Term
True or False?
In order for a country's real GDP per capita to increase, the country's population must grow faster than
the country's real GDP. |
|
Definition
FALSE.
In order for a country's real GDP per capita to increase, the country's REAL GDP must
grow faster than the country's POPULATION. |
|
|
Term
Wrexington's population is neither increasing nor decreasing, and Wrexington's real GDP is increasing at
a rate of 7%. Wrexington's real GDP per capita will double in approximately _____ years. |
|
Definition
|
|
Term
True or False?
A country will experience long-run economic growth if it increases its labor productivity. |
|
Definition
|
|
Term
True or False?
Computers are an example of capital. |
|
Definition
|
|
Term
True or False?
Wrexington has a small quantity of capital per hour worked, and Spaniel has a large quantity of capital per
hour worked. If both countries experience a 10% increase in capital per hour worked, then Wrexington's
labor productivity will improve more than Spaniel's labor productivity will. |
|
Definition
|
|
Term
True or False?
Both physical capital and human capital are produced factors of production. |
|
Definition
|
|
Term
True or False?
In order to increase future consumption by producing more capital, society must sacrifice some current
consumption. |
|
Definition
|
|
Term
True or False?
Economic growth depends more on increases in capital per hour worked than on technological change. |
|
Definition
FALSE.
Economic growth depends more on TECHNOLOGICAL CHANGE than on INCREASES
IN CAPITAL PER HOUR WORKED. |
|
|
Term
True or False?
The term "human capital" refers to machinery and equipment that must be operated by human workers. |
|
Definition
FALSE.
The term "human capital" refers to the knowledge and skills of human workers. |
|
|
Term
Which of the following government policies would not promote economic growth?
1. improving worker health by reducing disease and increasing nutrition
2. subsidizing education with public schools and financial aid
3. subsidizing research and development
4. enhancing and enforcing property rights
5. prohibiting international trade and investment
6. providing incentives for saving and investment
7. ending domestic civil wars and revolutions |
|
Definition
| 5. prohibiting international trade and investment |
|
|
Term
True or False?
Potential GDP is reached when all firms in the economy are producing the maximum output possible. |
|
Definition
FALSE.
Potential GDP is reached when all firms in the economy are operating on normal hours,
using a normal workforce. |
|
|
Term
True or False?
A well-functioning financial system is necessary for economic growth because firms are not usually able
to finance their expansions entirely with retained earnings. |
|
Definition
|
|
Term
True or False?
Dividends are paid on stocks, but not on bonds. |
|
Definition
|
|
Term
True or False?
A firm receives funds every time a share of its stock is sold. |
|
Definition
FALSE.
A firm only receives funds when a share of its stock is sold in the primary market, not
when a share of its stock is sold the secondary market. |
|
|
Term
True or False?
A firm should consider expanding its operations when its stock price decreases. |
|
Definition
FALSE.
A firm should consider expanding its operations when its stock price INCREASES. A stock
price increase indicates optimism about the firm’s profit prospects, in which case the firm should
consider expansion. |
|
|
Term
True or False?
The NASDAQ primarily consists of the stock prices of high tech firms. |
|
Definition
|
|
Term
True or False?
A firm should consider issuing new bonds when the price of its existing bonds decreases. |
|
Definition
FALSE.
A firm should consider issuing new bonds when the price of its existing bonds
INCREASES. An increase in the price of an existing bond indicates that demand for the firm’s bonds
is high (due to optimism or other firms’ new bonds paying less interest), so the firm could pay a
lower interest rate on a new bond, meaning that the cost of borrowing has fallen. |
|
|
Term
True or False?
Banks pay higher interest rates to savers than they charge borrowers. |
|
Definition
FALSE.
Banks pay LOWER interest rates to savers than they charge borrowers so banks can earn
profits. |
|
|
Term
True or False?
Savers can reduce risk by holding a diverse portfolio of financial investments. |
|
Definition
|
|
Term
True or False?
Liquidity is the ease with which a financial security can be exchanged for money. |
|
Definition
|
|
Term
True or False?
In macroeconomics, investment refers to the purchase of financial assets such as stocks and bonds. |
|
Definition
FALSE.
In macroeconomics, investment refers to the purchase of new capital. |
|
|
Term
True or False?
In a closed economy, saving equals investment and (Y - C - G) and (private saving + public saving). |
|
Definition
|
|
Term
Wrexington is a closed economy that has gathered the following information: Y = $20 trillion, C = $12
trillion, I = $3 trillion, TR = $1 trillion, and taxes = $7 trillion. Wrexington's private saving equals $_____
trillion. |
|
Definition
|
|
Term
Wrexington is a closed economy that has gathered the following information: Y = $20 trillion, C = $12
trillion, I = $3 trillion, TR = $1 trillion, and taxes = $7 trillion. Wrexington's public saving equals $_____
trillion. |
|
Definition
|
|
Term
True or False?
The demand for loanable funds comes from savers, and the supply of loanable funds comes from
investors. |
|
Definition
FALSE.
The demand for loanable funds comes from INVESTORS, and the supply of loanable
funds comes from SAVERS. |
|
|
Term
True or False?
The nominal interest rate reflects the true return to lending and the true cost of borrowing. |
|
Definition
FALSE.
The REAL interest rate reflects the true return to lending and the true cost of borrowing. |
|
|
Term
True or False?
As the interest rate rises, the quantity of loanable funds demanded falls and the quantity of loanable
funds supplied rises. |
|
Definition
|
|
Term
True or False?
When L* increases, the country's productivity and living standards increase. |
|
Definition
|
|
Term
If the government eliminates saving incentives, then the equilibrium interest rate will _____ and the
equilibrium quantity of saving and investment will _____.
1. increase; increase
2. increase; decrease
3. decrease; increase
4. decrease; decrease |
|
Definition
2. increase; decrease
The elimination of saving incentives shifts the supply of loanable funds left, which raises i*
and lowers L*. |
|
|
Term
If the government implements an investment incentive, then the equilibrium interest rate will _____
and the equilibrium quantity of saving and investment will _____.
1. increase; increase
2. increase; decrease
3. decrease; increase
4. decrease; decrease |
|
Definition
1. increase; increase
The implementation of an investment incentive shifts the demand for loanable funds
right, which raises i* and L*. |
|
|
Term
In 2004, Wrexington's government had a budget deficit, but in 2005, Wrexington's government had a
balanced budget. Holding all else constant, this would have caused the _____ loanable funds to shift _____
in 2005.
1. demand for; right
2. demand for; left
3. supply of; right
4. supply of; left |
|
Definition
|
|
Term
True or False?
Crowding out reduces the growth of productivity and GDP. |
|
Definition
|
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