econ final 2

Answer: B

1) An increase in labour hours will lead to A) an upward shift of the aggregate production function. B) a movement along the aggregate production function. C) both a movement along and an upward shift of the aggregate production function. D) neither a movement along nor a shift of the aggregate production function. E) a downward shift of the aggregate production function.

Answer: B

1) Between 1926 and 2014, the average growth rate of real GDP per person in Canada was ________ percent a year. During this period, ________ grew at a faster rate than the population. A) 2.0; GDP; B) 2.0; real GDP C) 1.0; inflation D) 3.0; real GDP E) 3.0; GDP

Answer: A

1) Capital is A) the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services. B) financial wealth. C) the sum of investment and government expenditure on goods. D) net investment. E) gross investment.

Answer: E

1) Economic growth is A) a sustained expansion of the population. B) a sustained expansion of consumption expenditure over a given period. C) always accompanied by a rising price level. D) equal to real GDP per capita multiplied by 70. E) the expansion of production possibilities.

Answer: D

1) If capital per worker decreases, real GDP per hour of labour A) decreases because the level of technology decreases. B) increases because the level of technology increases. C) increases for a given level of technology. D) decreases for a given level of technology. E) none of the above

Answer: A

1) If net taxes exceed government expenditures, the government sector has a budget ________ and government saving is ________. A) surplus; positive B) surplus; negative C) deficit; positive D) deficit; negative E) balance that is zero; zero

Answer: A

1) Knowledge capital is different from physical capital because knowledge capital A) does not experience diminishing returns. B) experiences diminishing returns. C) is free. D) increases with investment. E) plays a part in economic growth.

Answer: A

10) Suppose the market for loanable funds is in equilibrium. If expected profit falls, the equilibrium real interest rate ________ and the quantity of loanable funds ________. A) falls; decreases B) falls; increases C) rises; increases D) rises; decreases E) falls; increases or decreases but we don't know for sure

Answer: A

10) The aggregate production function shows how ________ varies with ________. A) real GDP; labour B) labour; leisure C) real GDP; leisure D) labour; capital E) real GDP; capital

Answer: B

11) Refer to Figure 23.2.5. In Figure 23.2.5, the supply of loanable funds curve is SLF0 and the demand for loanable funds curve is DLF0. An expansion that increases disposable income and expected profit A) shifts the supply of loanable funds curve rightward to curve SLF1 and does not shift the demand for loanable funds curve. B) shifts the supply of loanable funds curve rightward to curve SLF1, and shifts the demand for loanable funds curve rightward to curve DLF1. C) shifts the demand for loanable funds curve rightward to curve DLF1 and does not shift the supply of loanable funds curve. D) has no effect on either the demand for loanable funds curve or the supply of loanable funds curve. E) increases the inflation rate.

Answer: D

11) When labour productivity decreases, there is ________ the production function and ________ in potential GDP. A) a movement down along; no change B) a movement down along; a decrease C) a downward shift of; no change D) a downward shift of; a decrease E) neither a movement along nor a shift of; no change

Answer: E

4) Factors that influence labour productivity include A) the inflation rate, the real wage rate, and the exchange rate. B) the labour demand curve. C) physical capital, the real wage rate, and technology. D) the demand for labour, the real wage rate, and technology. E) physical capital, human capital, and technology.

Answer: B

4) If a bank's net worth is negative, then the bank is A) liquid. B) insolvent. C) illiquid. D) solvent. E) none of the above

Answer: A

4) If real GDP per person is growing at 4 percent per year, it will double in A) 17.5 years. B) 25 years. C) 4 years. D) 8 years. E) 56 years.

Answer: D

4) If the real wage rate is $10.00 an hour and the price level is 60, the money wage rate is A) $16.75 an hour. B) $18.50 an hour. C) $10.00 an hour. D) $6.00 an hour. E) $16.67 an hour.

Answer: C

4) The quantity of loanable funds demanded increases when A) expected profit decreases. B) the real interest rate rises. C) the real interest rate falls. D) the supply of loanable funds decreases. E) wealth increases.

Answer: A

5) A stock is A) a certificate of ownership and claim to the firm's profits. B) a promise to make specified payments on specified dates. C) a document which entitles its holder to the income from a package of mortgages. D) a financial market. E) available from a bank in the form of a loan.

Answer: B

5) Growthland's real GDP per person was $112,000 in 2013 and $117,000 in 2014. What is the growth rate of Growthland's real GDP per person in 2014? A) 4.3 percent B) 4.5 percent C) 5 percent D) 12 percent E) 17 percent

Answer: E

5) Labour productivity rises when A) technological progress is stagnant. B) firms invest more in hiring workers than in replacing worn-out capital. C) the amount of capital per worker decreases. D) the real wage rate falls. E) the amount of capital per worker increases.

Answer: B

5) Refer to Figure 22.3.2. The equilibrium quantity of labour is A) 100 billion hours. B) 150 billion hours. C) 200 billion hours. D) 50 billion hours. E) 250 billion hours.

Answer: C

5) Refer to Figure 23.2.2. In Figure 23.2.2, a decrease in expected profit will result in a movement from point E to A) point F. B) point G. C) point H. D) point I. E) either point G or point H.

Answer: A

12) When labour productivity decreases, the A) demand for labour curve shifts leftward and the real wage rate falls. B) supply of labour curve shifts rightward and the real wage rate fall. C) supply of labour curve shifts leftward and the real wage rate rises. D) demand for labour decreases and the supply of labour decreases, and the real wage rate rises, falls, or remains unchanged. E) demand for labour decreases and the supply of labour increases, and the real wage rate falls.

Answer: A

12) When the inflation rate is zero, the A) real interest rate equals the nominal interest rate. B) demand for loanable funds increases. C) supply of loanable funds decreases. D) nominal interest rate is zero. E) real interest rate is negative.

Answer: C

13) Which of the following explains why the demand for loanable funds is negatively related to the real interest rate? A) Consumers are willing to spend less so they save more at higher real interest rates. B) Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment. C) A lower real interest rate makes more investment projects profitable. D) All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate. E) None of the above are reasons why the demand for loanable funds is negatively related to the real interest rate.

Answer: D

14) Consider Table 23.2.3. If planned saving decreases by $1.0 trillion at each real interest rate, what is the new equilibrium real interest rate? A) 2 percent a year B) 5 percent a year C) 2.5 percent a year D) 3.5 percent a year E) There is no new equilibrium real interest rate.

Answer: E

2) A government budget deficit ________ the demand for loanable funds, ________ the real interest rate, and ________ investment. A) increases; decreases; crowds out B) increases; increases; increases C) decreases; increases; increases D) decreases; increases; crowds out E) increases; increases; crowds out

Answer: D

2) According to the law of diminishing returns, along the aggregate production function, an additional unit of A) capital produces more output than an additional unit of labour. B) labour decreases output. C) labour produces more output than the previous unit. D) labour produces less output than the previous unit. E) labour increases the real wage rate.

Answer: A

2) Approximately, the real interest rate ________ the inflation rate ________ the nominal interest rate. A) plus; equals B) equals; plus C) equals; minus D) minus; equals E) times; divided by 100 equals

Answer: C

2) Human capital is the A) machinery used by humans to produce GDP. B) technology used by humans to produce GDP. C) skill and knowledge accumulated by humans. D) plant and equipment produced by humans and not by machines. E) technology used by humans to produce real GDP.

Answer: A

2) If the economy's capital increases over time, A) net investment is positive. B) depreciation is less than zero. C) depreciation exceeds gross investment. D) gross investment equals depreciation. E) gross investment is zero.

Answer: A

2) In 2012, Northland had real GDP of $4.21 billion and a population of 2.98 million. In 2013, real GDP was $4.59 billion and population was 2.97 million. Northland's real GDP per person in 2013 was A) $1,545. B) $380. C) $1,413. D) $132. E) $1.41.

Answer: D

2) Which of the following does not contribute to achieving faster growth? A) increased research and development B) improvement in the quality of education C) provision of international aid to developing nations D) slowing down international trade so that more countries become self-sufficient E) increased saving

Answer: A

3) According to the Ricardo-Barro effect, A) the government budget has no effect on the real interest rate. B) a government budget deficit crowds out private investment. C) financing government spending with taxes has a less severe effect on private investment than financing through government borrowing. D) a government budget surplus crowds out private investment. E) a government budget surplus crowds out private saving.

Answer: B

3) As the ________ interest rate increases, the quantity of loanable funds demanded ________. A) real; increases B) real; decreases C) nominal; increases D) nominal; decreases E) none of the above. There is no relationship between interest rates and loanable funds.

Answer: C

3) Refer to Figure 22.3.1. The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) move to point such as Y. B) remain at point W. C) move to point such as X. D) move to point such as Z. E) either remain at point W or move to point X.

Answer: E

3) Suppose a country's population grows by 2 percent a year and, at the same time, its real GDP grows by 5 percent a year. Real GDP per person is increasing by ________ a year. A) 2 percent B) 5 percent C) 10 percent D) 16 percent E) 3 percent

Answer: C

3) Which of the following is FALSE? A) Saving adds to wealth. B) Income left after paying taxes can either be consumed or saved. C) Saving equals wealth minus consumption expenditure. D) Saving is the source of funds used to finance investment. E) Saving supplies funds in loan markets, bond markets, and stock markets.

Answer: A

3) Which of the following is not a source of economic growth? A) increasing stock market prices B) better educated workers C) growing physical capital D) appropriate incentive system E) advances in technology

Answer: C

4) A government budget surplus occurs, which ________ loanable funds. The real interest rate ________, household saving ________, and investment ________. A) increases the demand for; rises; increases; decreases B) increases the supply of; falls; increases; decreases C) increases the supply of; falls; decreases; increases D) decreases the demand for; falls; decreases; increases E) decreases the supply of; decreases; decreases; increases

Answer: E

6) Choose the statement that is incorrect. A) The growth rate of real GDP per person can be calculated approximately by subtracting the population growth rate from the real GDP growth rate. B) Real GDP per person grows only if real GDP grows faster than the population grows. C) The standard of living depends on real GDP per person. D) Real GDP increases when the economy returns to full employment in an expansion phase of the business cycle. E) The return to full employment in an expansion phase of the business cycle is economic growth.

Answer: D

6) Households will choose to save more if A) expected future income decreases. B) current disposable income increases. C) current disposable income decreases. D) Both A and B are correct. E) Both A and C are correct.

Answer: D

6) Refer to Table 22.3.1. The tables show the labour market and the production function schedule for the country of Pickett. An increase in population changes the quantity of labour supplied by 20 billion hours at each real wage rate. Potential GDP A) does not change. B) decreases to $3 trillion. C) increases to $50 trillion. D) increases to $18 trillion. E) increases to $20 trillion.

Answer: A

7) Changes in all of the following shift the supply curve of loanable funds EXCEPT A) the real interest rate. B) wealth. C) disposable income. D) expected future income. E) default risk.

Answer: C

7) Labour productivity is A) real GDP per hour of labour times the hours of work. B) real GDP per hour of labour times the population. C) the quantity of real GDP produced by an hour of labour. D) the rate of change in real GDP per hour of labour. E) shown as a movement along the production function.

Answer: D

8) In Figure 23.2.4, the economy is at point A on the supply of loanable funds curve SLF0. What happens if disposable income decreases? A) Nothing; the economy would remain at point A. B) There is a movement to a point such as B on the supply of loanable funds curve SLF0. C) The supply of loanable funds curve shifts rightward to a curve such as SLF2. D) The supply of loanable funds curve shifts leftward to a curve such as SLF1. E) The supply of loanable funds curve becomes downward sloping.

Answer: B

8) When labour productivity increases, the demand for labour curve ________ and the supply of labour curve ________. A) shifts rightward; shifts rightward B) shifts rightward; does not shift C) shifts leftward; shifts rightward D) shifts leftward; does not shift E) shifts rightward; shifts leftward

Answer: A

9) If new capital increases labour productivity, the supply of labour ________ and the demand for labour ________. A) stays the same; increases B) increases; increases C) increases; decreases D) decreases; stays the same E) increases; stays the same

Answer: B

9) If the real interest rate is below the equilibrium real interest rate, A) lenders are unable to find borrowers willing to borrow all of the available funds and the real interest rate falls. B) borrowers are unable to borrow all of the funds they want to borrow and the real interest rate rises. C) lenders are unable to find borrowers willing to borrow all of the available funds and the real interest rate rises. D) borrowers are unable to borrow all of the funds they want to borrow and the real interest rate falls. E) a surplus of loanable funds exists.

Answer: C

Consumption expenditure 80 Government expenditure on goods 30 and services Net taxes 35 Investment 20 Imports 10 Exports 20 1) Refer to Table 23.2.1. Government saving is A) $15 million. B) -$5 million. C) $5 million. D) $45 million. E) $20 million.