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The financial system of a country is important for long-run economic growth because |
B. firms need the financial system to acquire funds from households |
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It is essential for economic growth that firms have access to adequate sources of funds, because otherwise firms will not be |
able to invest in capital, adopt new technologies, and expand |
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The total value of saving in the economy must equal the total value of investment. Assume a closed economy, where: |
A. S=Y-C-G |
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Which of the following is not a "loanable fund"? |
B. Real estate |
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Households supply loanable funds because of the |
C. interest income received from the borrowers |
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Businesses demand loanable funds because |
B. firms need to borrow funds for new projects, such as building new factories or carrying out new research projects |
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When the budget deficit increases, |
B. both saving and investment decrease |
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Consider the following data for a closed economy: A. Private saving: $ ___ trillion |
5 |
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Consider the following data for a closed economy: B. Public saving: $ ____ trillion |
-2 |
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Consider the following data for a closed economy: C. Government purchases: $ ____ trilion |
5 |
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Consider the following data for a closed economy: D. The government budget balance is $ _____ trillion and as a result the government budget is in __________ |
-2 deficit |
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This Making the Connection claims that Ebenezer Scrooge promoted economic growth more when he was a miser and saved most of his income than when he reformed and began spending freely, Suppose, though, that most of his spending after he reformed involved buying food for the Cratchits and other poor families, Many economists believe there is a close connection between how much very poor people eat and how much they are able to work and how productive they are while working. Does this fact affect the conclusion about whether the pre-reform or post-reform Scrooge has a more positive impact on economic growth? |
Uncertain |
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Firms that act as financial intermediaries match households that have excess funds with firms that want to borrow funds. What other key services does the financial system provide to savers and lenders? |
B. allows savers to spread their money among many financial investments C. collects and communicates information about borrowers to savers E. provides an easy method of exchanging a financial security for money |
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In a closed economy, the values for GDP, consumption spending, investment spending, transfer payments, and taxes are as follows: Using the information above, what is the value of private saving and public saving? |
A. private saving equals $2 trillion and public saving equal $2 trillion |
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A country’s rate of economic growth is important because |
A. an economy that grows to slowly fails to raise the living standards of its citizens |
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Recently, economists Carol Shiue and Wolfgang Keller of the University of Texas at Austin published a study of "market efficiency" in the eighteenth century in England, other European countries, and China. If the markets in a country are efficient, a product should have the same price wherever in the country it is sold, allowing for the effect of transportation costs. If prices are not the same in two areas within a country, it is possible to make profits by buying the product where its price is low and reselling it where its prices is high. This trading will drive prices to equality, Trade is most likely to occur, however, if entrepreneurs feel confident that their gains will not be seized by the government and that contracts to buy and sell can be enforced in the courts. Therefore, the more efficient a country’s markets were, the more its institutions would have favored long-run growth. Shuie and Keller found that in 1770, the efficiency of markets in England was significantly greater than the efficiency of markets elsewhere in Europe and in China. This finding supports Douglas North’s argument concerning why the Industrial Revolution occurred in England because |
B. the efficient market system thrived due to a stable British parliament and an independent court system |
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Why do economic growth rates matter? A. high levels of sustained economic growth reduce infant mortality |
D. all of the above |
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Which of the following countries is NOT currently considered an industrial country? A. Spain |
D. Brazil |
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Prior to 1750 and the onset of Industrial Revolution, very little economic growth occurred in the world. What marks the beginning of the Industrial Revolution? A. When Eli Whitney invented the cotton gin, textile production increased world-wide. |
B. Adding mechanical power to the production process increased the quantity of goods each worker could produce |
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Suppose two countries, Country A and Country B, have a similar real GSP per capita. Country A has an average economic growth rate of 2% and Country B has an average economic growth rate of 3.3%. In the long run, what can we predict about living standards in the two countries? |
B. Country B’s living standards will increase much more rapidly in the long run |
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The most important factor in explaining increases in real GDP per capita in the long run is _____________________________ |
increases in productivity |
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Suppose you had a choice between living in the United States in 1900 with an income of $1,029,000 per year or int he United States in 2010 with an increase of $50,000 per year. Assume the incomes for both years are measured in 2000 dollars In which year would you have the highest real income? |
1900 2010 |
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Think about the relationship between economic prosperity and life expectancy The size of the health care sector in a less developed country is ______________ the size of the health care sector of a developed country. In particular, the size of the health care sector in a developing country |
smaller than B. growth with economic prosperity as life expectancy increases |
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If real GDP equals $11,567 billion in 2006 and $11,916 billion in 2007, and assuming population is constant over those two years, how many years will it take for real GDP per capita to double? ________ years |
23.2 |
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The financial system–either financial markets or financial intermediaries–provides savers and borrowers with all of the following except: A. the financial system provides security to savers by warranting that their funds are fully insured against loss |
A. the financial system provides security to savers by warranting that their funds are fully insured against loss |
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Suppose you can receive an interest rate of 10 percent on a certificate of deposit (CD) at a bank that is charging borrowers 20 percent on new cars loans Which one of the following choices does not explain why you might be unwilling to loan money directly to someone who wants to borrow from you to buy a new car, even if that person offers to pay you an interest rate higher than 10 percent? |
D. you are better at assessing risks than the usual financial institutions |
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What is the general relationship between the business cycle and unemployment and inflation? A. during a recession, unemployment and inflation increase |
C. during and expansion, unemployment falls and inflation increase |
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At the beginning of an expansion, which of the following is most likely to be true? A. nominal wages increase |
D. firms increase spending on capital goods |
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Which of the following is a true statement about long-run economic growth? A. in general, low-income countries are catching up with high-income countries |
B. small differences in economic growth rates result in big differences in living standards over time |
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Economic growth will A. slow down or stop if more capital per hour is used because of diminishing returns to capital |
A. slow down or stop if more capital per hour is used because of diminishing returns to capital |
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Some economics are able to maintain high growth rates despite diminishing returns to capital by using A. better or enhanced technology, along with accumulating capital; these economies are growing because technology, unlike capital, is subject to increasing returns |
A. better or enhanced technology, along with accumulating capital; these economies are growing because technology, unlike capital, is subject to increasing returns |
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Henry Harteveldt, travel analyst t tech-consulting firm Forrester Research, says checking in a passenger at a kiosk costs an airline just 14 cents on average, compared with $3.02 using an agent. From 2000 to 2005, the share of passengers using such a kiosk at least once leapt from close to zero to 63%. But in 2006, that figure merely crept up to 66% Assuming that Hartveldt’s data are correct, the implications of his analysis for future increases in labor productivity at the airlines are A. probably higher, since high rates of productivity growth result from a better educated labor force and not from machines |
C. probably lower, since the U.S. economy may not sustain such high rates of productivity growth that resulted from the growth of information technology |
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