Question 1

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?

Accepted Answer

A)  Services have become a smaller fraction of GDP since the 1950s.
B)  Unemployment insurance and other government transfer programs are more prevalent since the 1950s.
C)  The government has become more reluctant to intervene when real GDP declines and unemployment rises since the 1950s.
D)  both B and CE) A) and B)
F) None of the above

Question 2

Scenario 21-1
Consider the following data for a closed economy:
Y = $12 trillion
C = $8 trillion
I = $2 trillion
G = $2 trillion
TR = $2 trillion
T = $3 trillion
-Refer to Scenario 21-1.Based on the information above,what is the level of public saving?

Accepted Answer

A)  $0
B)  $1 trillion
C)  $2 trillion
D)  negative $1 trillion (a deficit of $1 trillion) E) A) and B)
F) A) and C)

Question 3

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?

Accepted Answer

A)  Private saving will increase by the amount of increase in the budget surplus.
B)  Private saving will decrease by the amount of increase in the budget surplus.
C)  Private saving will decrease by less than the amount of increase in the budget surplus.
D)  Private saving will be unaffected by the increase in the budget surplus.E) A) and D)
F) None of the above

Question 4

If,in a closed economy,real GDP is $30 billion,consumption is $20 billion,and government purchases are $5 billion,what is total saving in the economy?

Accepted Answer

A)  $5 billion
B)  $15 billion
C)  $45 billion
D)  $55 billionE) C) and D)
F) B) and D)

Question 5

Market economies tend to grow more quickly than centrally-planned economies.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  production
B)  employment
C)  income
D)  all of the aboveE) None of the above
F) A) and B)

Question 7

The Business Cycle Dating Committee defines a recession as

Accepted Answer

A)  two consecutive quarters of declining real GDP.
B)  two consecutive quarters of declining nominal GDP.
C)  a significant decline in activity visible in industrial production,employment,real income,and wholesale/retail trade lasting more than a few months.
D)  a significant decline in inflation and unemployment lasting more than a few months.E) All of the above
F) C) and D)

Question 8

Financial securities that represent promises to repay a fixed amount of funds are known as

Accepted Answer

A)  bonds.
B)  stocks.
C)  pension funds.
D)  insurance premiums.E) A) and B)
F) A) and C)

Question 9

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

Accepted Answer

A)  the government deficit to fall by $80 billion.
B)  household saving to rise by $80 billion.
C)  household saving to rise by less than $80 billion.
D)  household saving to fall by more than $80 billion.E) B) and D)
F) B) and C)

Question 10

Suppose you are an advisor to the Business Cycle Dating Committee.You are asked to look at macroeconomic data to evaluate whether the economy has entered a recession this year.Which data do you look at? How does the economy behave at the onset of a recession?

Accepted Answer

Since a recession is defined as signific...

Question 11

When a recession ends

Accepted Answer

A)  interest rates decrease.
B)  households decrease spending on durable goods.
C)  the household sector decreases spending substantially.
D)  firms increase the amount of borrowing.E) All of the above
F) A) and B)

Question 12

An increase in government purchases,ceteris paribus,will

Accepted Answer

A)  increase public saving.
B)  increase the supply of loanable funds.
C)  reduce investment.
D)  reduce real GDP.E) A) and C)
F) All of the above

Question 13

An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

Accepted Answer

A)  supply;right;fall
B)  supply;left;rise
C)  demand;right;rise
D)  demand;left;fallE) A) and B)
F) B) and C)

Question 14

A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds.

Accepted Answer

A)  savers;borrower
B)  borrower;savers
C)  governments;households
D)  firms;insurance companiesE) B) and D)
F) C) and D)

Question 15

The federal budget deficit can be reduced by

Accepted Answer

A)  raising taxes.
B)  raising government spending.
C)  raising transfer payments.
D)  higher interest rates.E) A) and B)
F) All of the above

Question 16

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

Accepted Answer

A)  an increase in the real interest rate.
B)  a decrease in the real interest rate.
C)  an increase in expected profits from firm investment projects.
D)  an increase in the nominal interest rate accompanied by an equal increase in inflation.E) A) and C)
F) A) and B)

Question 17

There is a government budget surplus if

Accepted Answer

A)  T - TR > G.
B)  G > T.
C)  G > TR.
D)  TR < T.E) A) and B)
F) None of the above

Question 18

Carefully define the two categories of saving in the economy.

Accepted Answer

There are two categories of saving in th...

Question 19

A country with no trade and no borrowing and lending relationships with other countries is known as a(n)

Accepted Answer

A)  planned economy.
B)  market economy.
C)  open economy.
D)  closed economy.E) C) and D)
F) B) and D)

Question 20

Which of the following is an example of human capital?

Accepted Answer

A)  a computer
B)  a factory building
C)  a college education
D)  a software programE) A) and B)
F) A) and C)

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

There is a government budget surplus if

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A financial intermediary's main function is to match ________ with excess funds to ________ with a shortage of funds.

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Financial securities that represent promises to repay a fixed amount of funds are known as

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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?

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

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

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Scenario 21-1 Consider the following data for a closed economy: Y = $12 trillion C = $8 trillion I = $2 trillion G = $2 trillion TR = $2 trillion T = $3 trillion -Refer to Scenario 21-1.Based on the information above,what is the level of public saving?

Correct AnswerverifiedShow Answer

Suppose you are an advisor to the Business Cycle Dating Committee.You are asked to look at macroeconomic data to evaluate whether the economy has entered a recession this year.Which data do you look at? How does the economy behave at the onset of a recession?

Correct AnswerverifiedSince a recession is defined as signific...View AnswerShow Answer

An increase in government purchases,ceteris paribus,will

Correct AnswerverifiedShow Answer

A country with no trade and no borrowing and lending relationships with other countries is known as a(n)

Correct AnswerverifiedShow Answer

When a recession ends

Correct AnswerverifiedShow Answer

If,in a closed economy,real GDP is $30 billion,consumption is $20 billion,and government purchases are $5 billion,what is total saving in the economy?

Correct AnswerverifiedShow Answer

The federal budget deficit can be reduced by

Correct AnswerverifiedShow Answer

An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________.

Correct AnswerverifiedShow Answer

Market economies tend to grow more quickly than centrally-planned economies.

Correct AnswerverifiedShow Answer

Which of the following is an example of human capital?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following explains why fluctuations in real GDP have become less volatile in the United States since 1950?

Correct AnswerverifiedShow Answer

The Business Cycle Dating Committee defines a recession as

Correct AnswerverifiedShow Answer

Carefully define the two categories of saving in the economy.

Correct AnswerverifiedThere are two categories of saving in th...View AnswerShow Answer

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A financial intermediary's main function is to match with excess funds to with a shortage of funds.

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Since a recession is defined as signific...
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An increase in the government budget deficit will shift the curve for loanable funds to the and the equilibrium real interest rate will .

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There are two categories of saving in th...
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