Macro Exam 2

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

2,000, -1,000, 1,000

people who buy newly issued stock in a corporation such as Crate and Barrel provide

equity and finance and so become part owners of Crate and Barrel

if an American based firm opens and operates a factory in china, then it is engaging in

foreign direct investment

crowding out occurs when

investment declines because a budget deficit makes interest rates rise

The catch-up effect refers to the idea that

it is easier for a country to grow fast if it starts out relatively poor

municipal bonds pay a relatively

low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.

If a reform of the tax laws encourages greater saving, the result would be

lower interest rates and greater investment

When you rent a car, you might treat it with less care than you would if it were your own. This is an example of

moral hazard

a larger budget deficit

raises the interest rate and reduces investment

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.

Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?

the supply of loanable funds shifted left

Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,

their investments are being financed by someone elses savings

Janet is a farmer. Which of the following are included in her human capital?

what she's learned from experience, but not her tractor