Econ exam 3

If, in a closed economy, real GDP is $30 billion, consumption is $20 billion, and government purchases are $5 billion, what is total saving in the economy? A) $5 billion B) $15 billion C) $45 billion D) $55 billion

A) $5 billion

If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita? A) 4.7% B) 10.5% C) 15% D) 21%

A) 4.7%

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

A) a labor force that is more productive.

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

A) an increase in the federal government surplus

When the price level in the United States falls relative to the price level of other countries, ________ will fall, ________ will rise, and ________ will rise. A) imports; exports; net exports B) exports; imports; net exports C) net exports; exports; imports D) net exports; imports; exports

A) imports; exports; net exports

Because ________ in the government budget deficit increase the real interest rate, budget deficits can ________ firm investment. A) increases; increase B) decreases; increase C) decreases; decrease D) increases; decrease

A) increases; increase

.Potential GDP refers to A) the level of GDP attained when all firms are producing at capacity. B) the level of GDP attained by the country with the highest growth in real GDP in a given year. C) the difference between the highest level of real GDP per quarter and the lowest level of real GDP per quarter within any given year. D) the extent to which real GDP is above or below nominal GDP.

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

All of the following are reasons why the wages of workers and the prices of inputs rise more slowly than the prices of final goods and services except A) unions are successful in pushing up wages. B) firms are often slow to adjust wages. C) contracts make prices and wages "sticky." D) menu costs make some prices sticky

A) unions are successful in pushing up wages.

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

B) an increase in the budget deficit

Suppose there has been an increase in investment. As a result, real GDP will ________ in the short run, and ________ in the long run. A) increase; increase further B) increase; decrease to its initial value C) decrease; decrease further D) decrease; increase to its initial level

B) increase; decrease to its initial value

Which of the following is most likely to be able to sustain economic growth in an economy? A) sustained increases in the labor force participation rate B) technological change C) increases in capital per hour worked D) accumulations of economic resources

B) technological change

.Suppose the economy is at full employment and firms become more optimistic about the future profitability of new investment. Which of the following will happen in the short run? A) Output will decline. B) Prices will decline. C) Unemployment will decline. D) The aggregate demand curve will shift to the left.

C) Unemployment will decline

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

C) an increase in expected profits from firm investment projects.

The level of aggregate supply in the long run is not affected by A) changes in technology. B) changes in the capital stock. C) changes in the price level. D) changes in the number of workers.

C) changes in the price level.

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

C) demand; right

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

C) inventions of new machinery, equipment, or software

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 A) is 3.0%. B) is 3.6%. C) is 3.75%. D) cannot be determined from the information given

C) is 3.75%

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

C) reduce investment.

Suppose the U.S. GDP growth rate is faster relative to other countries' GDP growth rates. This will A) move the economy up along a stationary aggregate demand curve. B) move the economy down along a stationary aggregate demand curve. C) shift the aggregate demand curve to the left. D) shift the aggregate demand curve to the right.

C) shift the aggregate demand curve to the left.

If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve? A) This will move the economy up along a stationary aggregate demand curve. B) This will move the economy down along a stationary aggregate demand curve. C) This will shift the aggregate demand curve to the left. D) This will shift the aggregate demand curve to the right.

D) This will shift the aggregate demand curve to the right.

Which of the following best describes the "wealth effect"? A) When the price level falls, the real value of household wealth falls. B) When the price level falls, the nominal value of household wealth falls. C) When the price level falls, the nominal value of household wealth rises. D) When the price level falls, the real value of household wealth rises.

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

Which of the following will shift the aggregate demand curve to the right, ceteris paribus? A) an increase in interest rates B) a decrease in disposable income C) a decrease in expected profits for firms D) an increase in net exports

D) an increase in net exports

Which of the following statements is correct? a. The expected future profitability of a corporation influences the demand for that corporation's stock. b. When a corporation sells stock as a means of raising funds it is engaging in debt finance. c. The owners of bonds sold by the Microsoft Corporation are part owners of that corporation. d. All bonds are, by definition, perpetuities.

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

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? a. 1,500, 1,000, and 500, respectively b. 1,000, 500, and 1,500, respectively c. 500, 1,500, and 1,000, respectively d. None of the above is correct.

b. 1,000, 500, and 1,500, respectively

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will a. demand funds from the financial system by buying bonds. b. demand funds from the financial system by selling bonds. c. supply funds to the financial system by buying bonds. d. supply funds to the financial system by selling bonds.

b. demand funds from the financial system by selling bonds.

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? a. $4 trillion and $1 trillion, respectively b. $4 trillion and $-1 trillion, respectively c. $2 trillion and $1 trillion, respectively d. $2 trillion and $-1 trillion, respectively

c. $2 trillion and $1 trillion, respectively

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 low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct? a. Because they have the same term to maturity the interest rates should be the same. b. Because of the differences in tax treatment and credit risk, the state bond should have the higher interest rate. c. Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate. d. It is not possible to say if one bond has a higher interest rate than the other.

c. 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 a. the credit risk associated with Bond A is lower than the credit risk associated with Bond B. b. Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation. c. Bond A has a term of 20 years and Bond B has a term of 2 years. d. All of the above are correct.

d. All of the above are correct.

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 a. supply of existing shares of the stock and the price will both rise. b. supply of existing shares of the stock and the price will both fall. c. demand for existing shares of the stock and the price will both rise. d. demand for existing shares of the stock and the price will both fall.

d. demand for existing shares of the stock and the price will both fall.

According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would a. raise both national saving and private saving. b. raise national saving and reduce private saving. c. leave national saving and private saving unchanged. d. leave national saving unchanged and reduce private saving

d. leave national saving unchanged and reduce private saving