Econ chp 10 Hw
Which of the following are financial securities that represent promises to repay a fixed amount of funds?
bonds
Which of the following is the best example of human capital?
a worker gets a college degree
According to the "Rule of 70", how many years will it take for real GDP per capita to double when the growth rate of real GDP per capita is 5%?
14 years
If real GDP equals $11,567 billion in 2006 and $11,916 billion in 2007, and assuming population is constant over those two years, how many years will it take for real GDP per capitaLOADING... to double?
23.1 years.
a. The high point of economic activity is called b. The low point of economic activity is called c. The period between the high point of economic activity and the following low point is called d. The period between the low point of economic activity and the following high point is called
A= a peak. B= a trough. c=a recession D= an expansion.
Firms that act as financial intermediaries match households that have excess funds with firms that want to borrow funds. What other key services does the financial system provide to savers and lenders?
Allows savers to spread their money among many financial investments. Provides an easy method of exchanging a financial security for money. Collects and communicates information about borrowers to savers
Which of the following explains why employment only rises at a slow pace at the end of a recession?
Firms are hesitant to rehire laid off workers as they continue to operate below capacity.
Which of the following contribute(s) to shorter recessions, longer expansions, and less severe fluctuations in real GDP? A. Social Security benefits B. Monetary policy C. A service-based economy D. All of the above Your answer is correct. E. A and C only
D. all the above
What is the general relationship between the business cycle and unemployment and inflation?
During an expansion, unemployment falls and inflation increases.
Which of the following does NOT lead to long-run economic growthLOADING...?
Increase in average wages
Which of the following is not a service that the financial system provides for savers and borrowers?
guaranteeing savers high rates of return
In a closed economy, what is the relationship between saving and investment?
Investment is equal to saving.
Use the graph to help determine which one of the following statements regarding real and potential GDP is true.
Potential GDP increases every year.
If the CPI is currently 202, what does this tell you about inflation between last year and this year?
The CPI measures only the level of prices in a given year, not the percentage change in prices from one year to the next.
Which of the following is a reason the U.S. experienced larger economic growth than the Soviet Union? (Check all that apply.)
The U.S. had a market economy that allowed for greater entrepreneurship to occur. The U.S. had a greater amount of private property rights.
Following a long period of slow growth, the government of country X decided to open its economy and reduce trade barriers in order to boost economic growth. This provided the expected impetus to the economy as competition increased and the efficiency of domestic firms improved. A decade after opening the economy, the country's GDP is now growing at an average of 7-8 percent annually. A group of economists claim that the standard of living of the people has improved substantially during this period. They also expect this impressive growth to continue over the next five years. Which of the following, if true, will indicate that the country may not be able to maintain this average growth over the next few years?
The central bank announced its intention to take appropriate measures to ensure that inflation stays within control.
Firm X, a leading manufacturer of rubber tires in country A, caters to almost one-third of the domestic tire market. The country was hit by a recession last year that caused the national output growth to be negative. Simon Reeds, the CEO of firmX, feels that these fluctuations in the business environment are short-lived and expects the economy to recover very soon. In spite of the recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The firm's marketing head, Sandra Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making large-scale investments in the present climate. Which of the following, if true, would support the CEO's claim?
The government recently announced a plan to offer incentives to buyers in the car and household appliances market.
Suppose you can receive an interest rate of 5 percent on a certificate of deposit (CD) at a bank that is charging borrowers 10 percent on new car loans. Which one of the following choices does not explain why you might be unwilling to loan money directly to someone who wants to borrow from you to buy a new car, even if that person offers to pay you an interest rate higher than 5 percent?
You are better at assessing risks than the usual financial institutions.
When tax revenue exceeds government spending (government purchases and transfer payments) there is When tax revenue equals government spending there is When tax revenue is less than government spending there is
a budget surplus a balanced budget a budget deficit
Narnia, a developed open economy, has been experiencing double-digit inflation and a decelerating output growth for the last four quarters. Jonathan Mathews and Ben Hall, two market analysts, are discussing the various measures that can be adopted by the concerned authorities to curb inflation and boost production in the economy. Jonathan thinks that the central bank should raise the nominal interest rate to control inflation. This, he feels, will also contribute to an increase in the aggregate supply of funds available for investment in the economy. Ben however disagrees. According to him, an increase in the nominal interest rate will lower investment, leading to a decline in aggregate production by firms. This, in turn, will increase the shortage in the economy and prices will rise further. Ben's claim that a higher interest rate will increase the shortage in the economy fails to recognize the possibility that:
a higher interest rate induces consumers to increase saving.
Robert Samuelson, a columnist for the Washington Post argues that the Great Moderation actually caused the Great Recession. During the Great Moderation, "consumers could assume more debt—and lenders could lend more freely." Source: Robert J. Samuelson, "Is the Economy Experiencing another Great Moderation?" Washington Post, June 4, 2014. Consumers may have been willing to assume more debt, and banks and other lenders may have been willing to make loans more freely, during the Great Moderation because
consumer incomes were generally rising, and repayment prospects were good.
Cutting costs at the beginning of a recession tends to make the most sense for a business that produces or provides
durable goods.
Crowding out occurs when
governments must borrow funds which causes interest rates to rise and thus private investment is reduced.
Between 1950 and the mid-1990s, the United States experienced a much larger increase in the standard of living than the Soviet Union. This difference can be most attributed to the fact that the U.S.
had a greater amount of technological change.
Evaluate the following statement: "Saving money is not lending. How can it be? When I save my money, I put it in a bank. I don't loan it out to someone else." The statement is
incorrect. The supply of loanable funds is determined by household saving.
Evaluate the following statement: "Saving money is not lending. How can it be? When I save my money, I put it in a bank. I don't loan it out to someoneelse." The statement is
incorrect. The supply of loanable funds is determined by household saving.
During the expansion phase of the business cycle, production, employment, and income During the recession phase of the business cycle, production, employment, and income
increase decrease
Potential GDP
increases over time as the labor force grows. increases over time as technological change occurs.
Even though individuals earn interest on financial investments such as bonds, mutual funds, and certificates of deposits, they may still hold wealth in checking accounts because
individuals need money that is available to be spent on goods and services.
The ease with which a financial security can be exchanged for money is referred to as
liquidity.
These actions might have made the severe recession of 2007-2009 more likely because
once incomes began to fall, people could not pay their debt, and banks suffered losses as repayments fell.
Long−run economic growth requires all of the following except
political instability.
If real GDP per capita doubles between 2007 and 2022, what is the average annual growth rate of real GDP per capita?
4.7%
Which of the following is the best measure of the standard of living of the typical person in a country?
real GDP per person
One difference between stocks and bonds is that
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.
From a trough to a peak, the economy goes through
the expansionary phase of the business cycle.
Capital can be differentiated between physical capital and human capital. Human capital is
the knowledge and skills workers acquire from education and training or from their life experiences
An article in the Economist notes, "For 60 years, from 1770 to 1830, growth in British wages, adjusted for inflation, was imperceptible because productivity growth was restricted to a few industries." Not until the late nineteenth century, when productivity "gains had spread across the whole economy," did a sustained increase in real wages begin. Source: "The Onrushing Wave," Economist, January 18, 2014. You can expect there to be a close relationship between productivity gains and increases in real wages because
unit costs fall when more goods are produced per worker, so prices can fall, thereby increasing the value of real wages.
Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.
demanders; suppliers
Inflation tends to ________ during the expansion phase of the business cycle and ________ during the recession phase of the business cycle.
increase; decrease
