Which of the following statements is true? A) Growth in technology is linear in nature. B) Growth in land productivity is exponential in nature. C) Growth in technology is exponential in nature. D) Growth in labor productivity is exponential in nature. ANSWER C
A government budget deficit occurs during a budget year when A) tax revenues > government spending. B) tax revenues < government spending. C) tax revenues = government spending. D) tax revenues + government spending = personal consumption. ANSWER B
The transactions demand for money exists because households A) do not like the fact that money is a liquid asset. B) must save for unexpected emergencies. C) are insensitive to interest rate changes. D) do not receive their incomes at the same time they wish to make purchases. ANSWER D
Suppose that real GDP is initially $14 trillion and the government attempts to increase real GDP to $15 trillion. The marginal propensity to consume is 0.8, and every $1.00 increase in real government spending crowds out $0. 50 in real planned investment expenditures. Which increase in government spending below could yield the desired level of […]
If the nominal interest rate increases without any change in the rate of inflation: A) the ratio of real interest rate to nominal interest rate increases. B) the real interest rate increases. C) the real interest rate decreases. D) the real interest rate remains the same. ANSWER B
Suppose the growth in GDP per hour resulting from physical capital in an economy is 1% and the growth resulting from human capital is 2%. If the annual growth rate of GDP per hour is 5%, the growth resulting from technology equals: A) 4%. B) 3%. C) 2%. D) 1%. ANSWER C
A $20 price tag on a sweater in a department store is an example of money serving as a A) medium of exchange. B) unit of accounting. C) store of value. D) standard of deferred value. ANSWER B
If a friend of yours keeps cash hidden under the mattress, he is using money as a A) medium of exchange. B) unit of accounting. C) store of value. D) standard of deferred value. ANSWER C
Refer to the above figure. The marginal propensity to consume and the marginal propensity to save A) are 0.75 and 0.25, respectively. B) depend on the level of income. C) are 0.90 and 0.10, respectively. D) are 0.83 and 0.17, respectively. ANSWER D
If the annual inflation rate in an economy is “i”, then $1 borrowed at the beginning of a year will have the same purchasing power as ________ dollars at the end of the year. A) (1 – i) B) (1/i) C) (1 + i) D) i ANSWER C