Question 1

How would the equilibrium quantity of loanable funds respond to a change from an income tax to a consumption tax?

Accepted Answer

A)  The equilibrium quantity of loanable funds would rise. 
B)  The equilibrium quantity of loanable funds would fall. 
C)  The equilibrium quantity of loanable funds would be unaffected. 
D)  The equilibrium quantity of loanable funds may rise or fall based on whether household saving increases or decreases as a result of the change from an income tax to a consumption tax. 
A)  The equilibrium quantity of loanable funds would rise. 
B)  The equilibrium quantity of loanable funds would fall. 
C)  The equilibrium quantity of loanable funds would be unaffected. 
D)  The equilibrium quantity of loanable funds may rise or fall based on whether household saving increases or decreases as a result of the change from an income tax to a consumption tax. A

Question 2

Most economists believe that the return of ________ during the 2007-2009 recession is a key reason why the recession was so severe.

Accepted Answer

A)  high tariffs 
B)  financial instability 
C)  rapid inflation 
D)  high interest rates 
A)  high tariffs 
B)  financial instability 
C)  rapid inflation 
D)  high interest rates B

Question 3

Which of the following explains the cause of the change in the unemployment rate at the end of a recession?

Accepted Answer

A)  Firms are hesitant to rehire laid off workers, as they continue to operate below capacity. 
B)  Firms rapidly hire new workers at the first sign of an increase in demand for their goods. 
C)  Discouraged workers return to the labor force, and this makes the unemployment rate fall. 
D)  Discouraged workers leave the labor force, and this makes the unemployment rate rise. 
A)  Firms are hesitant to rehire laid off workers, as they continue to operate below capacity. 
B)  Firms rapidly hire new workers at the first sign of an increase in demand for their goods. 
C)  Discouraged workers return to the labor force, and this makes the unemployment rate fall. 
D)  Discouraged workers leave the labor force, and this makes the unemployment rate rise. A

Question 4

If consumers decide to be more frugal and save more out of their income, then this will cause

Accepted Answer

A)  a shift in the supply curve for loanable funds to the right. 
B)  a shift in the supply curve for loanable funds to the left. 
C)  a movement to the right along the supply curve for loanable funds. 
D)  a movement to the left along the supply curve for loanable funds. 
A)  a shift in the supply curve for loanable funds to the right. 
B)  a shift in the supply curve for loanable funds to the left. 
C)  a movement to the right along the supply curve for loanable funds. 
D)  a movement to the left along the supply curve for loanable funds.

Question 5

If government purchases are $400 million, taxes are $700 million, and transfers are $200 million, which of the following is true?

Accepted Answer

A)  Public saving is $500 million. 
B)  The budget deficit is $100 million. 
C)  The budget deficit is $500 million. 
D)  Public saving is $100 million. 
A)  Public saving is $500 million. 
B)  The budget deficit is $100 million. 
C)  The budget deficit is $500 million. 
D)  Public saving is $100 million.

Question 6

The Business Cycle Dating Committee, a part of the ________, officially decides when a recession begins and ends.

Accepted Answer

A)  federal government 
B)  Bureau of Labor Statistics 
C)  National Bureau of Economic Research 
D)  Federal Reserve 
A)  federal government 
B)  Bureau of Labor Statistics 
C)  National Bureau of Economic Research 
D)  Federal Reserve

Question 7

In a closed economy,

Accepted Answer

A)  I = Y - C - G. 
B)  I = Y + C - G. 
C)  I = Y - C + G. 
D)  I = Y + C + G. 
A)  I = Y - C - G. 
B)  I = Y + C - G. 
C)  I = Y - C + G. 
D)  I = Y + C + G.

Question 8

What is "human capital," and how does human capital affect labor productivity and economic growth?

Accepted Answer

Human capital is the accumulated knowled

Question 9

A recession begins with a(n) ________ in spending by firms on capital goods and a(n) ________ in spending on durable goods by households.

Accepted Answer

A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; decrease 
B)  increase; increase 
C)  decrease; increase 
D)  decrease; decrease

Question 10

If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2013, we would say that in the year 2013, the average American could buy ________ times as many goods and services as the average American in 1950.

Accepted Answer

A)  1/8 
B)  4 
C)  8 
D)  12 
A)  1/8 
B)  4 
C)  8 
D)  12

Question 11

How has economist Robert Fogel explained that economic growth is connected to life expectancy? Based on this connection, in what country would you expect to have a longer life expectancy, the United States or India? Explain.

Accepted Answer

According to Robert Fogel's research, co

Question 12

What is investment in a closed economy if you have the following economic data? Y = $10 trillion
C = $5 trillion
TR = $2 trillion
G = $2 trillion

Accepted Answer

A)  $2 trillion 
B)  $3 trillion 
C)  $5 trillion 
D)  cannot be determined without information on taxes (T) 
A)  $2 trillion 
B)  $3 trillion 
C)  $5 trillion 
D)  cannot be determined without information on taxes (T)

Question 13

Explain what happens to inflation during the business cycle. Give an intuitive explanation as to why inflation changes the way it does over the business cycle.

Accepted Answer

Inflation will rise during an expansion

Question 14

A period of expansion in the business cycle ends when

Accepted Answer

A)  real GDP is equal to potential GDP. 
B)  the business cycle reaches its peak. 
C)  the business cycle reaches its trough. 
D)  real GDP is less than potential GDP. 
A)  real GDP is equal to potential GDP. 
B)  the business cycle reaches its peak. 
C)  the business cycle reaches its trough. 
D)  real GDP is less than potential GDP.

Question 15

How would the equilibrium interest rate respond to a change from an income tax to a consumption tax?

Accepted Answer

A)  The equilibrium interest rate would rise. 
B)  The equilibrium interest rate would fall. 
C)  The equilibrium interest rate would be unaffected. 
D)  The equilibrium interest rate may rise or fall based on whether the demand or supply of loanable funds changes. 
A)  The equilibrium interest rate would rise. 
B)  The equilibrium interest rate would fall. 
C)  The equilibrium interest rate would be unaffected. 
D)  The equilibrium interest rate may rise or fall based on whether the demand or supply of loanable funds changes.

Question 16

The supply of loanable funds has a ________ slope because the greater the interest rate, the ________ the reward to saving, and the ________ the quantity of loanable funds supplied.

Accepted Answer

A)  positive; lesser; lesser 
B)  positive; greater; lesser 
C)  negative; lesser; greater 
D)  positive; greater; greater 
A)  positive; lesser; lesser 
B)  positive; greater; lesser 
C)  negative; lesser; greater 
D)  positive; greater; greater

Question 17

Which of the following is a correct statement?

Accepted Answer

A)  Inflation is measured as the percent change in the CPI. 
B)  The CPI is a widely used measure of the inflation rate. 
C)  Real GDP is our best measure of economic growth. 
D)  The PPI measures inflation as experienced by producers. 
A)  Inflation is measured as the percent change in the CPI. 
B)  The CPI is a widely used measure of the inflation rate. 
C)  Real GDP is our best measure of economic growth. 
D)  The PPI measures inflation as experienced by producers.

Question 18

Growth in potential GDP in the United States is estimated to be about

Accepted Answer

A)  8.25% per year. 
B)  5.0% per year. 
C)  3.2% per year. 
D)  1.5% per year. 
A)  8.25% per year. 
B)  5.0% per year. 
C)  3.2% per year. 
D)  1.5% per year.

Question 19

Which of the following will not occur as the result of a decrease in net taxes?

Accepted Answer

A)  decreased household saving 
B)  decreased government saving 
C)  a shift to the left of the supply curve for loanable funds 
D)  all of the above 
A)  decreased household saving 
B)  decreased government saving 
C)  a shift to the left of the supply curve for loanable funds 
D)  all of the above

Question 20

If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.

Accepted Answer

A)  labor force participation 
B)  the quantity of goods or services that can be produced by one hour of work 
C)  the working-age population 
D)  nominal GDP 
A)  labor force participation 
B)  the quantity of goods or services that can be produced by one hour of work 
C)  the working-age population 
D)  nominal GDP

Exam 21: Economic Growth, the Financial System, and Business Cycles

How would the equilibrium quantity of loanable funds respond to a change from an income tax to a consumption tax?

Most economists believe that the return of ________ during the 2007-2009 recession is a key reason why the recession was so severe.

Which of the following explains the cause of the change in the unemployment rate at the end of a recession?

If consumers decide to be more frugal and save more out of their income, then this will cause

If government purchases are $400 million, taxes are $700 million, and transfers are $200 million, which of the following is true?

The Business Cycle Dating Committee, a part of the ________, officially decides when a recession begins and ends.

In a closed economy,

What is "human capital," and how does human capital affect labor productivity and economic growth?

A recession begins with a(n) ________ in spending by firms on capital goods and a(n) ________ in spending on durable goods by households.

If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2013, we would say that in the year 2013, the average American could buy ________ times as many goods and services as the average American in 1950.

How has economist Robert Fogel explained that economic growth is connected to life expectancy? Based on this connection, in what country would you expect to have a longer life expectancy, the United States or India? Explain.

What is investment in a closed economy if you have the following economic data? Y = $10 trillion C = $5 trillion TR = $2 trillion G = $2 trillion

Explain what happens to inflation during the business cycle. Give an intuitive explanation as to why inflation changes the way it does over the business cycle.

A period of expansion in the business cycle ends when

How would the equilibrium interest rate respond to a change from an income tax to a consumption tax?

The supply of loanable funds has a ________ slope because the greater the interest rate, the ________ the reward to saving, and the ________ the quantity of loanable funds supplied.

Which of the following is a correct statement?

Growth in potential GDP in the United States is estimated to be about

Which of the following will not occur as the result of a decrease in net taxes?

If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

A recession begins with a(n) in spending by firms on capital goods and a(n) in spending on durable goods by households.

The supply of loanable funds has a slope because the greater the interest rate, the the reward to saving, and the the quantity of loanable funds supplied.