Econ test 4

Which of the following best describes the "wealth effect"?

When the price level falls, the real value of household wealth rises

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

$2 trillion and $1 trillion, respectively

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving?

1,000, 500, and 1,500, respectively

If real GDP in a small country in 2012 is $8 billion and real GDP in the same country in 2013 is $8.3 billion, the growth rate of real GDP between 2012 and 2013

3.75%

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita?

4.7%

If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve?

This will shift the aggregate demand curve to the right.

Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be lo w. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?

Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate.

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 and Bond B has a term of 2 years

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Demand for existing shares of the stock and the price will both fall

Refer to Figure 10-2. Which of the following is consistent with the graph depicted above?

New government regulations decrease the profitability of new investment.

Refer to Figure 10-1. Which of the following is consistent with the graph depicted above?

Technological change increases the profitability of new investment

what is true about companies stock?

The expected future profitability of a corporation influences the demand for that corporation's stock

Countries with high rates of economic growth tend to have

a labor force that is more productive

An increase in the demand for loanable funds will occur if there is

an increase in expected profits from firm investment projects

Which of the following will shift the aggregate demand curve to the right, ceteris paribus

an increase in net exports

what would you expect to increase the equilibrium interest rate?

an increase in the budget deficit

An increase in the real interest rate results in which of the following?

an increase in the quantity of loanable funds supplied

In comparison to a government that runs a balanced budget, when the government runs a budget deficit,

business investment will fall

Because ________ in the government budget deficit increase the real interest rate, budget deficits can ________ firm investment.

decreases; decrease

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

If technological change increases the profitability of new investments for firms, then the ________ curve for loanable funds will shift to the ________

demand; right

When the price level in the United States falls relative to the price level of other countries, ________ will fall, ________ will rise, and ________ will rise.

imports; exports; net exports

increase investment spending

increase in government surplus

Which of the following increases labor productivity

inventions of new machinery, equipment, or software

According to the definitions of national saving and private saving, if Y, C, and G,remained the same, an increase in taxes would

leave national saving unchanged and reduce private saving

An increase in government purchases, ceteris paribus, will

reduce investment

Suppose the U.S. GDP growth rate is faster relative to other countries' GDP growth rates. This will

shift the aggregate demand curve to the left.

Which of the following is most likely to be able to sustain economic growth in an economy?

technological change

Potential GDP refers to

the level of GDP attained when all firms are producing at capacity