macro chapter 23, 24, 25, 26 (exam 2)

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment

investment

is the source of the demand for loanable funds As the interest rate falls, the quantity of loanable funds demanded increases

The production function for Country A exhibits constant returns to scale. Suppose that physical capital per worker, human capital per worker, and natural resources per worker all triple. At the same time, Country A's technological knowledge doubles. Productivity

is two times larger

The catch-up effect refers to the idea that

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

Proprietary technology is knowledge that is

known only by the company that discovered it

If the expected rate of return is less than r r, the student would

lend

Short-term bonds are generally

less risky than long-term bonds and so they feature lower interest rates.

The inflation rate is defined as the

percentage change in the price level from the previous period

Productivity is the amount of goods and services

produced for each hour of a worker's time. It is linked to a nation's economic policies.

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

producer price index

A nation's standard of living is best measured by its

real GDP per person

A country is possibly overinvesting in human capital if the best job a Ph.D. in philosophy can find is managing a restaurant.

true

If the extra output produced from an additional unit of capital falls as the stock of capital rises, the country is possibly overinvesting in capital

true

The final element of a financial crisis is

vicious circle

​Bob's new startup goes public and sells shares of future profits. Bob's startup is best described as a

​borrower or as a demander of funds.

​GDP and GNP (gross national product) are identical when

all domestic production is by domestically owned producers and no foreign production is carried out by domestic producers.

The primary advantage of mutual funds is that they

allow people with small amounts of money to diversify

public spending

amount of tax revenue that the government has left over after paying for its spending: T-G

The level of real GDP person

and the growth rate of real GDP per person vary widely across countries.

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest?

apparel

Two of the economy's most important financial intermediaries are

banks and mutual funds

The economy's two most important financial markets are

bond and stock market

If the Apple corporation sells a bond it is

borrowing directly from the public

Bolivia had a smaller budget deficit in 2003 than in 2002. Other things the same, we would expect this reduction in the budget deficit to have

decreased the interest rates and increased investment

A country is possibly overinvesting in human capital if people are not educated enough to fill existing job openings.

false

A person might not want to hold stock in the company where she works because she would be better off holding stock in the highest-risk company that yields the highest rate of return.

false

Companies encourage their employees to hold stock in the company because it reduces the connection between employees' work effort and the companies' profits.

false

True or False: If the extra output produced from an additional unit of capital rises as the stock of capital rises, the country is possibly overinvesting in capital.

false

Which of the following is an example of a renewable natural resource?

fish, soybeans, wood

a mutual fund

- is a financial institution that stands between savers and borrowers. -is a financial intermediary. - allows people with small amounts of money to diversify their holdings.

less investments lead to ________ economic growth

- slower - there might be a transition period in which workers and owners in consumption-good industries would receive higher incomes.

You and your friend work together for 4 hours to produce a total of 8 bookcases. What is productivity?

1 book per hour

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

1500

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

2,000, -1,000, and 1,000, respectively.

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP?

22,000

brain drain

Large-scale emigration by talented people The emigration of highly skilled workers to rich countries

The CPI is a measure of the overall cost of the goods and services bought by

a typical consumer

private spending

Private Saving = Y−C−T

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

There is still debate among economists on the severity of the CPI bias and what to do about it

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

There would be an increase in the amount of loanable funds borrowed.

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

U.S. investment and GDP increase, but German GDP is unaffected.

Which of the following equations represents GDP for a closed economy?

Y = C + I + G

Which of the following is included in GDP?

both the market value of rental housing services and the market value of owner-occupied housing services

After a corporation issues stock, the stock

can be resold only if the corporation wants to buy it back ???

The basic tools of supply and demand are

central to macroeconomic analysis as well as to microeconomic analysis

a bond ia

certificate of indebtedness.

In an economy where net exports are zero, if saving rises in some period, then in that period

consumption falls and investment rises.

The goal of the consumer price index is to measure changes in the

cost of living

Tesla builds a new vehicle, and completes it in December 2015. It sells the vehicle in January 2016. The value of this vehicle affects U.S. GDP

for 2015 only, since it was completed in December of 2015

You would expect a bond of an Eastern European government to pay a _______ interest rate as compared to a bond of the U.S. government.

higher

catch-up effect

higher productivity growth in countries with less capital per person helps those countries grow faster and catch up to the per-capita incomes of countries with more capital per person.

For an actual economy, total expenditures on goods and services by households does not equal GDP because

household expenditures on goods and services falls short of GDP, since household save for the future.

Which of the following correctly lists what is included in the consumption component of GDP?

household purchases of services, nondurable goods, and durable goods other than residential construction

The purchase of a new house is the one form of

household spending that is investment rather than consumption

The nominal interest rate tells you

how fast the number of dollars in your bank account rises over time

The real interest rate tells you

how fast the purchasing power of your bank account rises over time

The slope of the demand for loanable funds curve represents the

negative relation between the real interest rate and investment

The logic behind the catch-up effect is that

new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital

Which of the following always uses prices and quantities from the same period?

nominal and not real

If your firm's production function has constant returns to scale, and if you double all your inputs, then your firm's productivity will

not change

Long-term bonds are

riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

When a large, well-known corporation wishes to borrow directly from the public, it can

sell bonds

Core CPI is​

the CPI excluding food and energy

A COLA automatically raises the wage when

the consumer price index increases

Ralph is a plumber. Which of the following are included in his human capital?

the knowledge he learned on the job, but not the tools he uses

Which of the following is an example of human capital?

the knowledge learned from reading books

debt finance

the sale of bonds to raise money