Review - Chapter 6 and Chapter 7 - ECON1022

Choose the correct statement about economic growth and a business cycle expansion.

• A return to full employment in a business cycle expansion is shown as a movement from inside the PPF to a point on the PPF.

• Economic growth is illustrated as a movement along the

  PPF.

• The return to full employment in an expansion phase of the business cycle is economic growth.

The aggregate production function is a relationship that tells us how​ _____ changes as the quantity of​ _____ changes when all other influences on production remain the same.

• real​ GDP; labour

• capital; labour

• ​output; investment

• real​ GDP; capital

The sources of economic growth are​ _______.

• work hours growth and full employment

• work hours growth and labour productivity growth

• labour productivity growth and incentives

• incentives and full employment

Using a government grant of​ $150,000, a research lab buys equipment for​ $75,000 that has depreciated by​ $11,000 after two years. Calculate gross investment and net investment.

• $150,000; $86,000

• $150,000; $139,000

• $75,000; $64,000

• $64,000; $75,000

The demand for loanable funds increases and the supply of loanable funds decreases.

  

As a​ result, the equilibrium real interest rate​ _______ and the equilibrium quantity of loanable funds​ _______.

• ​falls; decreases

• rises; increases,​ decreases, or remains the same

• rises, falls, or remains the​ same; increases

The ​crowding-out effect is the tendency for a government budget deficit to raise the​ _____ and​ _____ investment.

• real interest​ rate; decrease

• quantity of​ output; increase

• real wage​ rate; decrease

• price​ level; increase

What is true about the​ Ricardo-Barro effect?

• According to the​ Ricardo-Barro effect, a government budget deficit leads to the​ crowding-out effect.

• According to the​ Ricardo-Barro effect, a budget deficit raises the real interest rate.

• According to the​ Ricardo-Barro effect, rational taxpayers know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller.