If one wants to know how the material well-being of the average person has changed over time in a given country, one should look at the
growth rate of real GDP
A nation's standard of living is determined by
its productivity
correct way of productivity
divide the number of hours worked by output
The inputs used to produce goods and services are also called
factors of production
The saws, lathes, and drill presses that woodworkers at Cedar Valley Furniture use to produce furniture are called
physical capital
What is considered human capital
All of the above are correct
The inputs into productions of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called
natural resources
If a good has become more scarce than we know for sure that
either demand for it must have increased or the supply of it must have decreased
Using the notation and production function in the text, Y/L is
using the notation and production function in the productivity
The traditional view of the production process is that capital is subject to
diminishing returns
When opening a restaurant you may need to buy ovens, freezers, tables,a dn cash registers. Economists call these expenditures
capital investments
Institutions in the economy that help to match one person's saving with another person's investment are called the
financial system
When a country saves a large portion of its GDP it will have
more capital and higher productivity
Lekeishas income exceeds her expenditures. Lekeisha is a
saver who supplies money to the financial system
A bond is a
certificate of indebtedness
If the government's expenditures exceeds its receipts it would likely
sell bonds directly to the public
The length of time until a bond matures is called the
term
long term bonds are generally
more risky than short-term bonds and so pay higher interest
Municipal bonds pay a relatively
low rate of interest because of their low-default risk and because the interest they pay is not subject to federal income tax
the sale of stocks
to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance
Which of the following is not an important stock exchange in the US
Chicago Mercantile Exchange
The future value of a deposit in a savings account will be larger
all of the above are correct
diminishing marginal utility of wealth implies that the utility function is
upward sloping and has decreasing slope
best illustration adverse selection
a person who has narrowly avoided many accidents applies for automobile insurance
best illustrates moral hazard
after a person obtains life insurance, she takes up skydiving
To diversify a homeowner with variable-rate mortgage should choose investments that
provided a higher return than the market average
Marcus puts a greater proportion of his portfolio into government bonds this
decreases both risk and the average rate of return
dividends
are cash payments that companies make to shareholders
fundamentals analysis determines the value of a stock based on
all of the above
A government can encourage growth and, in the long run, raise the economy's standard of living be encouraging
saving and investment
Alfred's income exceeds his expenditures. Alfred is a
saver who supplies money to the financial system
A bond is a
certificate of indebtedness
If Microsoft sells a bond they are
borrowing directly from the public
The length of time until a bond matures is called a
term
A perpetuity a distinguished from other bonds in that it
never matures
Long term bonds are generally
more risky than short term bonds and so pay higher interest
Compared to long term bonds, other things the same, short term bonds generally have
less risk and so pay lower interest
Other things the same, as the maturity of a cone becomes longer, the bond will pay
more interest because it has more risk
Compared to bonds, stocks offer the holder
partial ownership
Financial intermediaries are
financial institutions through which savers can indirectly provide funds to borrowers
The major advantage of mutual funds
they allow people with limited funds to diversify
Diversification has the advantage of
reducing risks
A person is risk averse if he or she
prefers a less-risky income, holding fixed its expected value
Which of the following is an example of the "Brain drain
A countries most highly educated workers emigrate to rich countries
In a closed economy, national saving equals
investment
If the tax revenue of the federal government exceeds spending, then the government
runs a budget surplus
A budget surplus is created if
the government sells more bonds than it buys back
In a closed economy, public saving is the
amount of tax revenue that the government has left after paying for its spending
In a closed economy, what does (T-G) represent
public saving
In a closed economy, what does (Y-T-C) represent
private savings
When a country takes a multilateral approach to free trade it
reduces its trade restrictions while other countries do the same
When a country takes a unilateral approach to free trade it
removes trade restrictions on its own
The catch-up effect refers to the idea that
it is easier for a country to grow fast if it starts out relatively poor
Economists have found evidence that receiving unemployment insurance benefits
decrease the job-search effort of the unemployed
An increase in the minimum wage would
decreases the quantity of labor demanded while increasing the quantity supplied
The natural rate of unemployment is the
amount of unemployment that the economy normally experiences
Cyclical unemployments refers to
year-to-year fluctuations of unemployment around its natural rate
The labor force equals the
number of people employed plus the number of people unemployed
A rough estimate of the natural rate of unemployment is
5.5 precent
Unemployment insurance
reduces search efforts and raises unemployment
Most economists agree that eliminating unemployment insurance would
reduce unemployment and so improve economic well-being
Collective bargaining refers to
the process by which unions and firms agree on the terms of unemployment
Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded
fall, and investment spending fall
Dividends
are cash payments that companies make to shareholders
Some people claim that stocks follow a random walk. What does this mean
changes in stock prices cannot be predicted from available information
The efficient markets hypothesis sys that
it should be difficult to find stocks whose price differs from the fundamental value
An increase in the minimum wage would
decreases the quantity of labor demanded while increasing the quantity supplied
if the minimum wage were currently above the equilibrium wage then a decrease in the minimum wage would
increase the quantity of labor demanded and decrease the quantity supplied
The legislation that granted unions the legal right to organize workers and bargain collectively with employers was the
Wagner Act
The yardstick people use to post prices and record debts is called
a unit of account
Economists use the word money to refer to
those assets regularly used to buy goods and services
Liquidity refers to
the ease with which an asset is converted to the medium of exchange
Current US currency is
fiat money with no intrinsic value
Commodity money is
money with intrinsic value
What is not included in M1
credit cards
Money market mutual funds are included in
M2 but not M1
Demand deposits are a type of
checking account
the agency responsible for regulating the money supply in the Unites States is
the federal reserve
What part of the Fed meets to discuss changes in the economy and determines monetary policy
the FOMC