Guo Auburn Econ 2030 Exam 2

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. GDP $8.7 trillion Consumption Spending $6.1 trillion Taxes Net of Transfers $1.0 trillion Government Purchases $0.8 trillion Refer to Table 26-3. Determine the quantity of loanable funds demanded. $1.8 trillion $1.6 trillion $1.4 trillion $0.8 trillion

$1.8 trillion

Suppose that in a closed economy GDP is equal to 15,000, taxes are equal to 4,000, consumption equals 10,000, and government expenditures equal 3,000. What are private saving and public saving? 1,000 and 1,000 1,000 and -1,000 2,000 and 1,000 2,000 and -1,000

1,000 and 1,000

Which of the following is an example of the "brain drain?" A country has such a poor educational system that human capital falls over time. The population of a country grows so fast that the educational system can't keep up. A country steals patented technology from another country. A country's most highly educated workers emigrate to rich countries.

A country's most highly educated workers emigrate to rich countries.

Which of the following is a determinant of productivity? human capital per worker physical capital per worker natural resources per worker All of the above are correct.

All of the above are correct.

During the last twelve months country A had a population of 20,000, 15,000 workers who each worked 8 hours, and production of 2,400,000 goods. Country B had a population of 16,000, 12,000 workers who each worked 8 hours a day and produced 2,112,000 goods. Which of the following is correct? Country A had the highest productivity and the highest real GDP per person. Country A had the highest productivity and Country B had the highest real GDP per person. Country B had the highest productivity and the highest real GDP per person. Country B had the highest productivity and Country A had the highest real GDP per person.

Country B had the highest productivity and the highest real GDP per person.

Deborah and Greg make ice cream. Deborah works five hours a day and makes 100 pints a day. Greg works 8 hours a day and makes 120 pints a day. Deborah's productivity is greater than Greg's but her production is less. Deborah's production is greater than Greg's but her productivity is less. Deborah's production and productivity are higher than Greg's. Deborah's production and productivity are both less than Greg's.

Deborah's productivity is greater than Greg's but her production is less.

Harry buys a bond issued by Dell, Inc., which uses the funds to buy new machinery for one of its factories. In the language of macroeconomics, Harry buys a bond issued by Dell, Inc., which uses the funds to buy new machinery for one of its factories. In the language of macroeconomics, Harry is investing, Dell is saving. Harry and Dell are both saving. Harry and Dell are both investing. Harry is saving, Dell is investing.

Harry is saving, Dell is investing.

Suppose that the public consumes $200 billion less relative to the previous year and the government spends $100 billion less. Other things constant, what happens to the supply of loanable funds? It shifts right by $100 billion. It shifts right by $200 billion. It shifts right by $300 billion. None is correct.

It shifts right by $300 billion.

Which answer is not a way to promote economic growth? Good nutrition Minimum wage Free trade Funding research

Minimum wage

Figure 25-1. On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L). The graph is going up and starting to slope down at the top Refer to Figure 25-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies? In the long run, a higher saving rate leads to a higher growth rate of productivity. In the long run, a higher saving rate leads to a higher growth rate of income. Returns to capital become increasingly smaller as the amount of capital per worker increases. All of the above are correct.

Returns to capital become increasingly smaller as the amount of capital per worker increases.

Which of the following would necessarily increase the equilibrium interest rate? The demand for and the supply of loanable funds shift right. The demand for and the supply of loanable funds shift left. The demand for loanable funds shifts right and the supply of loanable funds shifts left. The demand for loanable funds shifts left and the supply of loanable funds shifts right.

The demand for loanable funds shifts right and the supply of loanable funds shifts left.

Stock is a claim to partial ownership in a firm. Bonds are certificates of indebtedness. True False

True

Which of the following would not lead to an increase in per worker productivity? the population gets easier access to education a tornado destroys a few miles of railroad an advance in technological knowledge discovery of a new mineral deposit

a tornado destroys a few miles of railroad

What can government policy do to raise productivity and living standards? all of them are policies that increase productivity and increase living standards. pursue outward-oriented policies in regards to trade. protect property rights and promote political stability. encourage saving and investment.

all of them are policies that increase productivity and increase living standards.

If the demand for loanable funds shifts to the right, then the equilibrium interest rate and quantity of loanable funds falls. and quantity of loanable funds rises. rises and the quantity of loanable funds falls. falls and the quantity of loanable funds rises.

and quantity of loanable funds rises.

If Congress increased the tax rate on interest income, investment would increase and saving would decrease. would decrease and saving would increase. and saving would increase. and saving would decrease.

and saving would decrease.

Other things the same, if the capital stock increases faster than employment, then we would expect both output and labor productivity to fall. output to rise but labor productivity to fall. both output and labor productivity to rise. output to fall but labor productivity to rise.

both output and labor productivity to rise.

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 26-1. This economy's government is running a budget surplus of $3,000. budget surplus of $12,000. budget deficit of $3,000. budget deficit of $12,000.

budget deficit of $3,000.

If the supply of loanable funds shifts to the right, then the equilibrium interest rate and quantity of loanable funds rises. and quantity of loanable funds falls. rises and the quantity of loanable funds falls. falls and the quantity of loanable funds rises.

falls and the quantity of loanable funds rises.

Which of the following would an improvement in the protection of property rights do? improve the functioning of the price system and increase investment from abroad improve the functioning of the price system but not increase investment from abroad increase investment from abroad but not improve the function of the price system neither improve the functioning of the price system nor increase investment from abroad

improve the functioning of the price system and increase investment from abroad

Investment from abroad increases a country's productivity but reduces its wages. reduces a country's productivity but increases its wages. reduces both a country's productivity and its wages. increases both a country's productivity and wages.

increases both a country's productivity and wages.

Which of the following is an example of physical capital? discovering a cheaper production method. the knowledge an auto mechanic has obtained stocks and bonds issued by a corporation machinery in a bottling factory

machinery in a bottling factory

Other things constant, if the government increases its expenditures but not taxes public saving and the interest rate will rise. public saving will rise and the interest rate will fall. public saving and the interest rate will fall. public saving will fall and the interest rate will rise.

public saving will fall and the interest rate will rise.

In the language of macroeconomics, a higher interest rate induces people to save less, so the supply of loanable funds slopes downward. invest more, so the supply of loanable funds slopes upward. save more, so the supply of loanable funds slopes upward. invest less, so the supply of loanable funds slopes downward.

save more, so the supply of loanable funds slopes upward.

An investment tax credit shifts the demand for loanable funds left and lowers the interest rate. shifts the supply of loanable funds right and lowers the interest rate. shifts the demand for loanable funds right and raises the interest rate. shifts the supply of loanable funds left and raises the interest rate.

shifts the demand for loanable funds right and raises the interest rate.

In the last few years the U.S. government budget deficit has increased. Other things the same this means the supply of loanable funds shifted right, interest rate increased, and quantity of loanable funds declined. supply of loanable funds shifted left, interest rate increased, and quantity of loanable funds declined. demand for loanable funds shifted right, interest rate increased, and quantity of loanable funds increased. demand for loanable funds shifted left, interest rate decreased, and quantity of loanable funds declined.

supply of loanable funds shifted left, interest rate increased, and quantity of loanable funds declined.

If the supply of and demand for loanable funds both shift left, which of the following necessarily happens? the equilibrium interest rate falls the equilibrium interest rate rises the equilibrium quantity of loanable funds rises the equilibrium quantity of loanable funds falls

the equilibrium quantity of loanable funds falls

You are thinking about buying a long-term bond from Flex Industries, an established firm with several years of profitability. Relative to other bonds, both the long term and the low risk of Flex bonds would tend to make the interest rate they pay lower. the long term of Flex bonds would tend to make the interest rate they pay higher, while the low risk of Flex bonds would tend to make the interest rate they pay lower. the long term of Flex bonds would tend to make the interest rate they pay lower, while the low risk of Flex bonds would tend to make the interest rate they pay higher. both the long term and low risk of Flex bonds would tend to make the interest rate they pay higher.

the long term of Flex bonds would tend to make the interest rate they pay higher, while the low risk of Flex bonds would tend to make the interest rate they pay lower.

On the market for loanable funds, if the interest rate were lower than the equilibrium level: the quantity of loanable funds supplied would be less than the quantity of loanable funds demanded. there would be a surplus of loanable funds. lenders have an incentive to lower the interest rate they charge. the quantity of loanable funds supplied would be greater than the quantity of loanable funds demanded.

the quantity of loanable funds supplied would be less than the quantity of loanable funds demanded.