macro chapter 7 and 8

Which of the following describes an increase in technological knowledge? a. A farmer discovers that it is better to plant in the spring rather than in the fall. b. A farmer buys another tractor. c. A farmer hires another day laborer. d. A farmer sends his child to agricultural college, and the child returns to work on the farm.

a. A farmer discovers that it is better to plant in the spring rather than in the fall.

An increase in the budget deficit is a. a decrease in public saving. b. an increase in public saving. c. a decrease in private saving. d. an increase in private saving. e. none of the above.

a. a decrease in public saving.

If real income per person in 2015 is $18,073 and real income per person in 2016 is $18,635, what is the growth rate of real income over this period? a. 3.0 percent b. 3.1 percent c. 5.62 percent d. 18.0 percent e. 18.6 percent

b. 3.1 percent

If Americans become more thrifty, we would expect a. the supply of loanable funds to shift to the right and the real interest rate to rise. b. the supply of loanable funds to shift to the right and the real interest rate to fall. c. the demand for loanable funds to shift to the right and the real interest rate to rise. d. the demand for loanable funds to shift to the right and the real interest rate to fall.

b. the supply of loanable funds to shift to the right and the real interest rate to fall.

If government spending exceeds tax collections, a. there is a budget surplus. b. there is a budget deficit. c. private saving is positive. d. public saving is positive. e. none of the above is true.

b. there is a budget deficit.

Which of the following statements is true? a. A stock index is a directory used to locate information about selected stocks. b. Longer-term bonds tend to pay less interest than shorter-term bonds. c. Municipal bonds pay less interest than comparable corporate bonds. d. Mutual funds are riskier than single stock purchases because the performance of so many different firms can affect the return of a mutual fund.

c. Municipal bonds pay less interest than comparable corporate bonds.

Which of the following is an example of foreign portfolio investment? a. A naturalized U.S. citizen, who was originally born in Germany, buys stock in Ford, and Ford uses the proceeds to buy a new plant. b. Toyota builds a new plant in Tennessee. c. Toyota buys stock in Ford, and Ford uses the proceeds to build a new plant in Michigan. d. Ford builds a new plant in Michigan. e. None of the above is an example of foreign portfolio investment.

c. Toyota buys stock in Ford, and Ford uses the proceeds to build a new plant in Michigan.

If Americans become less concerned with the future and save less at each real interest rate, a. real interest rates fall, and investment falls. b. real interest rates fall, and investment rises. c. real interest rates rise, and investment falls. d. real interest rates rise, and investment rises.

c. real interest rates rise, and investment falls.

A financial intermediary is a middleperson between a. labor unions and firms. b. husbands and wives. c. buyers and sellers. d. borrowers and lenders.

d. borrowers and lenders.

Which of the following expenditures to enhance productivity is most likely to emit a positive externality? a. Megabank buys a new computer. b. Susan pays her college tuition. c. Exxon leases a new oil field. d. General Motors buys a new drill press.

b. Susan pays her college tuition.

If the supply of loanable funds is very inelastic (steep), which policy would likely increase saving and investment the most? a. an investment tax credit b. a reduction in the budget deficit c. an increase in the budget deficit d. none of the above

b. a reduction in the budget deficit

If a production function exhibits constant returns to scale, doubling all of the inputs a. has absolutely no impact on output because output is constant. b. doubles output. c. more than doubles output due to the catch-up effect. d. less than doubles output due to diminishing returns.

b. doubles output.

Which of the following government policies is least likely to increase growth in Africa? a. increase expenditures on public education b. increase restrictions on the importing of Japanese automobiles and electronics c. eliminate civil war d. reduce restrictions on foreign capital investment e. All of the above would increase growth.

b. increase restrictions on the importing of Japanese automobiles and electronics

Once a country is wealthy, a. it is nearly impossible for it to become relatively poorer. b. it may be harder for it to grow quickly because of the diminishing returns to capital. c. capital becomes more productive due to the "catch-up effect." d. it no longer needs any human capital. e. none of the above is true.

b. it may be harder for it to grow quickly because of the diminishing returns to capital.

Credit risk refers to a bond's a. term to maturity. b. probability of default. c. tax treatment. d. dividend. e. price-earnings ratio.

b. probability of default.

Investment is a. the purchase of stocks and bonds. b. the purchase of capital equipment and structures. c. when we place our saving in the bank. d. the purchase of goods and services.

b. the purchase of capital equipment and structures.

If the public consumes $100 billion less and the government purchases $100 billion more (other things unchanging), which of the following statements is true? a. There is an increase in saving, and the economy should grow more quickly. b. There is a decrease in saving, and the economy should grow more slowly. c. Saving is unchanged. d. There is not enough information to determine what will happen to saving.

c. Saving is unchanged.

Thomas Malthus argued that a. technological progress will continuously generate improvements in productivity and living standards. b. labor is the only true factor of production. c. an ever-increasing population is constrained only by the food supply, resulting in chronic famines. d. private charities and government aid will improve the welfare of the poor. e. None of the above is true.

c. an ever-increasing population is constrained only by the food supply, resulting in chronic famines.

The opportunity cost of growth is a reduction in a. current investment. b. current saving. c. current consumption. d. taxes.

c. current consumption.

When a nation has very little income per person, a. it is doomed to being relatively poor forever. b. it must be a small nation. c. it has the potential to grow relatively quickly due to the "catch-up effect." d. an increase in capital will likely have little impact on output. e. none of the above is true.

c. it has the potential to grow relatively quickly due to the "catch-up effect."

An increase in the budget deficit that causes the government to increase its borrowing a. shifts the demand for loanable funds to the right. b. shifts the demand for loanable funds to the left. c. shifts the supply of loanable funds to the left. d. shifts the supply of loanable funds to the right.

c. shifts the supply of loanable funds to the left.

Which of the following is an example of equity finance? a. corporate bonds b. municipal bonds c. stock d. bank loan e. All of the above are equity finance.

c. stock

To increase growth, governments should do all of the following except a. promote free trade. b. encourage saving and investment. c. encourage foreigners to invest in your country. d. encourage research and development. e. nationalize major industries.

e. nationalize major industries.

Madelyn goes to college and reads many books while at school. Her education increases which of the following factors of production? a. human capital b. physical capital c. natural resources d. technology e. All of the above would be increased.

a. human capital

If Mazda builds a new plant in Illinois, a. in the future, U.S. GDP will rise more than U.S. GNP. b. in the future, U.S. GDP will rise less than U.S. GNP. c. in the future, U.S. GDP and GNP will both fall because some income from this investment will accrue to foreigners. d. there has been an increase in foreign portfolio investment in the United States. e. None of the above is true.

a. in the future, U.S. GDP will rise more than U.S. GNP.

Which of the following sets of government policies is the most growth oriented? a. lower taxes on the returns to saving, provide investment tax credits, and lower the deficit b. lower taxes on the returns to saving, provide investment tax credits, and increase the deficit c. increase taxes on the returns to saving, provide investment tax credits, and lower the deficit d. increase taxes on the returns to saving, provide investment tax credits, and increase the deficit

a. lower taxes on the returns to saving, provide investment tax credits, and lower the deficit

National saving (or just saving) is equal to a. private saving + public saving. b. investment + consumption expenditures. c. GDP-government purchases. d. GDP + consumption expenditures + government purchases. e. none of the above.

a. private saving + public saving.

An increase in the budget deficit will a. raise the real interest rate and decrease the quantity of loanable funds demanded for investment. b. raise the real interest rate and increase the quantity of loanable funds demanded for investment. c. lower the real interest rate and increase the quantity of loanable funds demanded for investment. d. lower the real interest rate and decrease the quantity of loanable funds demanded for investment.

a. raise the real interest rate and decrease the quantity of loanable funds demanded for investment.

A reasonable measure of the standard of living in a country is Answer a. real income per person. b. real income. c. nominal income per person. d. nominal income. e. the growth rate of nominal income per person.

a. real income per person.

Brazil, Japan, and China are growing very quickly because a. they have enormous natural resources. b. they are imperialists and have collected wealth from previous victories in war. c. they save and invest an unusually high percentage of their real income. d. they have always been wealthy and will continue to be wealthy, which is known as the "snowball effect."

c. they save and invest an unusually high percentage of their real income.

Which of the following statements regarding the impact of population growth on productivity is true? a. There is no evidence yet that rapid population growth stretches natural resources to the point that it limits growth in productivity. b. Rapid population growth may dilute the capital stock, lowering productivity. c. Rapid population growth may promote technological progress, increasing productivity. d. All of the above are true.

d. All of the above are true.

Which of the following statements is true? a. Countries may have a different level of income per person, but they all grow at the same rate. b. Countries may have a different growth rate, but they all have the same level of income per person. c. Countries all have the same growth rate and level of output because any country can obtain the same factors of production. d. Countries have great variance in both the level and growth rate of income per person; thus, poor countries can become relatively rich over time.

d. Countries have great variance in both the level and growth rate of income per person; thus, poor countries can become relatively rich over time.

Which of the following financial market securities would likely pay the highest interest rate? a. a municipal bond issued by the state of Texas b. a mutual fund with a portfolio of blue chip bonds c. a bond issued by a blue chip company d. a bond issued by a start-up company

d. a bond issued by a start-up company

Copper is an example of a. human capital. b. physical capital. c. a renewable natural resource. d. a nonrenewable natural resource. e. technology.

d. a nonrenewable natural resource.

If an increase in the budget deficit reduces national saving and investment, we have witnessed a demonstration of a. equity finance. b. the mutual fund effect. c. intermediation. d. crowding out.

d. crowding out.

For a given level of technology, we should expect an increase in labor productivity within a nation when there is an increase in each of the following except a. human capital per worker. b. physical capital per worker. c. natural resources per worker. d. labor.

d. labor.

Our standard of living is most closely related to a. how hard we work. b. our supply of capital because everything of value is produced by machinery. c. our supply of natural resources because they limit production. d. our productivity because our income is equal to what we produce.

d. our productivity because our income is equal to what we produce.

An increase in the budget surplus a. shifts the demand for loanable funds to the right and increases the real interest rate. b. shifts the demand for loanable funds to the left and reduces the real interest rate. c. shifts the supply of loanable funds to the left and increases the real interest rate. d. shifts the supply of loanable funds to the right and reduces the real interest rate.

d. shifts the supply of loanable funds to the right and reduces the real interest rate.

If the government increases investment tax credits and reduces taxes on the return to saving at the same time, a. the real interest rate should rise. b. the real interest rate should fall. c. the real interest rate should not change. d. the impact on the real interest rate is indeterminate.

d. the impact on the real interest rate is indeterminate.