ in the open market.
government securities; U.S. Treasury bills and bonds; New York Fed
When the unemployment rate is less than the natural unemployment rate, real GDP is ______ than potential GDP and the output gap is ______.
greater; positive
Read the news clip, then answer the following questions. Nation's Economic Pain Deepens A spike in the unemployment ratelong dashthe biggest in more than two decadeslong dashraised new concerns that the economy is heading into a recession. The U.S. unemployment rate soared to 5.5% in May from 5% in Aprillong dashmuch higher than forecasted. The surge marked the biggest one-month jump in unemployment since February 1986, and the 5.5% rate is the highest seen since October 2004. The unemployment rate in May 2008 is ______ the estimated natural unemployment rate. This implies that real GDP is ______ potential GDP at this time.
greater than; less than
The fundamental source of labor productivity growth is ______.
human capital
In October 2009, the U.S. unemployment rate was 10.0 percent. In October 2011, the unemployment rate was 8.9 percent. Assuming that unemployment remained constant between October 2009 and October 2011, then the labor force ______.
increased
An economy produces at point a on the PPF shown in the figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat ________.
increases
Read the news clip, then answer the following question. Toyota and Honda Shift Production to North America Toyota plans to stop exporting the Lexus RX to North America from Japan, building all of the vehicles in North America. The company will invest $98.3 million to boost its production capacity. Honda Motor Co. will shift a major chunk of its manufacturing to North America and increase its production capacity by as much as 40 percent Source: The Wall Street Journal, August 8, 2012 Assuming that U.S. consumers buy the same number of Lexus RX models and Hondas regardless of where they are built, U.S. GDP ______ when Toyota builds the Lexus RX in the United States and Honda increases production in the United States because ______.
increases; net exports and investment increase
When the Federal Reserve Bank increases the federal funds rate, other
interest rates rise, and consumption, firms' private investment and net exports decrease.
In the figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources
marginal benefit of a computer exceeds the marginal cost of a computer, so more computers
Real GDP ______ indicator of the standard of living because ______.
might be an unreliable; the standard of living depends on many factors, some of which are not part of real GDP
The money multiplier is the ratio of the change in the quantity of ______ to the change in the quantity of ______.
money; monetary base
The demand for money is the relationship between the quantity of real money demanded and the ______________ when all other influences on the amount of money that people wish to hold remain the same. When the nominal interest rate rises, the opportunity cost of holding money ______ and the quantity of real money demanded ______.
nominal interest rate rises; decreases
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
To increase the money supply, the Fed may conduct
open market purchases or decrease the discount rate.
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity
periodic; irregular; production
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good.
produced in place of; produced together with
When economic growth occurs, the
production possibilities frontier shifts outward
An open market operation is the ______. The Fed is the lender of last resort, which means _______.
purchase or sale of government securities by the Federal Reserve System in the loanable funds market if depository institutions are short of reserves, they can borrow from the Fed
Classical growth theory is the view that the growth of _____ is temporary and that when it rises above the subsistence level, a population explosion _____.
real GDP per person; eventually brings it back to the subsistence level
As output moves from point a to point b to point c along the PPF in the figure, the opportunity cost of one more unit of good X
rises. The opportunity cost of one more unit of good Y falls.
An increase in the population ______.
shifts the supply of labor curve rightward and creates a movement along the production function
A government budget surplus occurs, which increases the _____________ loanable funds The real interest rate ______, household saving ______,
supply of falls; decreases and investment increases
Read the news clip, then answer the following questions. GDP Expands 11.4 percent, Fastest in 13 Years China's gross domestic product grew 11.4 percent last year and marked a fifth year of double-digit growth. The increase was especially remarkable given that the United States is experiencing a slowdown due to the sub-prime crisis and housing slump. Citigroup estimates that each 1 percent drop in the U.S. economy will shave 1.3 percent off China's growth, because Americans are heavy users of Chinese products. In spite of the uncertainties, China is expected to post its sixth year of double-digit growth next year. Source: The China Daily, January 24, 2008 According to the expenditure approach for calculating China's GDP, "each one percent drop in the U.S. economy will shave 1.3 percent off China's growth" because as the U.S. economy shrinks, ______. China's ______ and China's real GDP decreases.
the United States imports less from China; exports decrease
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
Economic growth is _______. Growth rates are calculated in a similar manner for all variables. Real GDP growth rate = [(Real GDP in ______ yearminusReal GDP in ______ year) divided by Real GDP in ______ year ] times 100.
the expansion of production possibilities current; previous; previous
Nominal GDP is ______. Real GDP is ______.
the value of the final goods and services produced in a given year valued at the prices of that year; the value of final goods and services produced in a given year when valued at the prices of a reference base year
Physical capital is ______. Financial capital is ______. Examples of physical capital are ______. Examples of financial capital are ______.
the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services; ovens used by Pizza Hut and lawn mowers used by Larry's Mowing; bonds issued by Wal-Mart and stocks issued by Boeing
Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the marginal benefit of additional freeways ________ and the marginal cost of additional freeways ________.
decreases; increases
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; a base; final; that same