macro chapter 23, 24, 25, 26 (exam 2)
The source of the supply of loanable funds
is saving and the source of demand for loanable funds is investment
investment
is the source of the demand for loanable funds As the interest rate falls, the quantity of loanable funds demanded increases
The production function for Country A exhibits constant returns to scale. Suppose that physical capital per worker, human capital per worker, and natural resources per worker all triple. At the same time, Country A's technological knowledge doubles. Productivity
is two times larger
The catch-up effect refers to the idea that
it is easier for a country to grow fast and so catch-up if it starts out relatively poor.
Proprietary technology is knowledge that is
known only by the company that discovered it
If the expected rate of return is less than r r, the student would
lend
Short-term bonds are generally
less risky than long-term bonds and so they feature lower interest rates.
The inflation rate is defined as the
percentage change in the price level from the previous period
Productivity is the amount of goods and services
produced for each hour of a worker's time. It is linked to a nation's economic policies.
In addition to the consumer price index, the Bureau of Labor Statistics also calculates the
producer price index
A nation's standard of living is best measured by its
real GDP per person
A country is possibly overinvesting in human capital if the best job a Ph.D. in philosophy can find is managing a restaurant.
true
If the extra output produced from an additional unit of capital falls as the stock of capital rises, the country is possibly overinvesting in capital
true
The final element of a financial crisis is
vicious circle
Bob's new startup goes public and sells shares of future profits. Bob's startup is best described as a
borrower or as a demander of funds.
GDP and GNP (gross national product) are identical when
all domestic production is by domestically owned producers and no foreign production is carried out by domestic producers.
The primary advantage of mutual funds is that they
allow people with small amounts of money to diversify
public spending
amount of tax revenue that the government has left over after paying for its spending: T-G
The level of real GDP person
and the growth rate of real GDP per person vary widely across countries.
In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?
apparel
Two of the economy's most important financial intermediaries are
banks and mutual funds
The economy's two most important financial markets are
bond and stock market
If the Apple corporation sells a bond it is
borrowing directly from the public
Bolivia had a smaller budget deficit in 2003 than in 2002. Other things the same, we would expect this reduction in the budget deficit to have
decreased the interest rates and increased investment
A country is possibly overinvesting in human capital if people are not educated enough to fill existing job openings.
false
A person might not want to hold stock in the company where she works because she would be better off holding stock in the highest-risk company that yields the highest rate of return.
false
Companies encourage their employees to hold stock in the company because it reduces the connection between employees' work effort and the companies' profits.
false
True or False: If the extra output produced from an additional unit of capital rises as the stock of capital rises, the country is possibly overinvesting in capital.
false
Which of the following is an example of a renewable natural resource?
fish, soybeans, wood
a mutual fund
- is a financial institution that stands between savers and borrowers. -is a financial intermediary. - allows people with small amounts of money to diversify their holdings.
less investments lead to ________ economic growth
- slower - there might be a transition period in which workers and owners in consumption-good industries would receive higher incomes.
You and your friend work together for 4 hours to produce a total of 8 bookcases. What is productivity?
1 book per hour
Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving?
1500
Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?
2,000, -1,000, and 1,000, respectively.
James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP?
22,000
brain drain
Large-scale emigration by talented people The emigration of highly skilled workers to rich countries
The CPI is a measure of the overall cost of the goods and services bought by
a typical consumer
private spending
Private Saving = Y−C−T
Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?
There is still debate among economists on the severity of the CPI bias and what to do about it
What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?
There would be an increase in the amount of loanable funds borrowed.
A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,
U.S. investment and GDP increase, but German GDP is unaffected.
Which of the following equations represents GDP for a closed economy?
Y = C + I + G
Which of the following is included in GDP?
both the market value of rental housing services and the market value of owner-occupied housing services
After a corporation issues stock, the stock
can be resold only if the corporation wants to buy it back ???
The basic tools of supply and demand are
central to macroeconomic analysis as well as to microeconomic analysis
a bond ia
certificate of indebtedness.
In an economy where net exports are zero, if saving rises in some period, then in that period
consumption falls and investment rises.
The goal of the consumer price index is to measure changes in the
cost of living
Tesla builds a new vehicle, and completes it in December 2015. It sells the vehicle in January 2016. The value of this vehicle affects U.S. GDP
for 2015 only, since it was completed in December of 2015
You would expect a bond of an Eastern European government to pay a _______ interest rate as compared to a bond of the U.S. government.
higher
catch-up effect
higher productivity growth in countries with less capital per person helps those countries grow faster and catch up to the per-capita incomes of countries with more capital per person.
For an actual economy, total expenditures on goods and services by households does not equal GDP because
household expenditures on goods and services falls short of GDP, since household save for the future.
Which of the following correctly lists what is included in the consumption component of GDP?
household purchases of services, nondurable goods, and durable goods other than residential construction
The purchase of a new house is the one form of
household spending that is investment rather than consumption
The nominal interest rate tells you
how fast the number of dollars in your bank account rises over time
The real interest rate tells you
how fast the purchasing power of your bank account rises over time
The slope of the demand for loanable funds curve represents the
negative relation between the real interest rate and investment
The logic behind the catch-up effect is that
new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital
Which of the following always uses prices and quantities from the same period?
nominal and not real
If your firm's production function has constant returns to scale, and if you double all your inputs, then your firm's productivity will
not change
Long-term bonds are
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
When a large, well-known corporation wishes to borrow directly from the public, it can
sell bonds
Core CPI is
the CPI excluding food and energy
A COLA automatically raises the wage when
the consumer price index increases
Ralph is a plumber. Which of the following are included in his human capital?
the knowledge he learned on the job, but not the tools he uses
Which of the following is an example of human capital?
the knowledge learned from reading books
debt finance
the sale of bonds to raise money