Econ 1204 Test 2

Stock represents

a claim to a share of the profits of a firm, ownership in a firm, equity finance

When a large, well-known corporation wishes to borrow directly from the public, it can

sell bonds

An understanding of the best ways to produce goods and services is called

technology

The economy's two most important financial markets are

the bond market and stock market

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

the government's tax revenue is equal to its expenditure.

Cedar Valley Furniture uses five workers, each working eight hours, to produce eighty rocking chairs. What is the productivity of these workers?

2 chairs per hour

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $4 billion worth of goods and services each year, collects $6 billion in taxes, and provides $1 billion in transfer payments to households. Private saving in Cedarland is $4 billion. What is investments and consumption amount?

5 billion investment and 8 billion consumption

Last year, real GDP per person in the imaginary nation of Olympus was 4,500. The year before it was 4,250. By about what percentage did Olympian real GDP per person grow during the period?

5.9 percent

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Bond A has a term of 20 years when bond B has a term of 2 years

Which of the following is correct? a. In the national income accounts, investment and private saving refer to the same thing. b. In a closed economy if national saving is greater than zero, then everyone must be saving. c. The financial system channels funds from savers to borrowers. d. People whose consumption exceeds their income are savers.

C. the financial system channels funds from savers to borrowers.

If the government's expenditures exceeded its receipts, it would likely a. lend money to a bank or other financial intermediary. b. borrow money from a bank or other financial intermediary. c. buy bonds directly from the public. d. sell bonds directly to the public.

D. Sell bonds to the public directly.

All else equal, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit?

Output will rise by less than it did when the previous unit was added.

In a closed economy, what does (Y - T - C) represent?

Private savings

Which of the following is not always correct for a closed economy?

Private savings equals investments

the quantity of goods and services produced from each unit of labor input

Productivity

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

capital investments

Which of the following lists correctly identifies the four expenditure categories of GDP?

consumption, govt purchases, investments, net exports

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will

demand funds from the financial system by selling bonds.

All or part of a firm's profits may be paid out to the firm's stockholders in the form of

dividends

Institutions that help to match one person's saving with another person's investment are collectively called the

financial systems

The purchase of a new house is the one form of

household spending that is investment rather than consumption.

On a production function, as capital per worker increases, output per worker

increases. The increase is smaller at larger values of capital per worker.

Suppose that a new government is elected in Lawrencia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Lawrencia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably

raise real GDP and raise productivity in Lawrencia.

Other things the same, a government budget deficit

reduces the public savings and the national savings

Suppose the market for loanable funds is in equilibrium. What would happen in the market for loanable funds, other things the same, if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts?

the interest rate would fall and the quantity of loanable funds would increase

Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,

their investments are being financed by someone else's savings