Macroeconomics

A country's GDP (in billions) was $5,690 in 2010 and $5,899 in 2011. What is the growth rate of GDP?

3.67%

imagine an economy with production function Y = F(K) = and 400 units of capital. If the fraction of output invested in new capital is γ = 0.2, how much new capital will be created in the next period?

4

In a steady state, the capital stock:

remains constant.

An increase in government borrowing will cause the interest rate to:

rise and private spending to fall

An increase in government borrowing will cause the interest rate to:

rise and private spending to fall.

If consumers expect to have a shorter life expectancy and desire to save less, then the:

supply of loanable funds will decrease and the equilibrium interest rate will increase.

Birmingham Steel sells steel to Winston Golf Club Manufacturers for $300,000. Winston sells its golf clubs to Academy Sports for $1,000,000. Academy Sports sells Winston golf clubs for $1,500,000. How much is added to GDP?

$1,500,000

Refer to the table below for Questions #16-18. Component of GDP Amount Private Investment 1,640 Government Spending 2,872 Profits 1,565 Consumption 9,913 Wages 3,574 Exports 1,520 Imports 1,890 ---What is GDP in this economy?----

$14,055

Suppose you spend half the summer building a garage in your back yard. You purchase tools that cost $350 and wood that cost $4,000. A contractor would charge $25 per hour for the 40 hours of work necessary to build the garage. After you build the garage, your mother gives you a present of $500 in stocks. How much will GDP rise as a result of these activities?

$4,350

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP

$400,000

Refer to the table below for Questions #16-18. Component of GDP Amount Private Investment 1,640 Government Spending 2,872 Profits 1,565 Consumption 9,913 Wages 3,574 Exports 1,520 Imports 1,890 -- What is the sum of rent and interest income?---

$8,916

Refer to the table below for Questions #16-18. Component of GDP Amount Private Investment 1,640 Government Spending 2,872 Profits 1,565 Consumption 9,913 Wages 3,574 Exports 1,520 Imports 1,890 ---What is the value of net exports in this economy?---

-$370

Refer to the table below for Questions #11-13. Year Quantity Price 2000 100 100 2010 90 110 The growth rate of real GDP between 2000 and 2010 (in 2000 dollars) is:

-10%

Refer to the following scenario below for Questions #33-35. Consider an economy described by the production function Y = √ K with 50% of output invested in new capital (γ = .5) and 5% of the capital stock depreciating each year (δ = .05). --33. What is the steady-state level of capital?--

100

What makes a bigger contribution to GDP, 12 million cars sold at $28,000 each or 20 million computers sold at $1,000 each?

12 million cars

At an average growth rate of 4%, approximately how long would it take for an economy to double its GDP?

17.5 years

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP be in 70 years?

200,000

The value of a car produced and sold in 2005 and sold again in 2011 is included in:

2005's GDP only.

Refer to the following scenario below for Questions #33-35. Consider an economy described by the production function Y =√ K with 50% of output invested in new capital (γ = .5) and 5% of the capital stock depreciating each year (δ = .05). ---35. Suppose technological advancement increases the production function to Y = 2√K. What is the new steady-state level of output?---

40

Refer to the table below for Questions #11-13. Year Quantity Price 2000 100 100 2010 90 110 Real GDP in 2010 (in 2000 dollars) is:

9,000

:Refer to the table below for Questions #11-13. Year Quantity Price 2000 100 100 2010 90 110 Nominal GDP in 2010 is:

9,900

Gross domestic product (GDP) is the market value of:

All final goods and services produced within a country in a year

Which of the following explains why the supply of savings is upward sloping?

An increase in the interest rate leads to an increase in the quantity of saving.

GNP measures:

production by U.S. citizens wherever they work in the world.

Which statement is NOT an explanation for why Germany and Japan both grew faster than the United States following World War II?

Both countries were experiencing cutting-edge growth at the time.

In the national spending approach, investment spending involves the acquisition of which of the following?

Capital goods

Why might it be a good thing for the United States if more people in India and China start dying of cancer and heart disease instead of malnutrition and preventable disease?

Companies will invest more in curing cancer and heart disease.

Which of the following is TRUE in the calculation of GDP?

GDP does not include goods and services produced privately inside the home.

If 2009 prices are used in the calculation of real GDP and inflation occurs between 2009 and 2010, then nominal GDP will be ____ real GDP in 2010

Greater Than

income not spent on consumption goods

Savings

Why does South Korea have a higher level of real GDP per capita than North Korea?

South Korea has a better system of incentives than North Korea.

Due to economies of scale, average costs decline as:

production levels increase.

Individual savings contributes to

Supply of loanable funds

Which of the following would NOT be included in this year's GDP for the United States?

The U.S. government distributes $10 million in social security payments.

Business cycles are short-term movements in:

real GDP around its long term trend

A recession is a period of significant, widespread declines in:

real income and employment.

Table: Small-Town GDP Town Real GDP (U.S. dollars) Population A 4,859,307 250 B 10,000,050 175 C 6,000,000 320 D 3,549,289 90 Which of the four towns in this table has the highest standard of living?

Town B

Which of the following would be included in GDP for the United States?

Toyota, a japanese car company producing cars in the united states

Which of the following is NOT considered a government purchase?

Unemployment checks

Which of the following would NOT be included in the calculation of GDP as an investment expenditure?

You purchase $5,000 in shares of Apple stock.

In the Solow model, if a country's depreciation rate (δ) increased from 1% to 2% and it was operating at its steady state before the change, we would expect to see:

a decrease in both the capital stock and output.

The main reason people save during their working years is:

a preference toward a smooth consumption path overtime.

Which scenario has the greatest potential for free riding?

a system in which work effort and pay are not connected

A set of tires installed on a vehicle in an automobile factory is counted as:

an intermediate good and its market price is not part of GDP.

In financial markets, which group best represents the demand side of the market?

borrowers

If the interest rate increases, then:

both the quantity saved and the quantity supplied of loanable funds will increase.

Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes:

consumption and investment to fall.

The two types of economic growth are:

cutting-edge and catching-up.

If the interest rate rises from 5% to 9%, the number of new businesses will:

decrease

The AIDS epidemic _____ the savings rate in Africa

decreases

What is the most immediate (or direct) cause of growth in real GDP per capita?

factors of production

Gross domestic product is the market value of all:

final goods and services produced within a country in a year.

Refer to the following scenario below for Questions #33-35. Consider an economy described by the production function Y = √ K with 50% of output invested in new capital (γ = .5) and 5% of the capital stock depreciating each year (δ = .05). ---34. If the current output is 9, then the economy's capital stock would:--

grow, and the output next would increase

Countries with more human capital tend to have a:

higher GDP per capita.

A real variable is one that:

includes a correction for inflation

Which is NOT a key institution for economic growth?

income equality

An investment tax credit will cause the interest rate to________and borrowing to____________ .

increase and increase

In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause total output to:

increase, but by less than one unit.

If the supply of loanable funds increases and the demand for loanable funds increases at the same time, interest rates will:

increase, decrease, or remain the same.

Which best describes the growth process from its ultimate to its immediate causes?

institutions → incentives → factors of production → real GDP per capita

In a steady state, the level of investment:

is equal to depreciation.

Because of spillovers, the social benefit of research and development:

is greater than the private benefit.

When bond prices increase, interest rates:

must decrease

When a given bond's price increases, we know that the interest rate on this bond:

must decrease.

The value of a country's GDP exceeds that of the country's GNP if the value of the:

output produced by foreign workers in the country exceeds the value of output produced by the country's permanent residents in other countries

Property rights are important institutions for encouraging investment because:

people won't invest if they feel their property is at risk and that they may not realize a return on their investment.

If individuals become less impatient (or more patient), what will happen in the market for loanable funds?

supply of loanable funds will increase, interest rates will fall and borrowing will increase

A rural village in a developing country has an economy based on agriculture. Then the government of the country provides the village with newly developed hybrid seeds that more than double the agricultural yield per acre. This story illustrates the growth of per capita GDP in the village through which factor(s) of production?

technological knowledge

investment is:

the purchase of new capital goods.

The production function is a mathematical function that shows

the relationship between output and the factors of production.

If the interest rate in the market for loanable funds is below the market-clearing rate, then:

there will be a shortage of savings, and demanders will bid the interest rate up as they compete to borrow.

The factor income approach to calculating GDP states that GDP is equal to:

wages + rent + interest + profit

If income and consumption are equal, saving must be:

zero