ECON CHAPTER 9 QUIZ YO

In the short run, a positive demand shock _____ aggregate output and _____ the aggregate price level.

increases and the aggregate price level.

Potential output:

is the level of output that the economy would produce if all prices, including nominal wages, were fully flexible.

The short-run aggregate supply curve will shift to the:

left if nominal wages increase.

Which of the following financial asset(s) is (are) a share of ownership in a company?

I. bonds II. loan-backed securities III. stocks

Which of the following assets is the MOST liquid?

MONEY IN A checking asccountnttt

Economists mostly agree that the problem of climate change necessitates government action in the form of market-based incentives such as:

a carbon tax or a cap and trade system

(Figure: The Multiplier) Look at the figure The Multiplier. If this economy is at Y1 and the price level decreases: http://www.macmillanhighered.com/brainhoney/resource/6712/SitebuilderUploads/krugmanwellsmacro4/krugmanwellsmacro4_lor/chapter_12/chapter_12_27_aggregate_demand_and_aggregate_supply/resources/chapter_1227-_aggregate_demand_and_aggregate_supply/r2-1.png

a downward movement along the AD1 will take place, reflecting a decrease in the price level.

If a country has a trade surplus, we can conclude that it also has:

a net capital outflow.

The financial slump that began in the United States in the summer of 2007 was a result of:

a sharp fall in housing prices.

Roads, telephone lines, power facilities, and schools are examples of a nation's:

infrastrure

An important factor determining planned investment spending is:

expected real GDP.

Aggregate demand will shift to the RIGHT if:

government purchases increase.

Banks are financial intermediaries that:

have customer deposits as the primary asset and loans to borrowers as the primary liability.

One difference between a closed and an open economy is that:

in the former, foreign savings complement domestic savings in financing investment spending.

When the price level increases, firms in perfectly competitive markets will:

increase output.

Suppose the marginal propensity to consume equals 0.9 and investment spending increases by $50 billion. Assuming no taxes and no trade, real GDP will _____ by _____.

increase; $500 billion

According to the aggregate demand curve, when the aggregate price level _____, the quantity of aggregate output _____.

rises; aggregate output demanded falls

The sources of funds for investment spending are:

savings by households, government, and foreigners.

All else equal, a nation that has a high rate of _____ will have a high rate of _____ and therefore a high growth rate of _____ capital.

savings; investment; physical

Assuming that prices remain constant, suppose that consumer assets and wealth lose value. The aggregate demand curve will undergo a:

shift to the left.

If planned investment spending increases, the planned aggregate spending line:

shifts up.

National savings is the sum of private savings and:

the budget balance.

The marginal propensity to consume is:

the change in consumer spending divided by the change in aggregate disposable income.

The price in the loanable funds market is:

the interest rate

the present value of a $110 payment in one year, given an annual 10% interest rate, is:

$100

the MPS = 0.1, then the multiplier equals:

10

An increase in the marginal propensity to consume:

An increase in the marginal propensity to consume:

f the slope of the aggregate expenditures curve is 0.75, the multiplier is:

4

Which of the following is NOT one of the three principal factors upon which planned investment spending depends?

The interest rate, the expected future level of real GDP, and the current level of production capacity. IS THE PRINCIPAL FACTORS' the expected level of real GDP the interest rate the current level of production capacity the current level of aggregate wealth

suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.8. Assuming no taxes and no trade, real GDP will _____ by _____.

decrease; $500 billion

An improvement in the business outlook of firms is a type of positive _____ shock and therefore shifts the _____ curve to the _____.

demand; aggregate demand; right

Long-run economic growth is:

higher in countries with a strong rule of law and political stability

A positive demand shock leads to:

higher prices and higher employment.

The short-run aggregate supply curve is positively sloped because:

higher prices lead to higher profit and higher output

The skills, training, and education possessed by workers that contribute to economic growth are known as:

human capital

If real GDP is greater than planned aggregate spending:

real GDP will fall.

At the income-expenditure equilibrium, _____ is zero.

unplanned inventory investment

When planned investment is less than actual investment, there must be:

unplanned inventory investment.

Aggregate spending increases when:

unplanned investment spending increases.

Diminishing returns to physical capital suggests that:

when the amount of human capital per worker and the state of technology are fixed, successive increases in the amount of physical capital per worker lead to smaller increases in productivity

Unexpectedly rising commodity prices lead to a _____ shock.

negative supply

If real GDP is $1,000 billion and the aggregate expenditure is $850 billion, then the change in inventories will be:

$150 million.

Income-expenditure equilibrium occurs when:

. real GDP equals actual aggregate spending.

.The key measure used to track economic growth is:

.real GDP per capita

according to the _____, there is a positive relationship between planned investment spending and the expected growth rate of real GDP.

accelerator principle

. Investment spending in macroeconomics refers to:

adding to physical capital.

If the government increases its borrowing, then at every interest rate there is a(n):

additional demand for funds.

The aggregate demand curve shows the relationship between the aggregate price level and (the) aggregate:

aggregate quantity of output demanded by households, businesses, the government, and the rest of the world.

An increase in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.

an increase; an increase

A liquid asset:

can be easily converted to cash.

From the standpoint of economic growth, banks are important to:

channel savings into investmment

A change in _____ would cause a shift in the short-run aggregate supply curve.

commodity prices

If prices are constant, but the value of financial assets increases, aggregate _____ shifts to the _____.

demand; right

The demand curve for loanable funds slopes

downward, because demand is lower when the price to borrow money is higher.

Technological progress allows workers to produce more:

even when the amount of physical capital and human capital do not change.

An upward shift in the aggregate consumption function can be caused by:

expectations of higher incomes

Which of the following contributes to economic development?

investment in infrastructure

To acquire human capital a person would:

learn to use a printing press

Suppose that Jim just got a $20,000 loan from his credit union to buy a new car. The loan is a _____ for Jim and a _____ for the credit union.

liability; financial asset

Which of the following is NOT a financial intermediary?

life insurance company

According to the efficient markets hypothesis, if you are trying to find out what a stock is really worth, you should:

look up the stock's currentr price

If the marginal propensity to save is small, it will:

make the multiplier larger.

The aggregate supply curve shows the relationship between the aggregate price level and the aggregate:

output supplied.

An unplanned fall in inventories leads to:

production increasing.

A negative short-run supply shock _____ aggregate output and _____ the aggregate price level.

reduces; increases

If disposable income increases:

there will be a rightward movement along the consumption function.

A common strategy to reduce the risk of a large financial loss is:

to diversify financial assets so that their risks of failure are unrelated.

If your disposable income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $12,000, your marginal propensity to consume is:

0.6

In an economy with no taxes or imports, if disposable income increases by $1,000 and consumption increases by $600, the marginal propensity to consume is:

0.60

If disposable income increases by $5 billion and consumer spending increases by $4 billion, the marginal propensity to consume equals:

0.8

s: 1. The key measure used to track economic growth is: real GDP. real GDP per capita. nominal GDP per capita. nominal GDP. Score: 1 of 1 2. Scenario: Growth Rates Suppose that real GDP per capita of the United States is $32,000 and its growth rate is 2% per year. Real GDP per capita of China is $4,000, and its annual growth rate is 7%. Reference: Ref 9-3 (Scenario: Growth Rates) Look at the scenario Growth Rates. According to the rule of 70, how large will China's real GDP per capita be in 20 years? $8,000 $5,600 $16,000 $28,000 Score: 1 of 1 3. The skills, training, and education possessed by workers that contribute to economic growth are known as: human capital. saving. output of labor. natural resources. Score: 1 of 1 4. To acquire human capital a person would: purchase a printing press rather than a very large television. save to buy a printing press. sell the books that the printing press produces. learn to use a printing press. Score: 1 of 1 5. Diminishing returns to physical capital means that when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to: negative marginal product. a decrease in the total amount of output. a constant amount of total output. a smaller increase in real GDP per worker. Score: 1 of 1 6. All else equal, a nation that has a high rate of _____ will have a high rate of _____ and therefore a high growth rate of _____ capital. savings; investment; natural savings; consumption; physical investment; savings; human savings; investment; physical Score: 1 of 1 7. From the standpoint of economic growth, banks are important to: fight inflation. keep interest rates low. channel savings into investment. channel investment into savings. Score: 1 of 1 8. Long-run economic growth is: lower in countries whose courts enforce property rights and whose government protects its citizens. higher in countries with a strong rule of law and political stability. higher in countries with a weak rule of law and excessive government intervention. lower in countries with a strong government and independent judiciary. Score: 1 of 1 9. Which of the following contributes to economic development? complete absence of government involvement a command socialist economic system low saving and investment rates investment in infrastructure Score: 1 of 1 10. Economists mostly agree that the problem of climate change necessitates government action in the form of market-based incentives such as: a reduction in the price of green cars and appliances. a reduction in the amount of gasoline that each person is allowed to purchase. tax rebates to those causing negative externalities. a carbon tax or a cap and trade system. Score: 1 of 1 11. Figure: Technological Progress and Productivity Growth Reference: Ref 9-11 (Figure: Technological Progress and Productivity Growth) Look at the figure Technological Progress and Productivity Growth. Which of the following changes in real GDP is most likely to have resulted from an increase in domestic savings? C to A A to B C to B B to A Score: 1 of 1 12. Diminishing returns to physical capital suggests that: physical capital must be increased less than human capital and technological progress for growth to occur. when the amount of human capital per worker and the state of technology are fixed, successive increases in the amount of physical capital per worker lead to smaller increases in productivity. increases in technological progress lead to decreases in productivity. physical capital increases lead to drops in productivity when the amount of human capital per worker and the state of technology are fixed. Score: 1 of 1 13. Technological progress allows workers to produce more: because it increases the amount of human capital available. because it increases the amount of physical capital available. even when the amount of physical capital and human capital do not change. only if the amount of physical capital grows at the same rate. Score: 1 of 1 14. Figure: Technological Progress and Productivity Growth Reference: Ref 9-8 (Figure: Technological Progress and Productivity Growth) Look at the figure Technological Progress and Productivity Growth. If there is significant technological progress (all other factors remaining unchanged), it is best indicated by a move from: B to A. A to B. C to B. B to C. Score: 1 of 1 15. Technological progress is advanced through: government regulation. consumption. research and development. infrastructure. Score: 1 of 1 16. Infrastructure includes: New York City's public transportation system. private equity firms. the water supply system, government bonds, and corporate stock. corporate bonds. Score: 1 of 1 17. The convergence hypothesis states that international differences in real GDP per capita tend to _____ over time. diverge narrow fluctuate remain constant Score: 1 of 1 18. Roads, telephone lines, power facilities, and schools are examples of a nation's: technostructure. infrastructure. sociostructure. physiostructure. Score: 1 of 1 19. The sources of funds for investment spending are: always equal to U.S. spending on imports. directed to their most productive uses by the U.S. government. savings by households, government, and foreigners. taxes and transfer payments. Score: 1 of 1 20. Human capital refers to: people working with capital goods. society's investment in capital goods. the education and knowledge embodied in the workforce. output per worker. Score: 1 of 1

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Infrastructure includes:

New York City's public transportation system.

Diminishing returns to physical capital means that when the amount of human capital per worker and the state of technology are held fixed, each increase in the amount of physical capital per worker leads to:

a smaller increase in the marginal product of labor

The convergence hypothesis states that international differences in real GDP per capita tend to _____ over time.

narrow

An increase in the price of oil leads to a _____ shock.

negative supply

Stagflation is usually caused by a _____ shock.

negative supply

:echnological progress is advanced through

research and development.

the Fisher effect states that:

the expected real rate of interest is unaffected by the change in expected inflation.

A business will be likely to borrow to fund projects if:

the rate of return on the project is at least as high as the interest rate on the loan.

Human capital refers to:

the skills and knowledge that enable a worker to be productive.