ECONOMICS CH8-11

Which of the following most accurately depicts the formula for the expenditure multiplier?

1/MPS and 1/1-MPC

If MPC = 0.9, the multiplier is:

10

U.S. real GDP per capita in 2010 was _____ as much per person as in 1900.

758%

Which of the following may lead to lower productivity because of a lack of incentives?

government subsidies

All of the following are factors that drive productivity growth EXCEPT:

growth convergence

Economic growth is likely to entail:

higher saving

In financial markets:

households purchases financial assets

Private savings equals:

income after taxes minus consumption.

If other things are equal, an increase in aggregate wealth will _____ and shift the consumption function _____.

increase autonomous consumption; up

Efficiency wages are:

above equilibrium to encourage better performance.

Investment spending in macroeconomics refers to:

adding to physical capital

Because of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will _____ output by _____ a factor of two.

additions to aggregate output or real GDP decline.

Generous unemployment benefits are likely to cause:

an increase in the employment rate

In an open economy GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending?

$4 trillion

A country is closed. It has no government sector, and its aggregate price levels and interest rates are fixed. Furthermore, the marginal propensity to consume is constant and the country's consumption function is as follows: C = 200 + 0.75YD, where YD is disposable income and C is consumption. Assume that planned investment equals 75.If this country's income increased by $10,000, consumption would increase by:

$7,500

The rate of return on a business project equals:

(Revenue from project - cost of project) / Cost of project) × 100.

Which of the following most accurately describes how to calculate the unemployment rate?

(Unemployed / labor force) × 100

Suppose that the consumption function is C = $500 + 0.8 × YD, where YD is disposable income.If disposable income is $1,000, savings is:

-$300

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

0.40

In an economy with no taxes and no imports, disposable income decreases from $6,000 to $4,000. If consumption decreases from $4,500 to $3,000, the marginal propensity to consume is:

0.75

An economy initially has 200 units of physical capital per worker. Each year it increases the amount of physical capital by 10%. According to the aggregate production function for this economy, each 1% increase in physical capital per worker, holding human capital and technology constant, increases output per worker by 0.25%. Look at the scenario Capital. If there is no inflation and output per worker is initially $1,000, what does the estimated output per worker equal after one year?

1,025

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%. How long will it take for China's real GDP per capita to double?

10 years

If the marginal propensity to save is 0.5, the multiplier is:

2

In Techland, from 1980 to 2010, holding technology and human capital fixed, increasing physical capital per worker from $25,000 to $100,000 would have led to a doubling of real GDP per worker, from $40,000 to $80,000. However, not only did physical capital per worker increase from $25,000 to $100,000, but technological progress shifted the productivity curve upward so that real GDP per worker actually increased from $40,000 to $320,000.

2.0%

If the U.S. dollar were replaced with a "new dollar" at an exchange rate of 1 new dollar for 4 old dollars, then an hourly wage of $10 would become an hourly wage of _____ new dollars.

2.50

A survey reveals that on a small island 1,000 people have jobs, 250 people are unemployed and looking for jobs, and 450 people are neither working nor looking for work. The unemployment rate on the island is:

20%

If a country has a working-age population of 200 million, 120 million people with jobs, and 30 million people unemployed and seeking employment, then its unemployment rate is:

20%

Suppose investment spending increases by $50 billion and as a result the equilibrium income increases by $200 billion. The investment multiplier is:

4

Real GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8.What is the consumption function?

C = 500 + 0.8 × YD

Between 1980 and 1994, growth rates of real GDP per capita in sub-Saharan Africa ranged from 20% to 30%.

False

Between 2003 and 2010, the unemployment rate in Ft. Myers, Florida, decreased from 13% to 3%.

False

Higher interest rates encourage investment spending.

False

Most human capital is provided by: I. governments through public education II. investment spending by private sector firms

I only

Which of the following factors have contributed to the lack of economic growth in Africa? I. political instability II. lack of spending on education and infrastructure III. malnutrition and disease

I,II,III

Which of the following is (are) a task(s) of the financial system? I. reducing transactions costs II. reducing risk III. providing liquidity

I,II,III

Most physical capital, except for infrastructure, is provided by: I. governments through public education II. investment spending by private sector firms

II only

Which of the following factors have contributed to the lack of economic growth in Latin America? I. lack of natural resources II. high rates of savings that led to insufficient consumption of goods and services III. political instability

III only

In an economy with no international trade, no government expenditure, no transfers, and no taxes, disposable income equals GDP. Therefore, it follows that:

as GDP decreases, planned aggregate spending decreases.

The Keynesian cross was developed by:

Paul Samuelson

According to Thomas Malthus's work, which of the following is TRUE?

The amount of land per worker would eventually decline.

Discouraged workers are not working, want to work, but are not actively looking for a job.

True

Research and development is what we call spending to develop and implement new technologies.

True

The financial system contributes to long-run economic growth by channeling funds from savers to businesses for investment spending.

True

Which country had the lowest growth rate of real GDP per capita between 1980 and 2010?

Zimbabwe

The marginal propensity to consume equals:

a change in consumption divided by a change in disposable income.

Which of the following factors is NOT necessary for convergence between two countries?

a common language between the two countries

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion.a deficit of $1.5 trillion a deficit of $1.5 trillion.What is the government budget balance?

a deficit of $1.5 trillion

Ireland's recent economic growth and improving living standard are due primarily to its investment in all of the following types of physical and human infrastructure EXCEPT:

a more open election process

The primary cause of the recession that ended in late 2001 was:

a slump in business investment spending.

To be counted as unemployed, one must:

be out of work and be actively looking for a job during the past four weeks.

The expansion and collapse of the housing market in Ft. Myers between 2003 and 2010 is primarily an example of how:

changes in investment spending can affect consumer spending and the entire economy.

The recession began to wind down in late 2001 mainly because of an increase in:

consumer spending on durable goods, especially automobiles.

Two-thirds of total spending is usually attributed to:

consumption

The idea that relatively poor nations should have higher rates of growth of real GDP per capita than relatively rich nations is known as the:

convergence hypothesis

One factor frequently cited for slow growth in India until the 1990s is:

corruption among government officials

If the marginal propensity to save increases, the multiplier will:

decrease

It is generally accepted that a binding minimum wage does all of the following EXCEPT:

decrease the amount of labor supplied.

The marginal propensity to consume plus the marginal propensity to save must:

equal 1

The natural rate of unemployment is:

equal to the sum of frictional and structural unemployment.

Interest rates and planned investment spending:

exhibit a negative relationship

Suppose that Allison has an accounting degree, but she lost her job two months ago when her company merged with another firm. Allison hasn't been able to find another accounting job, so she has taken a part-time job as a sales clerk at a clothing store. As a result the official unemployment rate will:

increase temporarily, then fall back to its original level

The initial impact of a sudden decrease in the growth rate of GDP will most likely be a(n) _____ in _____ investment spending.

increase; unplanned

Which of the following is the most widely accepted measure of economic growth over time?

increases in real per capita GDP

A business will want a loan when:

interest rate < (return on project - cost of project) / cost of project × 100.

Human capital development often comes from:

investment spending by businesses.

The most important factor affecting a household's consumer spending is:

its current disposable income

The key factor explaining the poor growth performance in Africa is probably:

lack of domestic political stability

The planned aggregate spending line has a slope:

less than 1

Physical capital includes:

machine tools

In 2010, China saved:

more and spent more on investment as a percentage of its GDP than the United States.

According to the text, productivity is driven by all of the following EXCEPT:

natural resources

A _____ is a nonprofit institution that collects the savings of its members and invests those funds in a diversified portfolio to provide income to members when they retire.

pension fund

Productivity is equal to:

real GDP divided by the number of workers

Menu costs are the:

real costs of changing listed prices.

Which sector is responsible for most of the growth in the United States during the 1990s?

retail

A survey reveals that on a small island initially 1,000 people have jobs, 250 people are not working but are looking for jobs, and 450 people are neither working nor looking for work. Suppose that 150 of the 450 people who weren't looking for work now begin looking for work. There are now 400 people looking for work and 1,000 people working. The unemployment rate:

rises to 28.6

Facebook's primary type of investment spending is the purchase of:

server farms, or arrays of linked computers.

Annie's credit union charges a fee for transferring funds from her money market account to her checking account. The rate of inflation has been 12% lately, so Annie has transferred funds from her money market account to her checking account more often than usual. This cost is an example of the _____ cost of high inflation.

shoe-leather

Suppose that immigration laws are relaxed and many workers from other nations enter the U.S. labor force. The _____ for labor will _____.

supply; increase

The government saves when:

tax revenue is more than government spending

The budget balance equals:

taxes minus government spending

Which of the following CAN properly be called a part of infrastructure?

the Golden Gate bridge

Which of the following situations is likely to increase the natural rate of unemployment?

the entrance of many new people into the labor force

If the interest rate rises:

the opportunity cost of investment is greater.

Capital inflow equals:

the total inflow of foreign funds minus the total outflow of domestic funds.

Infrastructure includes:

the water supply system

Workers today are more productive than workers in the past because:

they now have more physical capital embodying better technology.

The main reason that speculators bought houses in Ft. Myers in the early 2000s was:

to profit by reselling them at much higher prices.

In general, the growth in real GDP per capita:

was greater than the growth of per capita oil consumption after 1973.

According to historical economic data for the United States from 1949 to 2014, the unemployment rate is most likely to rise:

whenever the economy grows at a rate below 3.25%.