Macro Test #2

Front 1

Actual real GDP will be above potential GDP if...?

Back 1

Firms are producing above capacity.

Front 2

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

Back 2

Capital Stock

Front 3

Botswana's rapid growth can be explained by...?

Back 3

The pro-growth policies of Botswana's government is the most important reason. But also avoiding civil wars and income from diamond exports.

Front 4

Since 1900, real GDP in the United States has grown...?

Back 4

From $5,600 to $42,200 (800%).

Front 5

What factors are the keys to determining labor productivity?

Back 5

1. The quantity of capital labor per hour worked

2. The level of technology.

Front 6

If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?

Back 6

Rule of 70:

Number of years to double your money = 70/Growth Rate.

So in this case it is 70/8, which equals 8.75 years.

Front 7

According to the "Rule of 70", it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is

Back 7

In this case the math would be:

4 = 70/?

70/4 = 17.5

4 = 70/17.5

So the growth rate would be 17.5.

Front 8

What governmental policy actions are helpful in supporting growth in an economy?

Back 8

1. Protecting private property / property rights (THIS IS THE BIG ONE)

2. Establishing an independent court system that enforces contracts between private individuals.

3. Facilitating the development of of an efficient financial system, as well as systems of education, transportation, and communication.

4. Allowing press freedom and democracy

5. Avoiding political instability and corruption.

Front 9

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

Back 9

slow down the quantity of goods and services consumed by the average person.

If ^ is to increase, then the quantity of goods and services produced per hour of work must also increase.

Page 308, in the paragraph under the main bolded title.

Front 10

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

Back 10

many of today's goods and services were not available back in 1900. I.E. no matter how rich you were, if you got sick, you couldnt by the medicine we can buy today.

Front 11

Since 1900, real GDP per capita has ________ and this measure ________ the actual growth in standards of living in the United States over this time.

Back 11

1. increased

2. understates

Front 12

If the U.S. 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 U.S. airlines.

Back 12

.

Front 13

Refer to Table 10-1. Using the table above, what is the approximate average annual growth rate from 2008 to 2011? (Question #13 has the table).

Back 13

You find the rate by taking the Current Real GDP minus the Real GDP in the base year, and then diving that sum by the Real GDP in the base year. This gives you your percentage.

9,280 - 8,700 = 580.

580 / 8,700 = 6.667%

6.667% / 4(total years)=1.6675%

Front 14

Countries with high rates of economic growth tend to have

Back 14

.

Front 15

Human capital refers to...?

Back 15

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

Front 16

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as...?

Back 16

Labor productivity

Front 17

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...?

Back 17

From 23.333 down to 17.5, which is approximately 8 years.

Front 18

Which of the following is an example of human capital?

Back 18

Workers with a college education generally have more skills and are more productive than workers with only a high school education.

Front 19

Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP from 2010 to 2011? (Table is at question #20)

Back 19

9,280 - 9,000 = 280

280 / 9,000 = 3.11%

Front 20

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%?

Back 20

70/5 = 14 years.

Front 21

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

Back 21

3.3% per year

Front 22

What factors promote Long-run economic growth?

Back 22

Labor productivity (which is determined by capital per hour worked and technological change).

Front 23

There is a government budget surplus if...?

Back 23

The government spends less than it collects in taxes.

Front 24

Borrowers are ________ of loanable funds, and lenders are ________ of loanable funds.

Back 24

.

Front 25

If Ebenezer Scrooge spends rather than saves his vast wealth he will...?

Back 25

Slow down economic growth, by a little. He will contribute to more consumption goods being produced and fewer investment goods.

Front 26

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

Back 26

.

Front 27

Refer to Figure 10-3 (Question #28). What factors explain the graph depicted above?

Back 27

Page 319

Front 28

If net taxes fall by $80 billion, we would expect household savings to...?

Back 28

Decrease. A government budget surplus increases household savings, which increases investment spending. So if the government got $80 million less in taxes, then household savings would go down because people would have more money to spend.

Front 29

Liquidity refers to...?

Back 29

Is the ease with which a financial security can be exchanged for money.

Front 30

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

Back 30

A reduction in the amount of goods and services they can assume and enjoy today. It will also result in an increase in investment spending.

Front 31

How will an increase in the government budget surplus as a result of lower government spending (with no change
in net taxes) affect private saving in the economy?

Back 31

.

Front 32

There is a federal budget deficit when...?

Back 32

When government spends more than it collects in taxes.

T < G+TR

Front 33

Increasing the amount of consumption spending and reducing the amount of savings ________ investment
expenditures, and ________ long-run economic growth in the economy.

Back 33

1. Decreases

2. Slows down

Front 34

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

Back 34

Total saving

Front 35

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

Back 35

.

Front 36

A government budget surplus from reduced government spending (no change in net taxes) will ________ the level of investment in the economy and ________ the level of saving (private plus public) in the economy

Back 36

.

Front 37

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 ________.

Back 37

.

Front 38

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

Back 38

.

Front 39

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 quantity demanded of loanable funds.

Back 39

.

Front 40

What do we typically see as the economy nears the end of an expansion?

Back 40

.

Front 41

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

Back 41

1. Durables

2. Nondurables