Chapter 10 Macro

B

If taxes are less than transfers plus government spending, then A) there is positive saving. B) there is public dissaving. C) there is a budget surplus. D) there is a balanced budget.

C

A country with no trade and no borrowing and lending relationships with other countries is known as a(n) A) open economy. B) market economy. C) closed economy. D) planned economy.

D

A firm can fund an expansion of its operations by A) loaning money. B) paying dividends. C) buying stock. D) issuing bonds.

B

A good measure of the standard of living is A) nominal GDP per capita. B) real GDP per capita. C) total real GDP. D) total nominal GDP.

A

A government budget surplus from reduced government spending (no change in net taxes) will ________ the level of investment in the economy and ________ the level of total saving (private plus public) in the economy. A) increase; increase B) decrease; decrease C) decrease; increase D) increase; decrease

A

A period of expansion in the business cycle ends when A) the business cycle reaches its peak. B) real GDP is equal to potential GDP. C) real GDP is less than potential GDP. D) the business cycle reaches its trough.

D

A(n) ________ comes to an end with a business cycle ________. A) expansion; trough B) recession; peak C) expansion; bubble D) recession; trough

C

A) An expected recession decreases the profitability of new investment. B) The government runs a budget surplus. C) Technological change increases the profitability of new investment. D) Households become spendthrifts and begin to save less.

D

A) The real interest rate is 5 percent, and the quantity of loanable funds is $150 million. B) The real interest rate is 5 percent, and the quantity of loanable funds is $90 million. C) The real interest rate is 3 percent, and the quantity of loanable funds is $90 million. D) The real interest rate is 3 percent, and the quantity of loanable funds is $150 million.

B

A) an increase in transfer payments to households B) an increase in the proportion of income after net taxes used for consumption C) an increase in household income D) an increase in tax revenues collected by the government

C

A) An increase in government spending crowds out private expenditures. B) An expected recession decreases the profitability of new investment. C) The government begins running a budget surplus. D) Technological change increases the profitability of new investment.

B

Actual real GDP will be above potential GDP if A) inflation is rising. B) firms are producing above capacity. C) firms are producing at capacity. D) firms are producing below capacity.

C

An increase in government purchases will A) reduce real GDP. B) increase the supply of loanable funds. C) reduce investment. D) increase public saving.

D

An increase in public saving has what impact on the market for loanable funds? A) The demand for loanable funds increases. B) The demand for loanable funds decreases. C) The supply of loanable funds decreases. D) The supply of loanable funds increases.

C

An increase in the demand for loanable funds will occur if there is A) a decrease in the real interest rate. B) an increase in the nominal interest rate accompanied by an equal increase in inflation. C) an increase in expected profits from firm investment projects. D) an increase in the real interest rate.

B

An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________. A) demand; right; rise B) supply; left; rise C) demand; left; fall D) supply; right; fall

B

An increase in the government budget surplus will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________. A) supply; left; rise B) supply; right; fall C) demand; left; fall D) demand; right; rise

D

As the economy nears the end of an expansion, interest rates usually ________ and wages rise more ________ than prices. A) rise; slowly B) fall; slowly C) fall; rapidly D) rise; rapidly

B

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds. A) demanders; demanders B) demanders; suppliers C) suppliers; suppliers D) suppliers; demanders

B

Countries with high rates of economic growth tend to have A) a declining incidence of business cycle fluctuations. B) a labor force that is more productive. C) low rates of technological advancement. D) a lower life expectancy at birth.

B

Cutting costs at the beginning of a recession tends to make the most sense for a business that produces or provides A) nondurable goods. B) durable goods. C) goods and services for export. D) services.

D

During the expansion phase of the business cycle, which of the following eventually increases? A) production B) employment C) income D) All of these

A

During the recession phase of the business cycle A) interest rates are usually falling. B) unemployment is usually falling. C) production is usually rising. D) income is usually rising.

D

Equilibrium in the loanable funds market determines A) the current interest rate. B) the expected interest rate. C) the nominal interest rate. D) the real interest rate.

C

Financial securities that represent promises to repay a fixed amount of funds are known as A) stocks. B) pension funds. C) bonds. D) insurance premiums.

C

Growth in potential GDP in the United States from 1949 to 2017 was estimated to be about A) 8.25% per year. B) 5.0% per year. C) 3.2% per year. D) 1.5% per year.

D

If consumers decide to be more frugal and save more out of their income, then this will cause A) a shift in the supply curve for loanable funds to the left. B) a movement to the right along the supply curve for loanable funds. C) a movement to the left along the supply curve for loanable funds. D) a shift in the supply curve for loanable funds to the right.

B

If government saving is negative, then A) T > TR. B) T - TR < G. C) G > T. D) Y + TR < C - T.

A

If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined. A) the quantity of goods or services that can be produced by one hour of work B) nominal GDP C) labor force participation D) the working-age population

A

If labor productivity growth slows down in a country, this will A) slow down the increase in real GDP per capita. B) accelerate the increase in nominal GDP. C) accelerate the increase in real GDP per capita. D) slow down the increase in nominal GDP.

C

If net taxes fall by $80 billion, we would expect A) the government deficit to fall by $80 billion. B) household saving to fall by more than $80 billion. C) household saving to rise by less than $80 billion. D) household saving to rise by $80 billion.

A

If real GDP in a closed economy is $40 billion, consumption is $20 billion, and government purchases are $10 billion, what is investment? A) $10 billion B) $30 billion C) $40 billion D) $70 billion

C

If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2018, we would say that in 2018, the average American could buy ________ times as many goods and services as the average American in 1950. A) 1/8 B) 4 C) 8 D) 12

D

If technological change increases the profitability of new investment for firms, then the ________ curve for loanable funds will shift to the ________ and the equilibrium real interest rate will ________. A) demand; left; fall B) supply; right; fall C) supply; left; rise D) demand; right; rise

A

If technological change increases the profitability of new investments for firms, then the ________ curve for loanable funds will shift to the ________. A) demand; right B) supply; left C) demand; left D) supply; right

B

If the CPI is currently 202, what does this tell you about inflation between last year and this year? A) There was deflation in the economy between this year and last year. B) The CPI measures only the level of prices in a given year, not the percentage change in prices from one year to the next. C) Inflation in the economy between this year and last year was 102%. D) Inflation in the economy between this year and last year was 2%.

B

If, between 2008 and 2018, the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy? A) 3% B) 7% C) 20% D) 100%

D

In a closed economy, private saving is equal to which of the following? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers) A) Y - C - T B) Y - G - T + TR C) Y - G - T D) Y + TR - C - T

C

In a closed economy, what is the relationship between saving and investment? A) Investment is greater than saving. B) Investment may be greater or smaller than saving. C) Investment is equal to saving. D) Saving is greater than investment.

B

In a closed economy, which of the following components of GDP is not included? A) government spending B) net exports C) consumption D) investment

C

In comparison to a government that runs a balanced budget, when the government runs a budget deficit, A) the equilibrium interest rate will fall. B) household savings will fall. C) business investment will fall. D) none of the above

C

In terms of economic growth, the key measure of the standard of living is A) real GDP. B) nominal GDP. C) real GDP per capita. D) nominal GDP per capita.

A

Inflation is measured A) as the percentage change in the consumer price index. B) using the level of real GDP. C) using the level of the consumer price index. D) as the percentage change in real GDP.

A

Labor productivity is A) the quantity of output produced by one worker or by one hour of work. B) the quantity of output produced in one hour by one machine. C) the quantity of output produced in one hour by several workers. D) the quantity of capital one worker can produce in one day.

A

Labor productivity will increase if the ________ increases and ________. A) quantity of capital per hour worked; technology improves B) quantity of labor per unit of capital; technology improves C) quantity of capital per hour worked; immigration increases while capital is fixed D) quantity of labor per unit of capital; immigration increases while capital is fixed

B

Liquidity refers to A) the ease with a stock can be traded for a bond. B) the ease with which a financial security can be traded for cash. C) the number of shares of stock a corporation issues. D) the number of times a dollar changes hands in the creation of GDP in an economy.

B

Long-run economic growth requires all of the following except A) technological change. B) political instability. C) government provision of secure property rights. D) increases in capital per hour worked.

A

One difference between stocks and bonds is that A) stocks do not involve a promise to repay a purchaser of the stock, while bonds represent a promise to repay the purchase price of the bond. B) stocks are usually issued in electronic form, while bonds are usually issued in paper form. C) stocks represent ownership in companies, while bonds represent ownership in banks. D) stocks are financial securities, while bonds are labor market securities.

A

Potential GDP in the United States A) grows as the economy grows. B) changes over a given business cycle. C) does not change over time. D) declines over time.

B

Potential GDP is defined as A) the amount of GDP produced if there is no structural unemployment. B) the level of GDP attained when all firms are producing at capacity. C) the amount of GDP produced if there is no frictional unemployment. D) the maximum of GDP that the economy can produce.

A

Potential GDP was estimated to grow at a rate of 3.2% from 1949-2017 in the United States. Actual GDP in the U.S. A) is the same as potential GDP if all firms in the economy were working at capacity. B) always grows at a faster rate than potential GDP. C) always grows at the same rate as potential GDP. D) always grows at a slower rate than potential GDP.

B

Private saving is defined as A) T - G + TR. B) Y + TR - C - T. C) Y + TR + C - T. D) T + G + TR.

A

Public saving in the economy can be increased by A) raising taxes. B) lowering taxes. C) raising transfer payments. D) raising government spending.

B

Purchases of Huggies diapers should A) increase in recessions and remain constant in expansions. B) remain fairly constant over the business cycle. C) increase in recessions and decrease in expansions. D) decrease in recessions and increase in expansions.

B

Purchases of which of the following goods would be dramatically reduced during a recession? A) tomatoes B) refrigerators C) ink pens D) gasoline

C

Recessions typically cause the unemployment rate to ________ and the inflation rate to ________. A) fall; fall B) fall; rise C) rise; fall D) rise; rise

C

The Business Cycle Dating Committee defines a recession as A) a significant decline in inflation and unemployment lasting more than a few months. B) two consecutive quarters of declining nominal GDP. C) a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months. D) two consecutive quarters of declining real GDP.

A

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase during the next decade, and due to these higher deficits, "the nation's capital stock ultimately would be smaller, and productivity and income would be lower than would be the case if the debt was smaller." This higher budget deficit would be represented graphically by A) a shift in the supply curve for loanable funds to the left. B) a movement to the left along the supply curve for loanable funds. C) a movement to the right along the supply curve for loanable funds. D) a shift in the supply curve for loanable funds to the right.

A

The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase in future years, and these higher deficits might "pose a threat to the economy by crowding out business investment and threatening a spike in interest rates." This higher budget deficit would be represented graphically by A) a shift in the supply curve for loanable funds to the left. B) a shift in the supply curve for loanable funds to the right. C) a movement to the right along the supply curve for loanable funds. D) a movement to the left along the supply curve for loanable funds.

D

The best measure of the standard of living is A) nominal GDP. B) nominal GDP per capita. C) real GDP. D) real GDP per capita.

C

The demand for durable goods A) rises by a greater percentage than does GDP during a recession. B) declines by a smaller percentage than does GDP during a recession. C) declines by a greater percentage than does GDP during a recession. D) has decreased over time.

B

The demand for loanable funds has a ________ slope because the lower the interest rate, the ________ number of investment projects are profitable, and the ________ the quantity of loanable funds demanded. A) negative; greater; lesser B) negative; greater; greater C) negative; lesser; greater D) positive; lesser; lesser

A

The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects. A) firms B) banks C) government D) households

C

The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds. A) greater; smaller; greater B) lower; smaller; greater C) lower; greater; greater D) greater; greater; greater

A

The economic effects of a recession are likely to have the smallest impact on the sales of which of the following businesses? A) a fast-food restaurant B) a home builder C) a furniture store D) an automobile manufacturer

B

The federal budget deficit can be reduced by A) raising transfer payments. B) raising taxes. C) raising government spending. D) higher interest rates.

B

The period between a business cycle peak and a business cycle trough is called A) recalculation. B) recession. C) expansion. D) diffusion.

B

The period of expansion ends with a ________ and the period of recession ends with a ________. A) business cycle trough; business cycle trough B) business cycle peak; business cycle trough C) business cycle peak; business cycle peak D) business cycle trough; business cycle peak

D

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as A) real GDP. B) technology. C) human capital. D) labor productivity.

D

The response of investment spending to an increase in the government budget deficit is called A) income minus net taxes. B) expansionary investment. C) private dissaving. D) crowding out.

D

The sum of public and private saving in an economy is equal to A) I - C - G. B) T - TR - G. C) Y - C - T. D) Y - C - G.

A

The total amount of physical capital available in a country is know as the country's A) capital stock. B) investment. C) labor productivity. D) savings.

B

There is a government budget surplus if A) TR < T. B) T - TR > G. C) G > T. D) G > TR.

C

There is public dissaving if A) TR > G + T. B) G + TR < T. C) G + TR > T. D) TR < G + T.

B

Under which of the following circumstances would private saving be positive in a closed economy? A) Y = $9 trillionC = $5 trillionTR = $1 trillionG = $1 trillionpublic saving = $3 trillion B) Y = $10 trillionC = $5 trillionTR = $2 trillionG = $2 trillionpublic saving = $1 trillion C) Y = $6 trillionC = $2 trillionTR = $8 trillionG = $3 trillionpublic saving = $1 trillion D) Y = $8 trillionC = $2 trillionTR = $4 trillionG = $2 trillionpublic saving = $4 trillion

A

Under which of the following circumstances would the government be running a deficit? A) G = $5 trillionT = $5 trillionTR = $1 trillion B) G = $7 trillionT = $7 trillionTR = $0 C) G = $5 trillionT = $7 trillionTR = $1 trillion D) G = $7 trillionT = $10 trillionTR = $3 trillion

B

Using the market for loanable funds, which of the following has the potential to raise the real interest rate? A) an increase in the quantity of loanable funds supplied B) an increase in the demand for loanable funds C) an increase in the quantity of loanable funds demanded D) an increase in the supply of loanable funds

A

What is one difference between stocks and bonds? A) Stocks represent partial ownership in a firm, while bonds do not. B) Bonds are purchased at a bank, while stocks are purchased through the federal government. C) Bonds earn a higher rate of return than stocks. D) Stocks earn a higher rate of return than bonds

D

What is the name of the organization that defines business cycle peaks and troughs in the United States? A) the Federal Reserve B) the National Peak and Trough Committee C) the Bureau of Labor Statistics D) the National Bureau of Economic Research

B

What two factors are the keys to determining labor productivity? A) the business cycle and the growth rate of real GDP B) the level of technology and the quantity of capital per hour worked C) the average level of education of the workforce and the price level D) the growth rate of real GDP and the interest rate

B

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring? A) Incomes are growing at a slower rate than the population. B) Real GDP per capita is rising. C) Living standards are falling. D) Real GDP is falling.

B

When the economy enters a recessionary phase of the business cycle, unemployment tends to A) decrease. B) increase. C) be unchanged. D) change in the same direction as the rate of inflation.

C

When the economy reaches a trough in a business cycle, which of the following will occur? A) Employment rises, but income and production will continue to fall. B) Income, production, and employment will continue to fall. C) Income, production, and employment will begin to rise. D) Income and production will rise, but employment will continue to fall.

D

When the government runs a budget deficit, we would expect to see that A) private saving will fall. B) G + TR < T. C) public saving is positive. D) investment will fall.

A

Which of the following financial securities is most liquid? A) a $20 bill B) a share of stock C) a cashier's check D) a savings account

A

Which of the following increases labor productivity? A) inventions of new machinery, equipment, or software B) decreases in the availability of computers and factory buildings C) an increase in the aggregate hours of work D) a decline in the health of the population

C

Which of the following is a correct statement? A) The CPI is a widely used measure of the inflation rate. B) Real GDP is our best measure of economic growth. C) Inflation is measured as the percentage change in the CPI. D) The PPI measures inflation as experienced by producers.

D

Which of the following is an example of human capital? A) a factory building B) a software program C) a computer D) a college education

C

Which of the following is most liquid? A) a mutual fund share B) a government bond C) a dollar bill D) a corporate bond

B

Which of the following is not one of the key services provided by the financial system? A) risk sharing B) decreasing taxes C) generating information D) liquidity

D

Which of the following statements about the budget deficit is true? A) From 2007-2009, the federal budget was balanced. B) In 2017, the federal budget was balanced. C) In 2016, the federal budget was in surplus. D) In 2009, the budget deficit was a record $1.4 trillion.

C

Which of the following will increase investment spending in the economy, holding everything else constant? A) an increase in consumer dissavings B) an increase in transfer payments C) an increase in the federal government surplus D) an increase in the budget deficit

C

Which of the following will increase the real interest rate? A) an increase in the supply of loanable funds B) an increase in household saving C) an increase in the demand for loanable funds D) an increase in the budget surplus

B

Which of the following will increase the real interest rate? A) an increase in the supply of loanable funds B) an increase in the demand for loanable funds C) an increase in household saving D) an increase in the budget surplus

A

Which of the following will not occur as the result of a decrease in net taxes? A) decreased household saving B) decreased government saving C) a shift to the left of the supply curve for loanable funds D) All of these

D

Which of the following would contribute to a sustained high rate of economic growth in the long run in an economy? A) an influx of immigrant labor into an economy without any accompanying technological change B) increases in labor force participation rates as workers who are out of the labor force pursue rising wages C) a shift of workers in the economy from the agricultural sector to the nonagricultural sector D) growth in capital per hour worked accompanied by technological change

D

Which of the following would encourage economic growth through increases in the capital stock? A) an increase in the profitability of new investment due to technological change B) an increase in household saving C) a decrease in the government deficit D) All of these

A

Which of the following would increase public saving? A) an increase in taxes B) an increase in transfers C) an increase in government purchases D) All of these would increase public saving.

B

Which of the following would you expect to increase the equilibrium interest rate? A) the government begins running a budget surplus B) an increase in the budget deficit C) a decrease in the profitability of investment projects firms are considering D) an increase in the percentage of income after net taxes that households save

A

Which one of the following is not considered a financial intermediary? A) a credit counselor B) an insurance company C) a bank D) a pension fund

C

Workers in high-income countries have ________ to work with than do workers in low-income countries. A) more labor and less physical capital B) more labor C) more physical capital D) less physical capital

A

________ are financial securities that represent promises to repay a fixed amount of funds. A) Bonds B) Stocks C) Interest rates D) Mutual funds