question

Inflation ____ during expansion phase of business cycle and ____ during the recession phase of business cycle

answer

increases; decreases

question

Increasing the amount of consumption spending and reducing the amount of savings ____ investment expenditures, and _____ long run economic growth in the economy

answer

decreases; decreases

question

US business cycle fluctuations have become what since the 1950's

answer

milder

question

Increases in real GDP since 1900 can actually underestimate growth in the standard of living for Americans since 1900 because

answer

the quality of health care that exists today was not available in 1900

question

Purchase of Huggies diapers do what the the business cycle

answer

remain fairly constant

question

Technological advances generally result in

answer

increased life expectancy

question

The demand for loanable funds is downward sloping because the _____ the interest rate, the _____ the number of profitable investment projects a firm can undertake, and the _____ the quality demanded of loanable funds

answer

lower; greater; greater

question

Countries with high rates of economic growth tend to have

answer

a labor force that is more productive

question

Borrowers are ____ of loanable funds, and lenders are _____ of loanable funds

answer

demanders; suppliers

question

In a closed economy, which of the following components of GDP is not included

answer

net exports

question

In a closed economy, what three components of GDP are included

answer

government spending, consumption, and investment

question

When the government runs a budget deficit, we would except to see that

answer

investment will fall

question

If the US government decided to regulate the prices of airline tickets to keep them from falling when the economy is weak, there would tend to be a ____ of airline tickets in the market and this would likely _____ the profits of US airlines

answer

surplus; reduce

question

An increase in the demand for loanable funds will occur if there is

answer

an increase in expected profits from firm investment projects

question

The total amount of physical capital available in a country is known as the country's

answer

capital stock

question

As the economy nears the end of an expansion, which of the following do we typically see?

answer

rising interest rates

question

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

answer

The equilibrium interest rate would fall

question

There is federal budget defect when

answer

the government spends more than it collects on taxes

question

What is the experience of the Boeing Corporation since it was established in 1916?

answer

strong growth interrupted by periods of business cycle recession

question

If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from

answer

23.3 years to 17.5 years

question

What encourages economic growth through increase in capital stock

answer

-changes from an income tax to a consumption tax - a decrease in the government deficit - increase in household saving

question

What increases investment by spending in the economy, holding everything else constant?

answer

increase in federal government surplus

question

Since 1900, real GDP in the US has grown

answer

more rapidly than the population

question

Which of these is most liquid?

answer

dollar bill

question

The effect of recession on a company like Boeing Aircraft is such as

answer

sales decline more sharply for Boeing as compared to firms that don't produce durable goods

question

What increases labor productivity

answer

inventions of new machinery, equipment or software

question

What decreases labor productivity

answer

-decrease in the availability of computers and factory buildings - increase in aggregate (total) hours of work - decline in the health of the population

question

During the recession phase of the business cycle

answer

interest rates are usually falling

question

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

answer

a shift in the supply curve for loanable funds to the right

question

If consumers decide to spend more of their income this will cause

answer

a shift in the supply surge for loanable funds to the left

question

The response of investment spending to an increase in the government budget deficit is called

answer

crowding out

question

If, in an economy experiencing inflation, the government decided to tax real interest income rather than nominal interest income, this change would cause the real interest rate to ____ and the equilibrium quantity of loanable funds to ____

answer

fall; rise

question

If government saving is negative then

answer

T-TR<G (Taxes- Transfers< Government purchases)

question

When economy enters a recessionary phase of the business cycle, unemployment tends to

answer

increase

question

Long run economic growth requires

answer

- technological change - increase in capital per hour worked - government provision of secure property rights

question

Long run economic growth does not require

answer

political instability

question

In comparison to a government that runs a balanced budget, when the government runs a budget deficit

answer

business investments will fall

question

In a closed economy, public saving is

answer

T-G-TR (Taxes- Government purchases- Transfers)

question

In a closed economy public saving plus private saving is equal to

answer

investment

question

If Benjamin Allan spends, rather than saves, his vast wealth he will

answer

slow economic growth because he is reducing the amount of funds available for investment (he can change this by buying lots and lots of cold stone)

question

If net taxes fall by $80 billion, we would expect

answer

household saving to rise by less than $80 billion

question

The quantity of goods and services that can be produced by one worker or by one hour of work is called

answer

labor productivity

question

What purchase would dramatically decline during a recession?

answer

refrigerator

question

Potential GDP refers to

answer

levels of GDP attained when all firms are producing at capacity

question

According to the National Bureau of Economic Research, the US experienced ___ recessions since 1950

answer

10

question

During the expansion phase of the business cycle, which of the following eventually increases?

answer

- income - employment - production

question

Which of the following would you expect to increase the equilibrium interest rate?

answer

increase in the budget deficit

question

The demand for durable goods

answer

declines by a greater percentage than does GDP during a recession

question

There is a government surplus if

answer

T-TR>G (Taxes-Transfers>government purchases)

question

What does human capital refer to?

answer

accumulated knowledge and skills workers acquire from education and training or from their life experiences

question

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

answer

The equilibrium quantity of loanable funds would rise

question

Most economists believe that the return of ____ during the 2007-2009 recession is a key reason why the recession was so serve

answer

financial instability

question

Liquidity refers to

answer

the ease with which a financial security can be traded for cash

question

The period between a business cycle peak and a business cycle trough is called

answer

recession

question

What is the name of the organization that defines business cycle peaks and troughs in the US

answer

National Bureau of Economic Research

question

Which of the following does not describe governmental policy actions that are helpful in supporting growth in an economy?

answer

Government policies that avoid playing any role in developing communication systems

question

In a closed economy, which of the following equations reflects investment

answer

Y-C-G (GDP-consumption-government purchases

question

What will not occur as the result of a decrease in net taxes

answer

decreased household saving

question

What will occur as the result of a decrease in net taxes

answer

- a shift to the left of the supply curve for loanable funds - decreased government spending

question

Actual real GDP will be above potential GDP if

answer

firms are producing above capacity

question

What explains the cause of the change in the unemployment rate at the end of a recession

answer

firms are hesitant to rehire laid off workers as they continue to operate below capacity

question

Since 1950, expansions in the US have become ___, while recessions have become ____

answer

longer; shorter

question

What is an example of human capital

answer

college education

question

A firm can fund an expansion of its operations by

answer

issuing bonds

question

A good measure of the standard of living is

answer

real GDP per capita

question

In a closed economy, private saving is equal to?

answer

Y+TR-C-T (GDP+ transfers- consumption- taxes)

question

From 1991 til 2001, the US was in a period of

answer

expansion

question

Typically, as an economy begins to emerge from a recessionary phase of the business cycle,

answer

unemployment continue to rise

question

During a recession, spending on ___ tends to fall more dramatically than spending on ___

answer

durable goods; nondurable goods

question

Growth in potential GDP in the US is estimated to be about

answer

3.3% per year

question

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

answer

the quantity of goods or services that can be produced by one hour of work

question

True/false- Inflation is measured as the percent change in the CPI

answer

true

question

As the economy nears the end of a recession, what do we typically see?

answer

increased spending on capital goods by firms

question

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%?

answer

14 years

question

The period of expansion ends with a ___ and the period of recession ends with a ____

answer

business cycle peak; business cycle trough

question

What two factors are the keys to determining labor productivity

answer

technology and the quantity of capital per hour worked

question

If labor productivity growth slows down in a country, this will

answer

slow down the increase in real GDP per capita

question

What contributes to a sustained high rate of economic growth in the long run in an economy

answer

growth per capita per hour accompanied by technological change

question

How will an increase in the government budget surplus as a result of lower government spending affect private saving in the economy

answer

private saving will decrease by less than the amount of incase in the budget surplus

question

A government budget surplus from reduced government spending will ____ the level of investment in the economy and ___ the level of saving in the economy

answer

increase; increase

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