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macroeconomics
Exploring Macroeconomics 5th Edition Robert L. Sexton - Solutions
New capital and new technology are completely separate factors of production. true or False
The amount of saving and investment are the foundation of economic growth. true or False
There is no difference in meaning between the terms saving and savings. true or False
The only way for a firm to obtain resources to invest in capital is via borrowing in financial markets. true or False
The default rate on home loans was much lower on those holding ___________ interest rate mortgage loans.
After several years of maintaining ______ real interest rates, the Fed reversed course and pushed short-term interest rates ______.
In 2006, a majority of subprime loans were ____________ loans, with a _________ fixed rate for the first few years, which then reset to a _____________ rate for the rest of the term.
In order to maintain investment yields as market interest rates decline requires an investor to take more ___________.
After the 2001 recession, the Fed funds rate was maintained at _____________ or lower for over three years.
The worst of the housing market decline after 2006 was in ____________, ____________, _____________, and _____________.
Many economists think the financial crisis of 2008 began in the _____________ market.
Too much __________, or excessive _____________, was a major cause of the financial crisis of 2008.
When the domestic real interest rate is ____________, capital will tend to flow out to foreign countries.
Capital inflows from foreign countries ________ to the supply of loanable funds.
When foreigners supply more funds than they demand, a capital _________ occurs.
If the government runs a budget ______________, other things equal, it will tend to increase national saving, decrease the real interest rate, increase the amount of investment, and increase economic growth.
If the government moved into a budget ______________, it would result in negative public saving, reduced national saving, a higher real interest rate, and reduced levels of investment.
Starting from a balanced budget, a government’s move to a budget __________ would increase public saving and increase national saving, other things equal.
Public saving is positive as the government _____________ more in taxes than it _______________.
In a ______________ economy, GDP is the sum of consumption plus investment plus government purchases.
At a real interest rate below equilibrium, a ________ for loanable funds would occur.
If the real interest rate was above equilibrium, the quantity of loanable funds ___________ would exceed the quantity of loanable funds ____________.
Desired loanable funds demanded equals desired ________ at the equilibrium real interest rate.
At a __________ real interest rate, a greater quantity of loanable funds will be supplied.
The supply of national saving comprises both _______ saving and ___________ saving.
As the real interest rate falls, ____________ investment projects become profitable, ____________ the dollar amount of investment.
The loanable funds ____________ curve for the economy is downward sloping.
The __________ interest rate is determined by investment demand and national savings.
Many financial analysts think that the best stock market strategy is to __________ and to hold stocks for ____________ periods of time.
The reason it is difficult, without inside information, to consistently pick winners in the stock market is because the value of a stock is a ________ _________.
Better business conditions would tend to make the value of stocks _________.
_______________ is the most important source of funding for firms.
The obligation to ___________ is of higher legal priority than that to _______________.
A ____________ is an owner of a corporation, whereas a ____________ is a creditor of a corporation.
Owners of preferred stock receive a _______ dividend payment, whereas owners of ______ stock do not.
An economy that invests a ___________ fraction of its GDP tends to grow faster.
The two most important financial institutions are the _____ market and the _________ market.
Saving refers to a _______ concept, while savings refers to a ______ concept.
The _________________ market is where households make their saving available to those who desire to borrow additional funds.
Investment cannot occur unless someone in the economy is _____________.
Reduced levels of illiteracya. are, in part, a cause of economic growth.b. are, in part, caused by economic growth.c. are, in part, both a cause of economic growth and caused by economic growth.d. are largely unrelated to economic growth.
Other things being equal, the higher the rate of savings across countries,a. the higher the rate of change of real GDP per capita.b. the lower the rate of change of real GDP per capita.c. the lower the productivity of labor.d. the lower the rate of investment.
Investment in human capitala. is of minor importance to economic growth.b. can be acquired through on-the-job training.c. is an important source of economic growth.d. does not affect economic growth; only physical capital does.e. is characterized by both b and c.
In a country that has an unstable government or judiciary, would you expect to see more entrepreneurial activity, or less?a. less, because an unstable economy has fewer entrepreneursb. less, because of an unreliable infrastructure for protecting property rightsc. more, because of fewer governmental
During the Klondike gold rush, the first prospectors in the region arrived before any government authority was established. They followed a long goldfield tradition and created “miners’ laws,” which described how gold claims could be staked and how these claims would be enforced. The creation
Economic growth tends to be greater in countries wherea. the government effectively protects property rights.b. more resources are devoted to research and development.c. there is greater freedom to trade freely.d. any of the above is true.
Which of the following is considered a factor that contributes to economic growth?a. government protection of property rightsb. increased specialization of laborc. research and developmentd. improved efficiencies through economies of scalee. all of the above
High rates of saving and investment in a countrya. guarantee rapid economic growth.b. tend to increase economic growth but do not guarantee it.c. will result in greater economic growth if they are accompanied by advances in technology than if they are not.d. will result in greater economic growth
Which of the following statements is incorrect?a. One of the most important determinants of economic growth is a nation’s saving rate.b. Injections of foreign capital from abroad may contribute to a nation’s economic growth.c. Economic growth depends on the quality and type of investments
If a country increased its saving rate,a. its current consumption would have to fall.b. its current consumption would have to rise.c. its future consumption possibilities will fall.d. its future consumption possibilities will rise.e. both a and d will occur.
If Goodland’s population grows faster than Badland’s population, but Badland’s labor force participation rate is growing faster than Goodland’s, other things being equal,a. real GDP will be growing faster in Badland.b. real GDP per capita will be growing faster in Badland.c. real GDP will
Technological advances can bea. labor saving.b. capital saving.c. land (natural resource) saving.d. any of the above.
If a country reduced its spending on education and used the resources to build capital goods, economic growth in that countrya. would tend to rise.b. would tend to fall.c. would tend to remain the same.d. could rise, fall, or remain the same.
If both the capital stock and the technology in a country increased, other things being equal, the country’s potential output woulda. rise.b. fall.c. remain unchanged.d. change in an indeterminate direction.
Per capita real output would tend to rise, other things being equal,a. if the labor force participation rate in the country rose.b. if the population rose.c. if the population fell and the labor force participation rate in the country fell.d. in all of the above cases.e. in none of the above cases.
According to the Rule of 70, if a country’s growth rate doubled, the amount of time before its output doubled would bea. quartered.b. halved.c. doubled.d. quadrupled.
According to the Rule of 70,a. if a country is growing at 7 percent per year, its output will double in approximately 10 years.b. if a country is growing at 3.5 percent per year, its output will double in approximately 20 years.c. if a country is growing at 1 percent per year, its output will
A country will roughly double its GDP in 10 years if its annual growth rate isa. 5 percent.b. 7 percent.c. 10 percent.d. 12 percent.e. 20 percent.
According to the Rule of 70, if a nation grows at a rate of 5 percent per year, it will take roughly _____________ for national income to double.a. 10 yearsb. 7 yearsc. 70 yearsd. 14 yearse. none of the above
Which one of the following will cause the production possibilities curve to shift outward?a. improved public educationb. improved health care systemsc. larger budgets for research, development, and explorationd. all of the above
Which of the following would not result in increasing the natural rate of output in a country?a. increasing current consumption by reducing current savingb. draining swampland to allow cultivationc. improving the transportation systemd. raising the fraction of resources that the country devotes to
An economy’s production possibilities curve will shift outward over time ifa. technological progress occurs.b. the stock of available capital decreases.c. emigration results in a decrease in the supply of available labor.d. the productivity of labor increases.e. either a or d occurs.
The standard of living will decline ifa. nominal GDP grows at a faster rate than real GDP.b. nominal GDP grows at a slower rate than real GDP.c. the rate of population growth exceeds the rate of growth of real GDP.d. the rate of population growth is less than the rate of growth of real GDP.
The natural level of real output in a country will tend to fall ifa. technology advances.b. an increasing fraction of the population retires.c. increased investment adds to the capital stock.d. existing supplies of natural resources are depleted.e. either b or d occurs.
How much the economy can produce at its natural rate of output depends ona. technology.b. the quantity of available natural resources.c. the productivity of labor.d. the stock of available capital.e. all of the above.
Economic growth is usually measured by the annual percent change ina. nominal GDP.b. nominal GDP per capita.c. real GDP.d. real GDP per capita.
Economic growth refers to a(n) _____________ in the output of goods and services in an economy. The greater the economic growth, the _____________ goods citizens and their descendants will have to consume.a. decrease; lessb. decrease; morec. increase; mored. increase; less
Economists typically measure economic growth by trackinga. the employment rate.b. the unemployment rate.c. the expansion index.d. real GDP per capita.e. nominal GDP.
John Maynard Keynes, who once said that “in the long run, we are all dead,” was primarily concerned witha. long-run economic growth.b. long-run price stability.c. redirecting short-run fluctuations in the business cycle.d. all of these issues equally.
Education is both a consequence of economic growth and a cause of economic growth. true or False.
The correlation between per capita output and the proportion of the population that is unable to read and write is small. true or False.
Trade can make economies more productive, even if individual enterprises don’t become more efficient. true or False.
Free-trade policies will tend to increase the value of total output in an economy. true or False.
In most developed countries, property rights are effectively protected by the government; but in developing countries, such protection is not normally the case. true or False.
An important link between research and development and capital investment means that when capital depreciates over time, it is replaced with new equipment that embodies the latest technology. true or False.
Investment alone does not guarantee economic growth. true or False.
One of the most important determinants of economic growth is the saving rate. true or False.
Technological advance permits us to economize on labor, land, or even capital. true or False.
Because new technology must be introduced into productive use by someone who weighs estimates of the benefits of the new technology against estimates of the costs, that person—the entrepreneur—is an important economic factor in the growth process. true or False.
Technological advances involve both invention and innovation. true or False.
Both the initial development process and the sustained growth of an economy are dependent on a large natural resource base. true or False.
A limited resource base is no obstacle to economic growth. true or False.
An increase in labor input does not necessarily increase output per capita. true or False.
Technological advances, even without any change in the quantity or quality of the labor resources used, tend to lead to economic growth. true or False.
If the quantity of physical capital in a country increases at the same time that the quantity or quality of labor resources used falls, that country would experience economic growth as a result. true or False.
Economic growth is a complex process involving many important factors, no one of which completely dominates. true or False.
The “richest” or “most-developed” countries today have many times the per capita output of the “poorest”or “least-developed” countries. true or False.
true or False.
The Rule of 70 says that the number of years necessary for a nation to double its output is approximately equal to the nation’s growth rate divided by
Greater stocks of land, labor, or capital can shift the production possibilities curve outward. true or False.
Another way of saying that economic growth shifted the production possibilities curve outward is that it increased potential output. true or False.
Along the production possibilities curve, the economy is producing at its potential output, sometimes called its natural level of output. true or False.
Economic growth is usually measured by the annual percent change in the nominal output of goods and services per capita. true or False.
Emphasis on the short run of the business cycle can ignore the longer-term dynamic changes that affect output and real incomes. true or False.
Human welfare is greatly influenced by long-term changes in a nation’s capacity to produce goods and services. true or False.
One problem in providing enough education in poorer countries is that children in developing countries are an important part of the labor force at a young age;therefore, a(n) _____________ opportunity cost of education is involved in terms of forgone contributions to family income.
Improvements in literacy stimulate economic growth by _____________ barriers to the flow of information and _____________ labor productivity.
With economic growth, illiteracy rates _____________ and formal education _____________.
Accepting a(n) _____________ in current income to acquire education and training can _____________ future earning ability, which can raise the standard of living.
_____________ can lead to greater output because of the principle of comparative advantage.
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