PSU Econ 104 Exam 2

Countries with high rates of economic growth tend to have

a labor force that is more productive

Which of the following policies would not help promote economic growth?

a law requiring that the funds in an individual retirement account be taxed

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase in future years, and these higher deficits might "pose a threat to the economy by crowding out business investment and threatening a spike in interest rates." This higher budget deficit would be represented graphically by

a shift in the supply curve for loanable funds to the left

An unplanned decrease in inventories results from

an actual investment that is less than planned investment

Holding all else constant, if the economy's marginal propensity to save (MPS) increases, the consumption function will:

become flatter

Suppose that an increase in capital per hour worked from $15,000 to $20,000 increases real GDP per hour worked by $500. If capital per hour worked increases further to $25,000, by how much would you expect real GDP per hour worked to increase if there are diminishing returns?

by less than $500

The total amount of physical capital available in a country is known as the country's

capital stock

According to the World Bank, Albania does one of the worst jobs as a country enforcing the rule of law. The consequence of a weak rule of law is

difficulty in attracting investment and low economic growth.

Because firms can free ride on the research and development of other firms

firms choose a level of research and development where the marginal cost of research is below the economy's marginal return of research.

Assume that, holding all else constant, taxes on businesses start to rise. If this is true, then

investment spending will fall.

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as

labor productivity

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as:

labor productivity

Knowledge capital is nonrival in the sense that

two people can use the same knowledge to develop and produce a product.

Using the following data, calculate public savings for a closed economy. Please round to 1 decimal place. Remember, negative numbers are OK for public savings. Y = 13.6 C = 7.9 I = 1.4 TR = 0.8 T = 2

-3.1

If a $562 increase in autonomous investment causes a $4,385 increase in GDP, what is the MPS? Please round to two decimal places where needed.

.13

Suppose Apple plans to produce 9.5 million iPhones this year. The company expects to sell 7.6 million. Suppose that at the end of the year, Apple has sold 7.2 million iPhones. What is the level of planned inventories?

1.9

Using the following data, calculate government purchases for a closed economy. Please round to 1 decimal place. Y = 13.5 C = 7.9 I = 3 TR = 1.9 T = 3.3

2.6

The fictitious country of World Campustan saw its GDP per-capita increase from $36,869 in 2017 to $37,843 in 2018. What was the growth rate in 2018?

2.64

Potential GDP equals $500 billion. The economy is currently producing GDP equal to $450 billion. If the MPC is 0.56, then autonomous spending must change by $_______ billion for the economy to move to potential GDP?

22

The fictitious country of World Campustan is expected to have an average annual growth rate of GDP per-capita of 3.01% for the foreseeable future. How many years will it take World Campustan's GDP per-capita to double? Please round to 2 decimal places.

23.26

Suppose that autonomous consumption is 2,200, government purchases are 646, taxes are 0, planned investment spending is 573, net exports are 136, and the MPC is 0.53. What is the value of autonomous spending?

3.555

You're given the following two equations representing the market for loanable funds: QL = 14.8 + 3.3r QL = 60.2 - 3.1r What is the equilibrium quantity of loanable funds?

38.2

The fictitious country of World Campustan saw it's GDP per-capita increase from $6,381 in 1975 to $37,450 in 2018. What was the average annual growth rate over this time?

4.2

Using the following data, calculate private savings for a closed economy. Please round to 1 decimal place. Y = 14 C = 6.5 I = 2.4 TR = 0.5 T = 1.5

6.5

If the MPC is equal to 0.51, then a $130.84 increase in disposable income will increase savings by what amount?

64.11

You're given the following two equations representing the market for loanable funds: QL = 11.2 + 2.7r QL = 70.5 - 3.9r What is the equilibrium real interest rate?

8.9

What would you expect to be true if firms find that consumers are purchasing more than expected?

Aggregate expenditure will likely be greater than GDP.

The economic growth model predicts that

GDP per capita of poor countries will grow more rapidly than in rich countries.

In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry by instituting the assembly line. What impact did the assembly line method for producing automobiles have on the per-worker production function for Ford?

It shifted up

Empirical evidence from 1960 to 2014 shows that convergence in economic growth is occurring in which of the following cases?

Low-income industrial countries are catching up to high-income industrial countries.

If the price level in the United States is changing at a faster rate than the price level in other countries, what will be the effect on net exports for the United States?

Net exports will decrease as U.S. exports decrease.

Using the notation from this lesson and assuming we are in a closed economy, public saving is equal to which of the following

T - G - TR

Which of the following is a true statement about the multiplier?

The multiplier rises as the MPC rises

Which of the following policies is designed specifically to directly promote technological change in an economy?

government subsidization of research and development

In this lesson, we used the terms ____________________ when talking about knowledge capital and physical capital.

ideas and objects

All of the following policies are ways for a country to promote long-run economic growth except

imposing stricter regulations to limit foreign direct investment.

If the economy witnesses an unplanned decrease in inventories, we would expect to see production ___________ and employment ____________, moving the economy towards macroeconomic equilibrium.

increase, increase

Technological advances generally result in

increased life expectancy

Assuming no change to the federal budget deficit, if individuals expect their wealth to decrease in the upcoming year, the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________.

supply; right; fall

Assuming no change to the federal budget deficit, if the government passes legislation that prohibits banks from charging fees on savings accounts, the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________.

supply; right; fall