econ final

(Figure: Consumption Functions) Use Figure: Consumption Functions. An economy's consumption function would shift from curve C to curve C" when there is a(n):

decrease in wealth

One reason financial institutions become very large is to:

decrease transaction costs.

Other things equal, investment spending _____ when _____.

decreases; firms expect sales to fall

loanable funds borrowers:

demand funds

The _____ interest rate _____. nominal; can only be positive real; cannot be negative real; can only be positive real; can be zero, positive, or negative

real; can be zero, positive, or negative

Financial markets facilitate borrowing by simplifying negotiations between borrowers and lenders. The financial system thereby:

reduces transaction costs.

If the marginal propensity to consume is 0.9, and investment spending increases by $50 billion, the change in real GDP will be $_____ billion.

increase 500bil

increase in aggregate wealth

increase in aggregate consumption

If the nominal interest rate is 4%, and the inflation rate is 1%, then the real interest rate is _____%.

real = nominal - inflation

The four main types of financial assets do NOT include:

real estate (financial assets: bank deposits, stocks, bonds, and loans.)

(Figure: Aggregate Expenditures Curve III) Use Figure: Aggregate Expenditures Curve III. Suppose that the consumption function shifts upward by $100. Equilibrium real GDP will rise by: ​ ​ $100. $400. $800. $3,200. ​

-

If the marginal propensity to save is 0.25, and investment spending increases by $50 billion, the change in real GDP will be $_____ billion.

200 bil

If the marginal propensity to save is 0.25, and investment spending increases by $50 billion, the change in real GDP will be $_____ billion. 200 66.67 50 2,000

200 bil

Which annual rate of inflation is hyperinflation? 5% 13% 25% 2000%

2000%... above 50

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%.

35 yrs

Suppose that there is no trade and no government. GDP is $25 trillion, and consumption spending is $18 trillion. What is the level of private saving? You Answered $7 trillion $18 trillion $43 trillion -$7 trillion ​

7 tril

(Table: Labor Force Data) If the labor force participation rate is 70%, the unemployment rate is _____%. Labor Force Data Total population200 million Population age 16 and older150 million Employed97 million

7.6%

A fixed nominal interest rate of _____% with _____% inflation will yield the highest real rate of return for a lender.

8:1

(Table: Investment Projects) Use Table: Investment Projects. If the market interest rate is 11.5%, the quantity of loanable funds demanded is:

?

(Table: Kenya's Economy in 2010) Use Table: Kenya's Economy in 2010. During 2010, assuming there are no changes in the price level, aggregate output per capita in Kenya grew at a rate of: Table: Kenya's Economy in 2010Aggregate output at the beginning of the year$31 billionPopulation at the beginning of the year40 millionOutput growth5.2%Population growth2.6% 0.6%. 2.6%. 5.2%. 7.8%.

?

(Table: National Income Accounts) Use Table: National Income Accounts. The value of private savings is: Table: National Income AccountsTrillionsGDP$20.0Consumption14.0Government Spending3.0Exports2.2Imports2.7Budget Balance-1.2 ​ $1.8 trillion. $0.5 trillion. $4.2 trillion. $14 trillion. ​

?

Government spending is NOT like investment when it: helps pay for education. provides infrastructure for the economy. is used to promote public health. is used to monitor environmental restrictions.

?

(Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. Which change in real GDP is MOST likely to have resulted from an increase in the quality (as well as quantity) of government spending on education?

B TO C

A downward shift of the consumption function can be caused by:

a decrease in wealth.

Suppose that the U.S. economy is in a severe recession. Most households are trying to save more of their income than before. This increase in private savings will lead to:

a fall in real GDP, as more savings means people will spend less.

crowding out refers to

a negative effect on private investment spending of government deficit spending

Which government policy promotes economic growth? building infrastructure and providing public goods implementing a monetary policy that causes prices, on average, to fall implementing a fiscal policy that increases inflation increasing the interest rate charged on student loans

building infrastructure and providing public goods

The demand curve for loanable funds slopes:

downward, because the quantity of loanable funds demanded falls when the price of borrowing money rises.

The rule of 70 is MOST useful in: identifying the causes of economic growth. identifying the sources of economic growth. estimating the productivity of labor. estimating the doubling time of real GDP for a given growth rate.

estimating the doubling time of real GDP for a given growth rate.

The official unemployment rate reported by the government may tend to understate the amount of unemployment because it:

excludes discouraged workers

If real GDP is less than aggregate spending, then inventories will _____, and firms will _____. increase; cut back on future production fall; decrease the prices of their products increase; lower their product prices fall; increase their future production ​

fall, increase future production

Sources of financing of physical capital include:

foreign investment in the home country.

Structural unemployment CANNOT be caused by: a government-mandated floor on the price of labor set above the equilibrium wage. collective bargaining efforts that secure higher wages for unionized workers than for nonunionized workers. offering high wages to attract high-quality workers. granting Social Security benefits to laid-off workers.

granting social security

Two primary goals of macroeconomic policy makers are price stability and _____ unemployment.

low

MPC

marginal propensity to consume

Someone who must decide whether to receive $100 now or $100 one year from now will probably choose _____, since there is a(n) _____ in waiting to use the money.

opportunity cost

An amount that would correspond to a particular future value if deposited today at a specific interest rate is the:

present value

Economists use real GDP per capita to measure economic growth: because it does not adjust for price changes. because poor nations have large populations, and the populations of richer nations are declining. because it provides an inflation-adjusted measure of a country's production of goods and services, controlled for population. even though nominal GNP per capita is a superior measure of economic growth.

provides inflation-adjusted measure

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

factor that does NOT affect consumer spending is: current disposable income. wealth. past disposable income. expected disposable income.

shifters

In the loanable funds market, savers:

supply funds

A budget surplus exists when: taxes are greater than government spending. taxes are less than government spending. taxes are less than government spending plus investment. investment is less than government spending less taxes. ​

taxes are greater than government spending.

The MOST important driver of economic growth appears to be:

technological progress

If aggregate spending is higher than real GDP: there are unplanned decreases in inventories. employment decreases. aggregate output decreases. actual real output is greater than equilibrium real output. ​

there are unplanned decreases in inventories.

Unemployment rates are usually higher in Europe than in the United States because: the minimum wage is higher in the United States than in Europe. U.S. economic policy is much more effective than European economic policy. there are more unskilled, uneducated workers in Europe than in the United States. unemployment benefits are more generous in Europe than in the United States.

unemployment benefits are more generous in Europe than in the United States.