ECON 2020 8-13

The figure above shows the labor market in a small town. If the government imposes ________ that firms must at least pay, the effect will be ________ because ________. a. an efficiency wage of $10; a decrease in unemployment; a surplus of labor is created b. a minimum wage of $10; an increase in unemployment; a surplus of labor is created c. a minimum wage of $10; a decrease in unemployment; a shortage of labor is created d. an efficiency wage of $10; an increase in unemployment; a shortage of labor is created

a minimum wage of $10; an increase in unemployment; a surplus of labor is created

If a surplus of loanable funds exists in the loanable funds market, the real interest rate ________ and the quantity of saving ________. a. rises; increases b. rises; decreases c. falls; increases d. falls; decreases

falls; decreases

When the expected profit ________, investment demand ________ and the ______ for loanable funds curve shifts ________. a. falls; decreases; demand; leftward b. rises; increases; supply; leftward c. falls; decreases; demand; rightward d. rises; decreases; supply; rightward

falls; decreases; demand; leftward

Economic growth is enhanced by_____, and the following policies encourages economic growth______. a. free international trade; creation of tax-free savings accounts b. limiting international trade so that the domestic economy can prosper; high tariffs and strict import quotas on foreign-made products c. discouraging saving because increased saving means less spending; increased taxes on income and business profits d. ignoring incentive systems; limiting the years people spend in education so that they can start productive work

free international trade; creation of tax-free savings accounts

The word "capital" refers to ______, and financial capital________ a. the tools, instruments, and other produced goods used to produce goods and services; depends on saving and borrowing decisions. b. the funds that firms use to buy and operate their businesses; is accumulated investment. c. purchases in the market for stocks and bonds; is another name for the machines and tools that businesses buy. d. the workers that firms employ to produce goods and services; is independent of physical capital.

the tools, instruments, and other produced goods used to produce goods and services; depends on saving and borrowing decisions.

The above figure shows a nation's production function. Point A is____, and point B is_______ a. the maximum amount of real GDP the nation can produce; unattainable. b. attainable if the economy is inefficient; attainable if the nation uses resources inefficiently. c. unattainable given the state of the economy; attainable if the nation uses resources efficiently. d. attainable if the nation uses resources efficiently; the maximum amount of real GDP the nation can ever produce.

unattainable given the state of the economy; attainable if the nation uses resources efficiently.

The tables above show a nation's labor demand and labor supply schedules and its production function. The equilibrium real wage rate is ________ and the full employment Real GDP is ________ billions of dollars. a. $40; 3.7 b. $40; 4.2 c. $50; 3.0 d. $30; 4.5

$40; 4.2

The population in the current year is 32 million and the real GDP is $835 million. The previous year's statistics were a population of 31 million and a real GDP of $800 million. The change in the standard of living is a. 1.074 percent b. 7.75 percent c. .13 percent d. 1.15 percent

1.15 percent

Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's gross investment is ________ mowers; net investment is _____mowers, and his capital at the end of the year is ____mowers. a. 10; 7; 27 b. 13; 10; 27 c. 7; 27; 30 d. 27; 13; 33

10; 7; 27

Belgium's real GDP per person is $33,000 and Austria's is $34,700. The population growth rate in Belgium is 0.13 percent and the growth rate of real GDP is 3.0 percent. The population growth rate in Austria is 0.08 percent and the growth rate of real GDP is 3.3 percent. If these growth rates continue, how many years will it take for Belgium's real GDP per person to equal Austria's real GDP per person? a. just over 23 years b. Belgium's standard of living will never equal Austria's. c. just over 24 years d. just over 21 years

Belgium's standard of living will never equal Austria's.

In the loanable funds market, which of the following is an example of investment demand? a. Mary buying stocks for her retirement portfolio. b. George purchasing United States savings bonds for his son's college fund. c. Scott purchasing a rookie-year baseball card for last year's World Series MVP. d. Brian, owner of Bryan Games, purchasing computers to enhance the production of games.

Brian, owner of Bryan Games, purchasing computers to enhance the production of games.

In which of the following cases would the supply of loanable funds curve shift rightward? a. Joe is worried about cutbacks at his firm so his expected future income falls. b. In June, Sally learns that at year's end she will receive a bonus that will double her current salary. c. The stock market booms so people's wealth increases. d. The economy moves into a recession.

Joe is worried about cutbacks at his firm so his expected future income falls.

A rise in the price level produces ________ the potential GDP line, _____the aggregate supply curve, and ______the aggregate demand curve. a. a rightward shift of; a rightward shift of; a leftward shift in b. a movement downward along; a movement downward along; a movement downward along c. neither a shift nor a movement along; neither a shift nor a movement along; neither a shift nor a movement along d. a movement upward along; a movement upward along; a movement upward along

a movement upward along; a movement upward along; a movement upward along

If the price level increases, there is ________ the AD curve and the quantity of real GDP demanded ________. a. a movement downward along; increases b. a rightward shift of; increases c. a movement upward along; decreases a leftward shift of; decreases

a movement upward along; decreases

When the macroeconomic equilibrium is such that real GDP is less than potential real GDP, the economy is suffering from ________, and the government policy to eliminate this gap will ________ real GDP and ______ the price level. a. a recessionary gap; decrease; decrease b. an inflationary gap; increase; decrease c. a recessionary gap; increase; increase d. an inflationary gap; decrease; increase

a recessionary gap; increase; increase

Economic growth is defined as_______, and is expressed as the ________ . a. a decrease in the rate of inflation; standard of living b. an increase in the employment; real GDP minus population c. a sustained expansion of production possibilities; annual percentage change of real GDP d. a one-time increase in real GDP; annual percentage change of real GDP per person.

a sustained expansion of production possibilities; annual percentage change of real GDP.

Human capital is defined as the _______, and the expansion of human capital and the discovery of new technologies ________ because ________. a. skills that people are born with; are subject to diminishing returns; they shift the productivity curve downward b. number of factories built for human beings; are subject to diminishing returns; they shift the productivity curve upward c. amount of machinery human beings have; are not subject to diminishing returns; they shift the productivity curve downward d. accumulated skill and knowledge of human beings; are not subject to diminishing returns; they shift the productivity curve upward

accumulated skill and knowledge of human beings; are not subject to diminishing returns; they shift the productivity curve upward

In the figure above, the economy is at _________, as the economy naturally moves toward its ultimate equilibrium, the ________ curve shifts ________ because ________. a. below full employment; aggregate supply; leftward; the real wage rate rises b. below full employment; aggregate supply; rightward; the money wage rate falls c. below full employment; aggregate demand; rightward; the money wage rate falls d. below full employment; potential GDP; leftward; the real wage rate falls

below full employment; aggregate supply; rightward; the money wage rate falls

The table above gives the aggregate demand and aggregate supply schedules in the economy of Pearldesh. If the potential GDP in Pearldesh is $11.0 trillion, the economy is now at ______ equilibrium, with a(n) ______, and its unemployment rate is _____ the natural rate of unemployment. a. above full employment; recessionary gap; above b. above full employment; inflationary gap; below c. below full employment; inflationary gap; below d. below full employment; recessionary gap; above

below full employment; recessionary gap; above

In the figure above, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve. If there is no Ricardo-Barro effect, the figure shows the situation in which the government has a ________ so that the equilibrium real interest rate is ________ and the equilibrium quantity of investment is ________. a. budget surplus of $1 trillion; 4 percent; $1 trillion b. budget deficit of $0.5 trillion; 4 percent; $1.0 trillion c. budget deficit of $1 trillion; 6 percent; $2.0 trillion d. budget surplus of $0.5 trillion; 6 percent; $1.5 trillion

budget deficit of $1 trillion; 6 percent; $2.0 trillion

The presence of efficiency, minimum and union wages... a. can explain job rationing because they raise the real wage rate above equilibrium. b. can explain job rationing because they lower the natural unemployment rate. c. can explain job rationing because they lower the real wage rate below equilibrium. d. does not affect job rationing because they affect only the amount of job search.

can explain job rationing because they raise the real wage rate above equilibrium.

A country reports that its price level fell and the money wage rate did not change. This will lead to a(n) ________ because the country experienced a(n) ________. a. decrease in the quantity of real GDP supplied; higher real wage rate and lower profits for firms b. increase in the quantity of real GDP supplied; lower real wage rate and higher profits for firms c. decrease in aggregate supply; higher real wage rate and lower profits for firms d. increase in aggregate supply; lower real wage rate and higher profits for firms

decrease in the quantity of real GDP supplied; higher real wage rate and lower profits for firms

An increase in the real wage rate ________ the quantity of labor demanded, ______ the quantity of labor supplied, and when the labor market is in equilibrium,_________ a. decreases; decreases; Real GDP is greater than potential GDP. b. increases; decreases; Real GDP is less than potential GDP. c. decreases; increases; there is full employment and potential GDP is produced. d. increases; increases; the unemployment rate is zero.

decreases; increases; there is full employment and potential GDP is produced.

Crowding out can occur when a government budget ________ raises the real interest rate and at the equilibrium the quantity of private investment ________. a. surplus; increases b. surplus; decreases c. deficit; increases d. deficit; decreases

deficit; decreases

Which of the following increases frictional and/or structural unemployment? a. ii only b. i only c. i, ii, and iii d. iii only

i, ii, iii

If the real interest rate falls, people decide to ________ because the opportunity cost of ________. a. increase their consumption expenditure; saving has decreased b. increase their consumption expenditure; consumption has decreased c. decrease their consumption expenditure; consumption has decreased d. save more; saving has decreased

increase their consumption expenditure; consumption has decreased

A technological advancement ________ aggregate supply, shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle. a. decreases; rightward; expansion b. decreases; leftward; recession c. increases; rightward; expansion d. increases; rightward; recession

increases; rightward; expansion

The global economy enters a recession, and real GDP in the rest of the world decreases. As a result, in the United States, _________; if the aggregate supply curve does not shift, then aggregate demand will ________, real GDP will ________, and the price level will ________. a. government expenditure will decrease; decrease; decrease; increase b. all will remain the same; not change; remain the same; will remain the same c. unemployment rate will decrease; increase; increase; decrease d. level of exports will decrease; decrease; decrease; decrease

level of exports will decrease; decrease; decrease; decrease

The Classical macroeconomic model proposes that______, and the Keynesian macroeconomic model proposes that________ a. changes in the quantity of money are critical in driving economic growth; real GDP equals potential GDP as long as inflation equals zero. b. government intervention is required to help the economy reach its potential; markets work efficiently to produce the best macroeconomic outcomes. c. government intervention is an appropriate tool to steady the economy; the economy is fairly stable. d. markets work efficiently to produce the best macroeconomic outcomes; the economy is inherently unstable and government intervention is required to maintain continued economic growth.

markets work efficiently to produce the best macroeconomic outcomes; the economy is inherently unstable and government intervention is required to maintain economic growth.

In the productivity curve figure above, when the quantity of capital per hour of labor increases, the change in the labor productivity could be illustrated as _________, the discovery of new technologies could be illustrated as______, and the combined effect of capital accumulation, discovery of new technologies, and the expansion of human capital on the labor productivity could be illustrated as________ . a. movement from A to B; a shift from A to C; a shift from A to D b. movement from B to A; movement from A to B; a shift from A to C c. shift from A to C; movement from B to A; a shift from B to D d. shift from A to D; movement from C to D; a movement from A to B

movement from A to B; a shift from A to C; a shift from A to D

The production function describes the relationship between____, along the production function the factor of production that is NOT fixed is ______, and as additional units of the factor of production (that is not fixed) are employed, holding all other factors constant,__________ a. real and potential GDP; money; real GDP increases at an increasing rate. b. the real wage and the quantity of labor supplied; technology; potential GDP increases at an increasing rate. c. potential GDP and the real wage rate; labor; potential GDP increases at a decreasing rate. d. real GDP and the quantity of labor employed; labor; real GDP increases at a decreasing rate.

real GDP and the quantity of labor employed; labor; real GDP increases at a decreasing rate.

The idea that potential GDP is the sustainable upper limit of production means that... a. nominal GDP may be temporarily less than potential GDP. b. real GDP may be temporarily larger than potential GDP, but not permanently. c. unemployment can only temporarily be zero in a healthy economy. d. Real GDP must always be the same as potential GDP in a growing economy.

real GDP may be temporarily larger than potential GDP, but not permanently.

The productivity curve is a relationship between... a. real GDP per hour of labor and capital per hour of labor, with technology held constant. b. nominal GDP per hour of labor and capital per hour of labor, with technology held constant. c. real GDP per hour of labor and capital per hour of labor whenever technological growth occurs. d. real GDP per unit of capital and capital per hour of labor, with technology held constant.

real GDP per hour of labor and capital per hour of labor, with technology held constant.

Labor productivity is defined as______, and an increase in labor productivity______ . a. hours of work per person; might be the result of an increase in the quantity of labor b. real GDP per person; cannot occur without a corresponding increase in employment c. total output multiplied by total hours of labor; generally occurs when physical capital decreases because firms must then hire more workers d. real GDP per hour of labor; increases the standard of living

real GDP per hour; increases the standard of living

Classical growth theory predicts that increases in_______, the New Growth theory predicts that _____, and ________ . a. real GDP per person is permanent and sustainable; economic growth is only temporary; technological advances are the result of random chance. b. real GDP per person is temporary and not sustainable; economic growth can last indefinitely; technological advances are the result of discoveries and choices. c. resources permanently increase labor productivity; ultimately people earn a subsistence wage; the subsistence level of income leads to technological advances. d. resources permanently increase real GDP per person; government policies can do nothing to foster increased growth; it is impossible to replicate production activities.

real GDP per person is temporary and not sustainable; economic growth can last indefinitely; technological advances are the result of discoveries and choices.

Moving along the AS curve, when the price level increases, the... a. real wage rate falls, and there is an increase in the quantity of real GDP supplied b. real wage rate rises, and there is an increase in the quantity of real GDP supplied. c. nominal wage rate falls, and there is an increase in the quantity of real GDP supplied. d. nominal wage rate rises, and there is a decrease in the quantity of real GDP supplied.

real wage rate falls, and there is an increase in the quantity of real GDP supplied.

In the Aggregate Supply-Aggregate Demand model, economic growth is a persistent ____in the ______, and inflation arises from a persistent increase in ____at a faster pace than a persistent increase in ______. a. rightward shift; aggregate demand; aggregate supply; aggregate demand b. leftward shift; potential GDP line; potential GDP; aggregate supply c. rightward shift; potential GDP line; aggregate supply; aggregate demand d. rightward shift; potential GDP line; aggregate demand; potential GDP

rightward shift; potential GDP line; aggregate demand; potential GDP

Suppose that there is an increase in expected future disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________. a. rises; might increase, decrease, or not change b. rises; increases c. rises; decreases d. falls; might increase, decrease, or not change

rises; might increase, decrease, or not change

An increase in capital brings a large increase in output at a ________ quantity of capital and a small increase in output at a ________ quantity of capital because of ________. a. small; large; the smaller the quantity of capital the smaller the output b. small; large; diminishing returns along the productivity curve c. large; small; the greater the quantity of capital the greater the output d. large; small; the smaller the quantity of capital the smaller the output

small; large; diminishing returns along the productivity curve

A country reports that its actual real GDP is greater than its potential GDP. It must be that... a. more workers decided to quit work in order to enjoy leisure time. b. the excess by which real GDP exceeds potential GDP is only temporary, and eventually, real GDP will decrease to be equal to potential GDP. c. unemployment rate is temporarily zero. d. an error was made when calculating actual real GDP.

the excess by which real GDP exceeds potential GDP is only temporary, and eventually, real GDP will decrease to be equal to potential GDP.