Macroeconomics Exam 2

contributions to social security bonds issues by an automaker profits of a large investment company decreased property taxes

not an input in the aggregate production function for GDP

labor productivity

output per worker

What type of spending depends primarily on these three factors: the interest rate, the expected future level of real GDP and the current level of production capacity?

planned investment spending

Which of the statements best describes the paradox of thrift?

Households increase savings during recessions, which causes consumption to fall, aggregate expenditures to fall, and may possibly lead to or make worse a recession

shift in supply or demand? China decides to reduce its capital investment in the United States, as it expects low returns due to a weak U.S. economy

shift in supply

shift in supply or demand? as a result of a stock market boom, individuals begin to feel richer and spend more while

shift in supply

a share of ownership in a company

stock

population

when considering economic growth, many policy makers focus on real gross domestic product (GDP) per capita since it takes into account the potentially distorting effects of

How do mutual funds reduce risk for the average individual investor?

Mutual funds reduce risk through portfolio diversification.

If the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the process how will the borrowing business act?

The business will not take out a loan

outflow of funds can only be generated by countries with a larger GDP per capita than the country receiving the funds national budget deficits are not included in the calculation of national savings

false statements regarding the savings-investment spending identity

budget surplus

government spends less money than it takes in through taxes

budget deficit

government spends more money than it takes in through taxes

countries' real GDP per capita growth rates differ largely due to disparities in the rates at which they accumulate ________________________ as well as the rate of __________

human and physical capital technological

the government's direct role in creating human capital is primarily on

improving the education system

What statement best summarizes the impact of the Fisher effect

Consumers consider future inflation

Which of the following best defines a financial intermediary?

a financial institution that transforms investor funds to financial assets

significant amount of oil discovered in Texas unskilled migrant worker from Latin America recent graduate with an engineering degree upgrade of computers for Mikey's motors

an input in the aggregate production function for GDP

labor productivity

any large, sustainable increase in real GDP must be due to steadily increasing

funds that are kept in a bank that must be relinquished upon the owner's request

bank deposit

a promise to pay issued by a borrower with annual interest payments and a principal payment at maturity

bond

national savings

budget balance is combined with all of the privately held savings from across the country

the government's direct role in the production of physical capital is primarily focused on ___________

developing infrastructure

budget balance

difference between the amount the government collects and how much it spends

the consumption function shows the relationship between consumption spending and ________

disposable income

Changes in consumption can be predicted by multiplying the change in ___________ by the _________ ______ ______________

disposable income marginal propensity to consume

purpose of growth accounting

estimate the contribution in each component of the aggregate production function makes to overall growth

adult literacy increases number of college graduates increases a doctor's knowledge about a new cancer treatment more people graduate from culinary school

examples of human capital

company cars company computers

examples of physical capital

new distribution techniques a new cancer treatment

examples of technology

Collaboration with Congress during the Clinton administration allowed for an aggressive deficit-cutting plan to pass. As a result, the government was able to reach a balanced budget at the end of the 90's. Move the supply and/or demand curves to describe the expected effect that this deficit reduction likely had upon the loanable funs market. As a result, private investment should have ________ because the cost of borrowing ___________

increased decreased

Adjust the graph to show how a 25.8 billion dollar increase in the government's budget deficit affects the hypothetical loanable funds market below, holding all else equal. The deficit ________ the demand for loanable funds and shifts the demand curve to the ______; _______ the interest rate and crowding out investment spending

increases right increasing

Which of the terms acts as the "price" in the market for loanable funds"

interest rate

two aspects of efficiency that the equilibrium of market for loanable funds exhibits

investment projects that are financed by savers have larger rates of return than projects that do not receive financing savers who lend money are willing to accept a lower minimum interested rate than potential savers who do not lend money

fundamental relationship between savings and investment spending is that

investment spending and savings are always equal

an agreement between a borrower and a lender

loan

idea of economic convergence

lower GDP per capita countries will catch up with higher GDP per capita countries

the slope of the consumption function is the ___________ ______ _____ ____________

marginal propensity to consume

how are investment and national saving related

national saving equals investment

capital inflow

net amount of funds coming into a country

As interest rate decreases, what happens to the quantity of loanable funds demanded?

quantity demanded will increase

What effect will an increase in interest rates have on the quantity of loanable funds supplied?

quantity supplied will increase

governments play an indirect role in private savings and invest

regulating the financial system

in many countries, growth has been achieved through high rates of __________ and __________ spending

saving and investment spending

shift in supply or demand? Calopolis, a college town in Northern California, has for many years banned the presence of fast food restaurants in city limits. As of 2012, however, the city will allow several fast food companies to open franchised locations

shift in demand

shift in supply or demand? due to an increase in revenues after a tax hike, the US is able to eliminate the deficit and begins to maintain a balanced budget for the first time in several decades

shift in demand

The multiplier (expenditure multiplier) is the ratio between which two measures?

total change in real GDP due to an autonomous change in aggregate spending AND the size of the autonomous change in aggregate spending

national savings are the combined value of all private savings and the budget balance budget balance can either be positive or negative

true statements regarding the savings-investment spending identity