Econ Final Exam

1. 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?

$5 billion

$ 15 billion

$ 45 billion

$55 billion

2. Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $23 million, what unplanned changes in inventories occurred?

There was unplanned decrease in inventories equal to $2 million

There was an unplanned increase in inventories equal to $2 million

There was was an unplanned decrease in inventories equal to $19 million

There was no unplanned change in inventories

3. Potential GDP is estimated to grow at a rate of 3.3% in the United States. Acutal GDP in the U.S.

Always grows at a slower rate than potential GDP

Is the same as potential GDP if all firms in the economy were working at capacity.

Always grows at a faster rate than potential GDP

Always grows at the same rate as potential GDP

4. Policies to promote growth by increasing saving and investment work through

Increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital

Increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital

Increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital

Decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital

5. If GDP grew 3% in 1970, 2.2% in 1971 and 2.5% in 1972 then, what is the average annual growth rate over this period?

5%

4%

2.6%

-2.2%

6. In a small economy in 2011, aggregate expenditure was $850 million while GDP that year was $800 million. Which of the following can expalin the difference between aggregate expenditure and GDP that year?

Firm investment in inventories was less than anticipated in 2011

Firm investment in inventories was greater than anticipated in 2011

Aggregae expenditure is always less than GDP in developed countries

Aggregate expenditure is always less than GDP in developing countries

7. Which of the following is most likely to be able to sustain economic growth in an economy?

Sustained increaes in the labor force participation rate

Accumulation s of economic resources

Technological change

Increases in capital per hour worked

8. The business cycle Dating Comitee defines a recession as..

Two consecutive quarters of declining nominal GDP

Two consecutive quarters of declining real GDP.

A significant decline in inflation and unemployment lasting more than a few months.

9. Which of the following would increase public saving?

An increase in government purchases

An increase in taxes

An increase in transfers

All of the above would increase public savings

10. Lack of investment in strong education and health care systems

Cuases a deterioration in human capital and a decline in labor productivity

Cuases a deterioation in human capital and an increase in physical capital

Increases human capital and cause a decline in labor productivity

Causes a decline in physical capital and a decline in labor productivity

11. Aggregate expenditure includes spending on

C+I+depreciation-NX

C+I+G+NX

C+I+G

C+I+G-NX

12. In a closed economy,

I=Y-C-G

I=Y+C+G

I=Y-C+G

I=Y+C-G

13. A stock market crash which causes stock prices to fall should cuase

A decrease in consumption spending

No change in consumption spending

An increase in wealth

An increase in consumption spending

14. The marginal propensity to consume is defined as

Consumption divided by disposable income

The change in disposable income divided by the change in consumption

The change in consumption divided by the change in disposable income

Disposable income divided by consumption

15. Which of the following is an example of foreign direct investment?

You purchase a plane ticket to China on American airlines

American airlines builds a hub in china

A stock broker from china sells you a chinese government savings bond

You buy a plan that was made in china

16. An economic growth model

Explains changes in nominal GDP per capita in the short run

Explains changes in real GDP per capita in the short run

Explains changes in real GDP per capita in the long run

Explains changes in nominal GDP per capita in the long run

17. Labor Productivity is...

The quantity of capital one worker can produce in one day

The quantity of output produced in one hour by one machine.

The quantity of output produced in one hour by several workers

The quantity of output produced by one worker or by one hour of work.

18. Suppose that real GDP for 2010 was $10,000 billion and real GDP for 2011 was $11,000 billion. What is the rate of growth of real GDP between 2010 and 2011?

1%

2%

5%

10%

19. An increase in public saving has what impact on the market for loanable funds?

The demand for loanable funds decreases

The supply of loanable funds decreases

The supply of loanable funds increases

The demand for loanable funds increases

20. If the CPI is currently 202, what does this tell you about inflation between last year and this year?

Inflation in the economy between this year and last year was 102%

There was deflation in the economy between this year and last year.

Inflation in the economy between this year and last year was 2%

21. All of the following are true statements about the multiplier exept

The multiplier effect occurs when autonomous expenditure changes

The multiplier rises as the MPC rises

The multiplier is a value between zero and one

The smaller the MPS, the larger the mulitiplier

22. Which of the following accurately describes the impact of the rule of law on a country's economic growth rate?

Countries with a weak rule of law have faster economic growth

Countries that enforce property rights through lawsuits have slower economic growth

Countries where favoritism and bribery are common have stronger rates of growth

Countries with a strong rule of law have faster economic growth

23. New growth theory

States that the rate of technological change is determined outside the working of the market system

States that the rate of technological change is unaffected by economic incentives

States that the rate of technological change is caused by economic incentives.

Does not adequately explain the factors that determine productivity

24. According to the text, there are three ways the government can help increase the accumulation of knowledge capital. What are they?

Encouraging the use of trade secrets,expanding student loan programs, and increasing the minimum wage.

Reducing taxes on capital, increasing social security payments, and lowering the exchange rate

Increasing taxes on firms, eliminating patents, and increasing the minimum wage

Protecting intellectual property rights, subsidizing research and development, and subsidizing education

25. GDP in a country grew from $10 billion to $14 billion over the span of 5 years. The percentage change in GDP was

4%

7%

10%

40%

26. When the economy reaches a trough in a business cycle, which of the following will occur?

Employment rises, but income and production will continue to fall

Income and production will rise, but employment will continue to fall.

Income, production, and employment will continue to fall

Income, production, and employment will begin to rise.

27. Which of the following is not a reason why china is unlikely to maintain high enough rates of productivity growth to catch-up with the standard of living in the United States?

Because of the low birth rate in china, the labor force will soon decline.

The united states invests more in research and development. than china does

The chinese migration of rural workers to more productive urban jobs.