econ set 2

national saving=

Private + public saving

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result, a. U.S. investment and GDP increase, but German GDP is unaffected. b. U.S. investment and German GDP increase, but U.S. GDP is unaffected. c. U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods. d. U.S. investment, U.S. GDP, and German GDP all increase.

a

Alexis and Tara both mine salt. Alexis mines 300 pounds in 20 hours. Tara mines 400 pounds in 40 hours. Which of the following is correct? a. Alexis's productivity is greater than Tara's. This difference could be explained by Alexis having more physical capital than Tara. b. Alexis'sproductivityisgreaterthanTara's.Thisdifferencecannotbeexplainedby a difference in the physical capital each has. c. Tara's productivity is greater than Alexis's. This difference could be explained by Tara having more physical capital than Alexis. d. Tara's productivity is greater than Alexis's. This difference cannot be explained by a difference in the physical capital each has.

a

Consider two people who are currently out of work. Tim is not looking for work because there have been many job cuts where he lives and he doesn't think it likely that he will find work. Bev is not currently looking for work, but she would like a job and she has looked for work in the past. The Bureau of Labor Statistics considers a. both Tim and Bev to be marginally attached workers. b. neither Tim nor Bev to be marginally attached workers. c. only Tim to be a marginally attached worker. d. only Bev to be a marginally attached worker

a

Daisy is the newly appointed CEO of a company that manufactures CD drives on an assembly line. Her staff has told her that the output the firm produces, given the number of workers employed, indicates that some workers may be shirking. According to efficiency wage theory, what should she do? a. pay all workers more than the equilibrium wage rate b. pay all workers below the equilibrium wage rate to make up for the loss from shirking c. make sure that workers are getting paid exactly the equilibrium wage rate d. pay bonuses to workers who report the shirking of other workers

a

GDP $8.7 trillion Consumption Spending $3.5 trillion Taxes Net of Transfers $2.7 trillion Government Purchases $3.0 trillion Assuming the market for loanable funds is in equilibrium, use the following numbers to determine the quantity of loanable funds supplied a. $2.2 trillion b. $2.5 trillion c. $3.9 trillion d. $5.2 trillion

a

In general, if a consumer good is produced domestically and consumed domestically, an increase in its price will have which of the following effects? a.The consumer price index will increase relatively more than will the GDP deflator. b. The consumer price index and the GDP deflator will increase by the same amount. c. The consumer price index will increase relatively less than will the GDP deflator. d. One cannot generalize about the increase in the consumer price index relative to the increase in the GDP deflator.

a

In the calculation of the CPI, coffee is given greater weight than tea if a. consumers buy more coffee than tea. b. the price of coffee is higher than the price of tea. c. it costs more to produce coffee than it costs to produce tea. d. coffee is more readily available than tea is to the typical consumer.

a

In the loanable funds model, an increase in an investment tax credit would create a a. shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate. b. shortage at the former equilibrium interest rate. This shortage would lead to a fall in the interest rate. c. surplus at the former equilibrium interest rate. This surplus would lead to a rise in the interest rate. d. surplus at the former equilibrium interest rate. This surplus would lead to a fall in the interest rate.

a

Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then a. both the unemployment rate and labor-force participation rate would be higher. b. the unemployment rate would be higher and the labor-force participation rate would be lower. c. the unemployment rate would be lower and the labor-force participation rate would be higher. d. both the unemployment rate and labor-force participation rate would be lower.

a

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy a. more milk and more T-shirts. b. more milk and fewer T-shirts. c. less milk and more T-shirts. d. less milk and fewer T-shirts.

a

What would happen in the market for loanable funds if the government were to increase the tax on interest income? a. Interest rates would rise. b. Interest rates would be unaffected. c. Interest rates would fall. d. The effect on the interest rate is uncertain

a

When the quality of a good improves while its price remains the same, the purchasing power of the dollar a. increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. b. increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. c. decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. d. decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

a

Which of the following does the level of real GDP measure? a. total real income b. productivity c. the standard of living d. All of the above are correct.

a

Which of the following lists contains, in this order, natural resources, human capital, and physical capital? a. For a restaurant: the land the restaurant was built on, the things the Chef learned at Cooking School, the freezers where the chops and steaks are kept. b. For a furniture company: wood, the company cafeteria, saws. c. For a railroad: fuel, railroad engines, railroad tracks. d. None of the above is correct.

a

Which of the following statements is correct? a. The level of real GDP is a good gauge of economic prosperity, and the growth of real GDP is a good gauge of economic progress. b. The level of real GDP is a good gauge of economic progress, and the growth of real GDP is a good gauge of economic prosperity. c. The level of real GDP is a good gauge of economic prosperity, and the level of real GDP per person is a good gauge of economic progress. d. The level of real GDP is a good gauge of economic progress, and the level of real GDP per person is a good gauge of economic prosperity.

a

Expenditures on a nations domestic production

are equal to its domestic production

30. In 2010, the imaginary nation of Bovina had a population of 5,000 and real GDP of 500,000. In 2011 it had a population of 5,100 and real GDP of 520,200. During 2011 real GDP per person in Bovina grew by a. 2 percent, which is high compared to average U.S. growth over the last one-hundred years. b. 2 percent, which is about the same as average U.S. growth over the last one-hundred years. c. 4 percent, which is high compared to average U.S. growth over the last one-hundred years. d. 4 percent, which is about the same as average U.S. growth over the last one-hundred years

b

8. An important difference between the GDP deflator and the consumer price index is that a. the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers b. the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects price of g&s bought by customers c. the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers. d. the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.

b

An important difference between the GDP deflator and the consumer price index is that a. the GDP deflator reflects the prices of goods and services bought by producers, whereas the consumer price index reflects the prices of goods and services bought by consumers. b. the GDP deflator reflects the prices of all final goods and services produced domestically, whereas the consumer price index reflects the prices of goods and services bought by consumers. c. the GDP deflator reflects the prices of all final goods and services produced by a nation's citizens, whereas the consumer price index reflects the prices of all final goods and services bought by consumers. d. the GDP deflator reflects the prices of all final goods and services bought by producers and consumers, whereas the consumer price index reflects the prices of all final goods and services bought by consumers.

b

By not taking into account the possibility of consumer substitution, the CPI a. understates the cost of living. b. overstates the cost of living. c. may overstate or understate the cost of living, depending on how quickly prices rise. d. may overstate or understate the cost of living, regardless of how quickly prices rise.

b

Constant returns to scale is the point on a production function where increasing inputs will no longer increase output. a. True b. False

b

Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods. a. Country A has higher productivity and higher real GDP per person than country B. b. Country A has lower productivity and lower real GDP per person than country B. c. Country A has higher productivity, but lower real GDP per person than country B. d. Country B has lower productivity, but higher real GDP per person than countryB.

b

From 2013 to 2014, the CPI for medical care increased from 150 to 159. What was the inflation rate for medical care? a. 5.7 percent b. 6.0 percent c. 9.0 percent d. 59.0 percent

b

If it could increase its growth rates slightly, a country with low income would catch up with rich countries in about ten years. a. True b. False

b

In the long run, an increase in the saving rate a. doesn't change the level of productivity or income. b. raises the levels of both productivity and income. c. raises the level of productivity but not the level of income. d. raises the level of income but not the level of productivity

b

Michelle bought word-processing software in 2009 for $75. Michelle's cousin, Barry, bought an upgrade of the same software in 2010 for $75. To which problem in the construction of the CPI is this situation most relevant? a. substitution bias b.unmeasured quality change c. introduction of new goods d. income bias

b

Other things equal, the likelihood that a country will experience a relatively-high level of income is greater if the country a. pursues inward-oriented policies. b. has natural seaports. c. minimizes the role of the courts in its economy. d. enacts policies to encourage consumption and discourage saving

b

Other things the same, if a country raises its saving rate, then in the long run a. both the level and growth rate of real GDP are unchanged. b. the level of real GDP is higher but the growth rate of real GDP is unchanged. c. both the level and growth rate of real GDP are higher. d. None of the above are correct.

b

Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed? a. 1.5 million b. 28.5 million c. 30 million d. 47.5 million

b

Suppose that because of the popularity of the low-carb diet, bakeries need fewer workers and steak houses need more workers. This is an example of a. frictional unemployment created by efficiency wages. b. frictional unemployment created by sectoral shifts. c. structural unemployment created by efficiency wages. the longer the duration of each spell of unemployment, and the higher the unemployment rate. d. structural unemployment created by sectoral shifts

b

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving? a. 1,500, 1,000, and 500, respectively b. 1,000, 500, and 1,500, respectively c. 500, 1,500, and 1,000, respectively d. None of the above is correct

b

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person? a. It more than doubled. b. It increased, but it less than doubled. c. It was unchanged. d. It decreased.

b

The consumer price index tries to gauge how much incomes must rise to maintain a. an increasing standard of living. b. a constant standard of living. c. a decreasing standard of living. d. the highest standard of living possible

b

Two countries with the same saving rates must have the same growth rate of real GDP per person. a. True b. False

b

Which of the following is correct? a. The GDP deflator is better than the CPI at reflecting the goods and services bought by consumers. b. The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers. c. The GDP deflator and the CPI are equally good at reflecting the goods and services bought by consumers. D. The GDP deflator is more commonly used as a gauge of inflation than the CPI is.

b

Which of the following is included in the investment component of GDP? a. spending on new residential construction and spending on stocks and bonds b.spending on new residential construction but not spending on stocks and bonds c. spending on stocks and bonds but not spending on new residential construction d. neither spending on stocks and bonds nor spending on new residential construction

b

Which of the following is not an explanation for the existence of structural unemployment? a. efficiency wages b. job search c. minimum-wage laws d. unions

b

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? a. Private and public saving are both positive. b. Private saving is positive; public saving is negative. c. Private saving is negative; public saving is positive. d. Both private saving and public saving are negative.

b

1. For an economy as a whole, income must equal expenditure because a. the number of firms is equal to the number of households in an economy. b. international law requires that income equal expenditure. c. every dollar of spending by some buyer is a dollar of income for some seller. d. every dollar of saving by some consumer is a dollar of spending by some other consumer.

c

Assume most athletic apparel bought by U.S. consumers is imported from other nations. If all else is constant, an increase in the price of foreign-made athletic apparel will cause the U.S. a. consumer price index and GDP deflator to increase by exactly the same amount. b. GDP deflator to increase more than the consumer price index. c. consumer price index to increase more than the GDP deflator. d. GDP deflator to decrease less than the consumer price index

c

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that a. the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year. b. the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year. d. neither the price of pretzels nor the price of cookies changes from year to year. c. neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.

c

Consumer goods that are produced, go into inventory, and are not sold during the current period are a. counted as intermediate goods and so are not included in current period GDP. b. counted in current period GDP only if the firm that produced them sells them to another firm. c. included in current period GDP as inventory investment. d. included in current period GDP as consumption

c

Economists would predict that, other things the same, the more generous unemployment compensation a country has, a. the shorter the duration of each spell of unemployment, and the higher the unemployment rate. b. the shorter the duration of each spell of unemployment, and the lower the unemployment rate. c. the longer the duration of each spell of unemployment, and the higher the unemployment rate. d. the longer the duration of each spell of unemployment, and the lower the unemployment rate.

c

From time to time, the demand for workers has risen in one region of the United States and fallen in another. This illustrates a. frictional unemployment created by efficiency wages. b. structural unemployment created by efficiency wages. c. frictional unemployment created by sectoral shifts. d. structural unemployment created by sectoral shifts.

c

Goods that go into inventory and are not sold during the current period are a. counted as intermediate goods and so are not included in current period GDP. b. counted in current period GDP only if the firm that produced them sells them to another firm. c. included in current period GDP as inventory investment. d. included in current period GDP as consumption.

c

If a reform of the tax laws encourages greater saving, the result would be a. higher interest rates and greater investment. b. higher interest rates and less investment. c. lower interest rates and greater investment. d. lower interest rate and less investment.

c

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is a. 80, and this indicates that the price level has decreased by 20 percent since the base year. b. 80, and this indicates that the price level has increased by 80 percent since the base year. c. 125, and this indicates that the price level has increased by 25 percent since the base year. d. 125, and this indicates that the price level has increased by 125 percent since the base year.

c

If nominal GDP is $12 trillion and real GDP is $10 trillion, then the GDP deflator is a. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year. b. 83.33, and this indicates that the price level has increased by 83.33 percent since the base year. c. 120, and this indicates that the price level has increased by 20 percent since the base year. d. 120, and this indicates that the price level has increased by 120 percent since the base year

c

If there are constant returns to scale, the production function can be written as a. xY = 2xAF(L, K, H, N). b. Y/L = A F(xL, xK, xH, xN). c. Y/L = A F( 1, K/L, H/L, N/L). d. L = AF(Y, K, H, N).

c

In countries that experience political instability, standards of living tend to be low because of a. violations of diminishing returns. b. excessive levels of caloric intake. c. lack of respect for property rights. d. attempts by government officials to thwart the catch-up effect.

c

John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants doesn't appear to be falling, there seems to be more people applying than jobs available. a. John and Curtis are both frictionally unemployed. b. John and Curtis are both structurally unemployed. c. John is frictionally unemployed, and Curtis is structurally unemployed. d. John is structurally unemployed, and Curtis is frictionally unemployed.

c

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that a. GDP is not a useful measure of society's welfare. b. GDP is still a useful measure of society's welfare because providing these other attributes is the responsibility of government. c. GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare. d. GDP is still the best measure of society's welfare because these other values cannot actually be measured.

c

Other things equal, relatively poor countries tend to grow a. slower than relatively rich countries; this is called the poverty trap. b. slower than relatively rich countries; this is called the fall-behind effect. c. faster than relatively rich countries; this is called the catch-up effect.

c

Other things equal, relatively poor countries tend to grow a. slower than relatively rich countries; this is called the poverty trap. b. slower than relatively rich countries; this is called the fall-behind effect. c. faster than relatively rich countries; this is called the catch-up effect. d. faster than relatively rich countries; this is called the constant-returns-to-scale effect

c

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor county to catch up? a. The poor country has outward-oriented trade policies. b. The poor country allows foreign direct investment. c. The poor country has poorly developed property rights. d. All of the above are correct.

c

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was a. 112.5 and the inflation rate was 12.5%. b. 112.5 and the inflation rate was 4.6%. c. 104.6 and the inflation rate was 4.6%. d. 104.6 and the inflation rate was 12.5%

c

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen? a. There would be no change in the interest rate or saving. b. The interest rate would decrease and saving would increase. c. The interest rate would increase and saving would decrease. d. None of the above is correct

c

Suppose a country has government expenditures of $3,500, taxes of $2,200, consumption of $9,000, exports of $2,500, imports of $2,700, transfer payments of $750, capital depreciation of $800, and investment of $3,000. GDP equals a. $24,450. b. $11,550. c. $15,300. d. $20,700.

c

Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds? a. The demand for loanable funds would shift left. b. The supply of loanable funds would shift left. c. The demand for loanable funds would shift right. d. The supply of loanable funds would shift right.

c

Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower between 2018 and 2019 than it was between 2017 and 2018. This means that a. the price index in 2019 was lower than 126.0. b. the price index in 2019 was lower than 147.0. c. the price index in 2019 was lower than 151.2. d. the inflation rate between 2018 and 2019 was lower than 1.2 percent

c

The labor force equals the a. number of people employed. b. number of people unemployed. c. number of people employed plus the number of people unemployed. d. adult population

c

The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows: a. Choose a base year, fix the basket, find the prices, compute the basket's cost, compute the index, and compute the inflation rate. b. Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index. c. Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate. d. Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

c

Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called a. the natural rate of unemployment. b. cyclical unemployment. c. structural unemployment. d. frictional unemployment

c

Which of the following statements is correct? a. The total income in the economy that remains after paying for consumption and government purchases is called private saving. b. The sum of private saving and national saving is called public saving. c. For a closed economy, the sum of private saving and public saving must equal investment. d. For a closed economy, the sum of consumption, national saving, and taxes must equal GDP.

c

Which of the following statements is not correct? a. The catch-up effect is based on the assumption of diminishing returns to capital. b. Investmentinpoorcountriesbycitizensofrichcountriesisonewaypoorcountriescanlearn new technologies. c. Malthus argued that charity and government aid was an effective way to reduce poverty. d. Peace and justice are keys to growth

c

n the long run, a higher saving rate a. cannot increase the capital stock. b. means that people must consume less in the future. c. increases the level of productivity. d. None of the above is correct.

c

Household spending on education is under what part of gdp

consumption

10. Suppose government expenditures on goods and services and net taxes both decrease, and expenditures fall by more than net taxes. The effects of these changes on the budget deficit cause a. both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall. b. both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise. c. the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall. d. the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.

d

Consider the following three items of spending by the government: (i) the federal government pays a $500 unemployment benefit to an unemployed person; (ii) the federal government makes a $2,000 salary payment to a Navy lieutenant; (iii) the city of Bozeman, Montana makes a $10,000 payment to ABC Lighting Company for street lights in Bozeman. Which of these payments contributes directly to government purchases in the national income accounts? a. only item (i) b. only item (ii) c. only items (i) and (ii) d. only items (ii) and (iii)

d

Cyclical unemployment a. has a different explanation than does the natural rate of unemployment. b. refers to the year-to-year fluctuation in unemployment around an economy's natural rate of unemployment. c. is closely associated with short-run ups and downs of economic activity. d. All of the above are correct.

d

Dilbert's Incorporated produced 5,000,000 units of accounting software in 2010. At the start of 2011 the pointy haired boss reduced total annual hours of employment from 10,000 to 8,000 and production was 4,800,000. These numbers indicate that productivity a. fell by 4%. b. fellby20%. c. rose by 12%. d. rose by 20%.

d

GDP does not reflect a. the value of leisure. b. the value of goods and services produced at home. c. the quality of the environment. d. All of the above are correct.

d

Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also has increased? a. The total number of hours worked rose. b. The total number of hours worked stayed the same. c. The total number of hours worked fell. d. Both b and c are correct.

d

Given that a country's real output has increased, in which of the following cases can we be sure that its productivity also has increased? a. The total number of hours worked rose. b. The total number of hours worked stayed the same. c. The total number of hours worked fell. d. Both b and c are correct.

d

If a U.S. citizen buys a television made in Korea by a Korean firm, then a. U.S. net exports decrease and U.S. GDP decreases. b. U.S. net exports are unaffected and U.S. GDP decreases. c. U.S. net exports are unaffected and U.S. GDP is unaffected. d. U.S. net exports decrease and U.S. GDP is unaffected.

d

If there is surplus of loanable funds, then a. the supply for loanable funds shifts right and the demand shifts left. b. the supply for loanable funds shifts left and the demand shifts right. c. neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. d. neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

d

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy? a. Private saving is equal to government expenditures. b. Public saving is equal to investment. c. After paying their taxes and paying for their consumption, households have nothing left. d. T he gover nment ' s t ax r evenue is e qual t o i t s expenditur es .

d

Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been chosen as the base year. In 2002, the basket's cost was $75.00; in 2004, the basket's cost was $79.50; and in 2006, the basket's cost was $85.86. The value of the CPI was a. 100 in 2002. b. 106 in 2004. c. 114.48 in 2006. d. All of the above are correct.

d

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate a. and investment both would increase. b. and investment both would decrease. c. would increase and investment would decrease. d. would decrease and investment would increase.

d

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. The increase in the rate of interest should a. not influence the decision to build the factory because The Eye of Horus doesn't have to borrow any money. b. not influence the decision to build the factory because its stockholders are expecting a new factory. c. make it more likely that The Eye of Horus will build the factory because a higher interest rate will make the factory more valuable. d. make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.

d

The consumption component of GDP includes spending on a. durable goods and nondurable goods, but not spending on services. b. durable goods and services, but not spending on nondurable goods. c. nondurable goods and services, but not spending on durable goods. d. durable goods, nondurable goods, and services.

d

The deviation of unemployment from its natural rate is called a. the unnatural rate of unemployment. b. structural unemployment. c. frictional unemployment. d. cyclical unemployment.

d

The inflation rate is the a. absolute change in real GDP from one period to another. b. percentage change in real GDP from one period to another. c. absolute change in the price level from one period to another. d. percentage change in the price level from one period to another.

d

Two of the economy's most important financial intermediaries are a. suppliers of funds and demanders of funds. b. banks and the bond market. c. the stock market and the bond market. d. banks and mutual funds.

d

Two of the economy's most important financial intermediaries are a. suppliers of funds and demanders of funds. b. banks and the bond market. c. the stock market and the bond market. d. banks and mutual funds

d

Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called a. the natural rate of unemployment. b. cyclical unemployment. c. structural unemployment. d. frictional unemployment.

d

Which of the following is correct? a. There is no debate about the effects of higher population growth on economic growth. b. Natural resources clearly place limits on growth; there is simply no way to reduce either the amount or type of natural resources needed to produce goods. c. How much an increase in capital increases a country's output is independent of that country's current level of capital. D.economists argue that outward rather than inward policies are likely to promote economic growth.

d

Which of the following items plays a role in determining productivity? a. physical capital b. natural resources c. technological knowledge d. All of the above are correct.

d

Which of the following statements about real and nominal interest rates is correct? a. When the nominal interest rate is rising, the real interest rate is necessarily rising; when the nominal interest rate is falling, the real interest rate is necessarily falling. b. If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is 7 percent. c. An increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate, an increase in the inflation rate, or both. d. When the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate.

d

if the price of Italian shoes imported into the United States increases, then a. both the GDP deflator and the consumer price index will increase. b. neither the GDP deflator nor the consumer price index will increase. c. the GDP deflator will increase, but the consumer price index will not increase. d. the consumer price index will increase, but the GDP deflator will not increase.

d

In the actual economy what do households do

divide income among many things

Budget deficit =

g-t

budget surplus =

t-g

public saving =

t-g

Investment=

y-c-g

Private saving=

y-t-c