Econ Unit 3

You are working at the campus bookstore, earning $9.00 per hour. Your manager tells you that in the upcoming year, you will get a 2% raise. a. What is the approximate change in your real wage if inflation is 1%?

.09

Use the Fed rule‑of‑thumb to predict the Fed's target for the federal funds rate for each of the following scenarios if its estimate of the neutral real interest rate is 2%. a. A recession hits the economy, causing output to fall to 0.75% below potential output and inflation to fall to 1%.

.75

Make a prediction about what you think the output gap will be in the second quarter of 2019. Explain your reasoning. Predicted output gap:

.8

What is the approximate change in your real wage if inflation is 2%?

0

In which year or years did Turkey experience a recession?

2001 and 2009

Your small business has a cash reserve of $200,000, earning 2% annual interest. How much will your cash reserve be worth in 3 years?

212241.60

What is the present value of the stream of revenue due to the upgrades? Round to the nearest dollar.

3077

An increase in consumer and business confidence pushes output to 2% above potential output, while inflation rises to 3.5%.

4.75

How much will the federal government spend on science and international affairs if the federal government's total spending is $4.3 trillion.

86

Which of the following are reasons why the fed targets inflation greater than 0%

helps avoid the risk of deflation; enables the labor market to function more smoothly; enables the fed to more effectively fight recessions

In an effort to encourage people to purchase electric cars, the federal government passes a tax credit of $2,500 for each new electric car that is bought in the United States. a. This policy will primarily benefit those who

pay more than $2,500 in taxes each year.

Leading indicators are variables that tend to the path of the economy.

predict

If the output gap in an economy is 2.8% and the potential GDP is $13 trillion, what is the actual GDP?

$13.36 trillion

If the output gap in an economy is -4% and potential GDP is $15 trillion, what is the actual GDP?

$14.4 trillion

If U.S. consumption spending is $14.2 trillion, investment spending is $8.3 trillion, government spending is $4 trillion, and net exports are -$1 trillion, what is the U.S. GDP?

$25.5 trillion

Which of the letters in the graph corresponds to the long-run aggregate supply curve?

A

The AD-AS model does NOT describe which of the following scenarios?

A price increase in sunscreen due to increased demand during the summer

The AD-AS model would be used to interpret which of the following scenarios?

A spending change leading to a shift in employment resulting in lower demand in the economy and a lower GDP

The US dollar depreciates relative to the Chinese yuan

AS line back

congress passes a bill that increases federal minimum wage...

AS line back

the implementation of artificial intelligence...

AS line forward

What would cause a change in the marginal cost and benefit of making a loan?

An increase in the federal funds rate

You have collected data from nonfarm payrolls over the last seven months and data from initial unemployment claims over the past two months. Which of these would make it easier to compare the data you have obtained?

Annualized rate

Which of the letters in the graph corresponds to the aggregate supply curve in the short run?

D

Which of these BEST explains how the quote "every unhappy family is unhappy in its own way," from the novel Anna Karenina, applies to economics?

Each recession is different.

The microeconomic forces of demand and supply are similar to the macroeconomic forces of AD and AS because occurs where the curves cross.

Equilibrium

Which of these correctly describes business cycles?

Every business cycle is unique, but all business cycles share some common features.

Which of the following are advantages that the argument may overlook with regard to expansionary fiscal and monetary policies.

Expansionary policies reduce the adjustment time needed to return the economy to potential output. Expansionary policies will help increase employment in the short term and reduce the hardships of those who have lost jobs due to the recession.

_____ tend to be _____ as the economy recovers and grows.

Expansions; gradual

Which of the following changes would NOT result in a shift of the aggregate demand curve due to the Federal Reserve's response? I. A rise in corporate taxes II. A rise in inflation III. An increase in oil prices due to an embargo

II only

Why might an economist argue that the Fed is keeping inflation too low?

If the Fed is keeping inflation too low, this may indicate that it is not being aggressive enough at boosting output and employment

You are collecting data on GDP, GDI, nonfarm payrolls, and initial unemployment claims to track the state of the economy. Which of these indicators will you receive data from most regularly?

Initial unemployment claims

Which of these shows that people will adjust their behavior in response to regulation?

Many firms will avoid hiring parents when a regulation requires employers to pay for parental leave.

The federal government created a single-payer health care system for the elderly, which is called:

Medicare.

The purchase of a new iPhone 11 by a consumer from Japan would be categorized as what factor of aggregate expenditure in the US GDP?

Net exports

Which of these is NOT a purpose of social insurance?

Protect individual wealth

_____ is/are the broadest measure of economic activity.

Real GDP

How could you deal with a data series that experiences severe spikes during certain times of the year?

Use seasonal adjustment

What does this image say about the Fed's monetary policy?

What does this image say about the Fed's monetary policy?

A recession is:

a period of declining economic activity.

The inflation target refers to:

a publicly stated goal for the inflation rate.

A lower real interest rate will increase aggregate demand and thus encourage:

an expansion of the business cycle.

Which of the following are reasons why the fed targets inflation....

can influence unemployment with tools it uses to target inflation, since inflation and unemployment are interdependent. has many tools to influence inflation over the long run but none to influence unemployment over the long run.

When the economy experiences high inflation, the Federal Reserve pursues monetary policy. Use the AD-AS graph to show the impact of this monetary policy.

contractionary; AD line back

Government spending that results in less private spending, particularly in investment, is referred to as:

crowding out.

If inflation is below the Fed's target rate, the Fed will react by the interest rate. This will the opportunity cost of spending, and people will their consumption and investment. As people spend more, aggregrate expenditure will .

cutting; decrease; increase; rise

Kyro bank can leave its extra cash in a reserve account and earn a 2% return with no risk of losing money. It will not take the money out of the account unless its return will be greater than 2%. This shows the interest rate on _____ effectively acting as a _____ on the interest rate at which banks will loan their funds.

excess reserves; floor

When the economy experiences a recession, the Federal Reserve pursues monetary policy. Use the AD-AS graph to show the impact of this monetary policy.

expansionary; AD line forward

If the Fed pushes rates down the opportunity cost of borrowing . The level of output in the economy should .

falls; increase

Your friend's proposed cuts to science and international affairs spending would significantly reduce the size of the government.

false

Social insurance programs plus spending on military and veteran's benefits account for about 80% of government spending.

federal

The Fed adjusts the by buying and selling short‑term government bonds. This tool is called .

federal funds rate; open market operations

How does the saying, "The federal government is an insurance company with a military," while exaggerating a bit, describe U.S. federal government spending? The saying is true because the

federal government spends the vast majority of its budget on the military and social insurance

In the very short run, the aggregate supply curve is ; in the long run, it is . In the short run and medium run, the aggregate supply curve is . However, in the medium run, the aggregate supply curve is than it is in the short run.

horizontal; vertical; upward-sloping; steeper

Increased government purchases directly:

increase aggregate expenditure.

If an increase in nominal GDP were discovered, it would be difficult to tell whether it was a result of _____ prices or _____ output.

increased; rising

Aggregate demand is in determining output in the long run.

irrelevant

When many of the resources in an economy are left unused, GDP is expected to be _____ potential output, and the output gap will be _____.

less than; negative

If the Federal Reserve saw that price levels increased by 0.2% from one year to the next, it would likely _____ interest rates in response to _____.

lower; low inflation

If the Federal Reserve saw a GDP growth of 0.3% from one year to the next, it would likely _____ interest rates due to _____.

lower; weak output

Assume that a government has missed a rescheduled loan repayment. High and rising government debt would:

make it harder for the government to borrow more funds.

Today, the Federal Reserve moderates the economy by the use of _____ and _____, whereas historically, the Fed relied on changes in the money supply.

monetary policy; interest rates

When the government increases its purchases by $100 billion, it will increase GDP by $100 billion. An increase in spending has a effect on aggregate expenditure. This effect arises because one person's spending is another person's .

more than; multiplied; income

When the Fed acts to raise interest rates, borrowing becomes _____ expensive, which encourages consumers to _____.

more; save today instead of spending

Over the past quarter, the inflation rate has risen from 2% to 4%. In response, the Federal Reserve has raised the real interest rate. Use the graph to show this change.

move dot up line stay same

The unemployment rate has increased over the past quarter. In response, the Federal Reserve has lowered the real interest rate. Use the graph to show this change.

move line forward

A lower price level that leads the Fed to cut interest rates results in a the aggregate demand curve.

movement along

An increase in the general level of prices results in a the aggregate demand curve.

movement along

Excess demand leads to higher prices and a the aggregate supply curve.

movement along

Lower output leads to excess capacity and a the aggregate supply curve.

movement along

Technology that raises productivity leads to a the aggregate supply curve.

movement along

Deflation is _____ than inflation because inflation has its own momentum as it is determined by _____.

much rarer; outside factors

In the long run, a 110% increase in the price level of an economy will result in _____ in the quantity of goods and services produced.

no change

n the long run, a 50% increase in the price level of an economy will result in _____ in the quantity of goods and services produced.

no change

Using the classical dichotomy, an increase of 10% in price levels of the economy will result in no change in the quantity produced because price levels are _____ and quantity produced is a _____.

nominal variables; real variable

A change in aggregate demand, either an increase or a decrease, will result in a large change in _____ and no change in _____ in the very short run.

output; the price level

An economy might be at risk of _____ when the Fed _____ to create a short-term economic boom.

overheating; lowers interest rates

In the long run, a change in prices has no impact on output as the economy gravitates toward its . Market prices adjust to ensure that the demand for labor, capital, and raw materials will be equal to the supply.

potential output

If the discretionary fiscal policy fails to act quickly enough to boost spending, the policy will become _____, causing the economy to _____.

procyclical; destabilize

The opportunity costs of buyers in the micro context of a single market differ from those of all buyers in the macro context of aggregate demand, as they summarize different trade-offs. In the micro framework, the key trade-offs are across , while in the macro framework, the key trade-offs are across .

products; time

Excess demand results in firms _____ their prices because they have:

raising; limited production capacity and are unable to expand it.

The overall size of the economy

real GDP

A higher _____ will result in _____ aggregate expenditure level.

real interest rate; a lower

Government spending will and government revenue will .

remain the same; decrease

Government spending _____ automatically during a recession because when income falls, _____ people qualify for government benefits.

rises; more

When government spending exceeds government revenue, the government will:

run a budget deficit.

An increase in government purchases results in a the aggregate demand curve.

shift of

An increase in oil prices leads to a the aggregate supply curve.

shift of

The Fed increases the interest rate more dramatically than the systematic inflation-induced response. This results in a the aggregate demand curve.

shift of

Suppliers initially react to economic shocks by _____. In the long run, suppliers adjust to economic shocks by changing the prices charged and wages paid.

shifting the quantity produced

The business cycle refers to: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

short-term fluctuations in economic activity.

Changes in aggregate supply are often _____ than changes in aggregate demand because suppliers need to make adjustments such as _____.

slower; changing prices and wages

The short-run aggregate supply curve will be _____ than the very-short-run aggregate supply curve and will be _____ than the medium-run supply curve.

steeper; less steep

At high output levels, when the economy is relatively , businesses face demand and marginal costs, compelling them to raise their prices.

strong; excess; higher

Automation by the largest shipping and transportation companies has significantly decreased the transportation costs for businesses across the country. Aggregate will and shift to the The price level will and the quantity of output will

supply; increase; right; decrease; increase

A higher price of inputs used to make final goods and services will shift the aggregate _____ curve to the _____.

supply; right

The federal government primarily collects revenue by _____, while state and local governments focus more on _____.

taxing people's incomes; taxing people's spending

The relationship between the price level and the total quantity of output that buyers collectively plan to purchase is defined as:

the aggregate demand curve.

The relationship between the price level and the total quantity of output that suppliers collectively produce is defined as:

the aggregate supply curve.

Pursuing a graduate degree program, deciding whether to quit your job because you dislike your boss and purchasing a new car are all decisions that are affected by:

the current state of the economy

The deficit measures _____ over a year, while the debt measures _____ at a point in time.

the flow of new borrowing; the accumulated stock of borrowing

Four out of every 10 dollars the federal government spends go to the elderly or disabled. This spending is largely because:

the government provides a basic income and health care to almost all Americans over the age of 65

Fiscal policy refers to:

the government's use of spending and tax policies in an attempt to stabilize the economy.

The discount rate is:

the interest rate on loans that the Fed offers to banks through the discount window.

Potential output is:

the level of output that occurs when all resources are fully employed.

In the short run, suppliers adjust to economic shocks by shifting _____. In the long run, suppliers adjust to shocks by changing _____.

the quantity produced; the prices charged for goods and services

The marginal tax rate refers to:

the tax rate you pay if you earn another dollar.

Aggregate demand and aggregate supply are directly related to ________ because they look at measures such as _____ and average prices.

the whole economy; total output

A _____ is a low point in economic activity.

trough

If GDP is rising, which of these would NOT be expected to rise at the same time?

unemployment

In the , prices are fixed, as businesses have no time to change prices immediately following an economic shock. The , by contrast, allows businesses time to respond to insufficient demand by adjusting some prices, while others remain fixed, owing to price stickiness and menu costs. A year or two later, in the , prices will be less sticky; hence, more businesses will adjust their prices to existing economic conditions. Finally, in the , all businesses will fully adjust their prices to existing demand conditions, restoring output to potential.

very short run; short run; medium run; long run

At low output levels, when the economy is relatively , businesses facedemand andmarginal costs, compelling them to lower their prices.

weak; insufficient; lower

What causes depreciation?

wear and tear obsolescence aging

you would change long‑term rates if

you believe the change in the federal funds rate will be long‑lasting.

Eastland's government has a total national debt of $500 million, which is financed as follows: $100 million is held by other government agencies, $200 million is held by Eastland's citizens, and $200 million is held by foreign citizens. The amount of public debt in Eastland is:

$400 million.

What is the approximate change in your real wage if inflation is 3%?

-.09

The manager of a T-shirt company is considering investing in a new embroidery machine that costs $8,500, and the depreciation rate is 6.5% per year. The expected increase in next year's revenue as a result of the investment is $1,500. For what values of the interest rate (r) should the company make this investment? Specify the answer to two places beyond the decimal point. Any r below

11.14

You want $1 million in your retirement account in 50 years. If your account grows at an annual rate of 4%, how much do you have to deposit today to reach $1 million in 50 years?

140712.62

What percentage of federal government spending comes from science and international affairs? Share of federal spending:

2

Assume the equilibrium unemployment rate is 5%. If actual output falls to 5 percentage points below potential output, how would you expect the unemployment rate to change? (Note: Specify your answer to one decimal place, if necessary.) The unemployment rate would change by percentage points.

2.5

A politician says, "We could help low-wage workers by offering them tax credits like the earned income tax credit, but it would be cheaper to do it by raising the minimum wage because that would cost the government nothing." a. What type of policy is the minimum wage?

A government regulation

Which of the following factors would cause the aggregate demand curve to increase?

A government stimulus program

How might future spending change if Medicare and Social Security were discretionary spending programs instead?

Changes in spending on these programs could be made each year.

FV= PV * (1+R)^t fv- future value pv-present value R- interest rate t-number of years

Compounding Formula

If the government of Balancia runs a deficit of $50 million per year in Year 1 and in Year 2 due to its recession, but then has a $100 million surplus in Year 3 due to strong economic recovery, Balancia is likely following which type of rule?

Cyclically balanced budget

PV= FV/(1+R)^t

Discounting Formula

Which of the following would be an example of expansionary fiscal policy?

Extending the period in which unemployed workers can collect unemployment benefits

The purchase of a new floor for the local city municipal basketball court would be categorized as what factor of aggregate expenditure?

Government purchases

How can the minimum wage increase government spending?

If a higher minimum wage increases unemployment, government spending on social insurance programs will increase.

The president has just signed a new budget that drastically cuts taxes without decreasing government spending. When asked how he plans to address the dramatic increase in deficits that will occur due to the tax cuts, the president responds, "We're going to see some amazing economic growth because of this new policy, so much growth that we're going to grow our way out of any short-term increases to government debt." If this extra economic growth doesn't materialize, what are some of the risks to the U.S. economy?

Interest payments on the federal debt will consume a larger portion of the federal budget, potentially displacing other government priorities. Higher government debt may make future borrowing more difficult.

The S&P 500 has been increasing steadily over the last several months. What does this signal about how investors view future profits?

Investors believe future profits will be higher than previously expected.

What do economists mean when they say that business cycles are not cycles?

That the fluctuations are not rhythmic and predictable.

Low birth rates mean that the share of the population that is working-age will fall over the next few decades. What impact will this have on spending on Medicare and Social Security?

The share of GDP spent on these programs will increase.

A politician makes the following comment: "The fundamentals of our economy are very strong. According to market economists, we are producing more than anyone expected and even beyond what they call our potential output. My goal is to guarantee that we continue to produce more than our potential output throughout the next few decades." In the long run, can the politician achieve this goal?

This can only continue for limited time because eventually factories will need to make repairs, and people will want to reduce their hours.

In which of the following scenarios is it most appropriate to use seasonally adjusted data?

You are analyzing economic growth over the past few quarters to extract a trend that enables you to predict economic growth over the next year.

In the AS-AD model, the long run is defined as:

a period of time long enough for businesses to adjust prices and adapt to competitors' decisions.

Often assets you purchase depreciate over time and lose value. Which of these do you expect to depreciate?

a vehicle

In the AD-AS model, AD stands for _____ and AS stands for _____.

aggregate demand; aggregate supply

The aggregate supply curve describes the production and pricing decisions that _____ make and how they will adjust their production given changes in the _____.

all suppliers; price level

The future trajectory of economic activity

annual growth of the S&P 500

Why are consumer and business confidence indices helpful in making predictions about the state of the economy?

because they are leading indicators that tend to predict the future path of the economy

Why might requiring the federal government to balance its budget each year limit its ability to respond to an economic downturn? It would

compel the government to cut spending to offset lost tax revenues, which decline during recessions. prevent the government from employing an expansionary fiscal policy, since increased government spending would have to be offset by increased taxes.

Leading indicators

consumer confidence; stock market; business confidence

Lagging indicators

consumer price index; GDP; unemployment

Seasonally adjusted data are

data stripped of predictable seasonal patterns.

The New York Times decommissions an older printing press instead of repairing it, due to a decrease in print subscriptions. This decision the capital stock by the value of

decreases; the printing press

Gerardo borrows $30,000 from his local bank for a new addition to his warehouse.

demander

Stable inflation expectations

direct and transparent communication

In the short run, the economy will likely due to the increased government spending.

expand

If consumer confidence indices have been falling for several months, you might expect consumer spending to

fall

How do automatic stabilizers respond when output is above potential output?

falls and tax payments rise to help keep the economic expansion in check

Lagging indicators are variables that tend to the path of the economy.

follow

Predict how the Fed would likely respond if the output gap became more positive, so that output moved from being 0.1% above potential output to being 3% above potential output, and inflation rose above its 2% target rate. The Fed would likely set a interest rate target.

higher

As the economy recovers, political pressures lead the government to keep this spending in place. Possible long-run consequences of making this increased spending permanent include which of the following?

higher interest rates and inflation

How would you expect unemployment to change over the next year or two in response to the Fed's actions? b. If the Fed pursued this action, you would expect unemployment to over the next year or two.

increase

The increase in the federal funds rate will the interest rates on the business lines of credit and personal loans you make.

increase

This policy will the number of electric cars sold.

increase

Unemployment likely during each recession.

increased

Is a student with student loan debt participating in the market for loanable funds? The student

is participating.

How does mandatory government spending differ from discretionary government spending? Mandatory spending

is set by law, whereas discretionary spending is appropriated annually.

Economists expected GDP to grow at an annual rate of 3%. It was recently annouced that GDP grew at an annual rate of 2%. What do you expect to happen to the S&P 500?

it will decrease

The Fed's lender of last resort function gives rise to which of the following tradeoffs?

limits the severity of financial crisis; prevents potentially destructive failures of major financial institutions

The biggest chunk of government spending goes to public primary and secondary education, followed by smaller chunks for various community services.

local

Quantitative easing is when the Fed buys government bonds and securities in order to put pressure on long‑term interest rates.

long term; downward

If the Fed raises the interest rate on excess reserves, the to banks of loaning money . The supply of loanable funds therefore , pushing interest rates , and banks, correspondingly, the interest rates they charge on car loans, mortgages, student loans, credit cards, etc.

marginal cost; rises; falls; upward; raise

You invest $1,000 in stocks. Would a macroeconomist call this an investment? Why or why not? An economist would say

no, because you are just buying an existing asset without creating any new productive capacity in the economy.

Dana buys $1,200 of stocks every year in her IRA.

not involved

Why does the Fed use interest rates to influence the economy?

opportunity cost of spending today; by varying interest rates, the Fed nudges people and businesses to spend more or less today, which affects the level of economy activity.

Suppose your roommate's parents open a college savings account to pay for her college expenses. Opening a college savings account

shifts the supply curve of loanable funds to the right, decreases the neutral interest rate and increases the equilibrium quantity of loanable funds.

Recessions tend to be in duration. Expansions are often than recessions.

short; longer

Based on the marginal principle, the owner make this investment because the marginal benefit is the marginal cost.

should; greater than

The output gap in one time period is typically the output gap in the next time period. Changes in the output gap over time are usually

similar to; small and unpredictable

On average, half of government spending goes to employment and income support, and one-fifth goes toward education.

state

Latisha wants to save up for a new laptop to use in her business, so she puts aside $100 a month in a bank account until she can save up for it.

supplier

Higher input prices, such as those caused by a sudden shortage of oil, will shift the aggregate _____ curve to the left because higher input prices mostly impact _____.

supply; production costs

As the economy slows, the automatic decrease in will help stabilize the economy.

taxes

Which of the following occurs when investment is crowded out by government spending?

the amount of government debt rises

Wages and benefits

the employment cost index

Why does the Fed pay such close attention to GDP, if its mandate is to promote maximum employment while keeping prices stable?

the maximum sustainable level of employment occurs when the economy's GDP is equal to its potential GDP.

Labor market performance

the unemployment rate

Quantitative easing is considered monetary policy and may be used when the has hit the zero lower bound.

unconventional; federal funds rate

The Fed has decreased the federal funds rate—a nominal short‑term interest rate—to 0%, and yet the economy is still struggling. Which of the following actions could the Fed take to further stimulate the economy?

use forward guidance; use quantitative easing

When the economy is producing at its maximum sustainable level, what is the output gap?

0%

At the macroeconomic equilibrium of $17 trillion, what is the price level?

15

If the potential GDP is $16 trillion and the actual GDP is $15.2 trillion, about how many percentage points lower than the equilibrium unemployment rate will the actual unemployment rate be?

2.5

If the potential GDP is $18 trillion and the actual GDP is $16.92 trillion, about how many percentage points lower than the equilibrium unemployment rate will the actual unemployment rate be?

3

If the equilibrium unemployment rate is 5%, the potential GDP is $15 trillion, and the actual GDP is $14.4 trillion, what is the approximate unemployment rate according to Okun's rule of thumb?

3%

The equilibrium unemployment rate in the United States is 5%. If the output gap is -4%, what is the approximate unemployment rate in the United States, according to Okun's rule of thumb?

3%

If the actual unemployment rate in the United States is 3% and the output gap is -2%, what would be a good approximation of the equilibrium unemployment rate according to Okun's rule of thumb?

4%

Which of these statements is NOT true of government spending during a war?

Budget deficits during a war are typically small.

What does this image say about monetary policy?

The Fed is generally good at influencing the actual federal funds rate so that it matches the target federal funds rate.

Which of the following scenarios conflicts with the structure of the Federal Reserve?

The Federal Reserve wishes to increase output so it develops a monetary policy that alters interest rates and submits it for congressional approval.

Suppose that your biggest concern is spotting economic downturns before they occur and that you are not very worried about accidentally predicting an economic downturn when there will actually not be one. Which of these economic indicators would you likely watch most closely?

The stock market

Which of these is NOT true about government spending and revenue? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

The government usually brings in enough revenue to pay for all its spending.

Why can it be said with confidence that the average person will experience a number of recessions during his or her lifetime?

Things often go wrong in an economy.

Top executives report that they're quite uncertain about the future, as trade deals with the country's largest trading partners are being renegotiated and remain in flux. Aggregate will and shift to the The price level will and the quantity of output will

demand; decrease; left; decrease; decrease

The Mexican government eliminates the tariffs it charges on goods exported from the United States. Aggregate will and shift to the The price level will, and the quantity of output will

demand; increase; right; increase; increase

The federal government passes a new bill that dramatically increases government spending on education and the military. Aggregate will and shift to the the price level will, and the quantity of output will

demand; increase; right; increase; increase

low levels of output across the emtire economy

dot down

What are some ways in which government debt differs from personal debt? Select all that apply. The government

can pay its debt using options that households do not have in paying off theirs. can pay its debt over multiple generations, whereas individuals cannot.

Select each response which helps explain why big changes in investment have relatively small impacts on the amount of capital in the economy. One reason is that

capital deteriorates over time due to depreciation today's capital stock is the accumulation of many years of investment, so a change in spending for one year has relatively little effect on overall capital stock

Suppose the government passes a new law providing companies with low-cost alternative energy sources such as solar and wind. This would lead to a(n):

increase in aggregate supply

Capital per worker in China almost doubled between 1990 and 2010. How do you expect China's output per worker to have changed over the same period? Why? Output per worker probably

increased, because there is a positive correlation between capital per worker and output per worker.

Paying off these student loans

increases the amount of loanable funds available for others to use, thus increasing the supply of loanable funds.

A salesperson drops his laptop on the way to a big meeting, and his IT department buys a new replacement the next day. This purchase the capital stock by the value of the

increases; new laptop minus the value of the old laptop

It is appropriate to use seasonally adjusted data when you are

using quarterly data to describe or predict trends that occur over the course of a year.

Volatile inflation expectations

vague and...

Recessions in their severity.

vary significantly