Question 1

If the growth rate of real GDP increases from 3\% to 4\% per year, how does the number of years required to double real GDP change according to the Rule of 70?

Accepted Answer

It decreases from 23.3 years to 17.5 years.

Question 2

Using the formula $$	ext{Growth Rate} = \frac{	ext{GDP}_{2024} - 	ext{GDP}_{2023}}{	ext{GDP}_{2023}} 	imes 100$$ and the values $$	ext{GDP}_{2023} = 9,000$$ and $$	ext{GDP}_{2024} = 9,280$$, what is the approximate growth rate of real GDP from 2023 to 2024?

Accepted Answer

3\%

Question 3

Which of the following would contribute to a sustained high rate of economic growth in the long run?

Accepted Answer

Growth in capital per hour worked accompanied by technological change

Question 4

According to the Rule of 70, how many years will it take for real GDP per capita to double if the growth rate is 5\%?

Accepted Answer

14 years

Question 5

If real GDP grows from $$20$$ billion to $$40$$ billion between 2014 and 2024, what is the average annual growth rate? Use the formula $$	ext{Growth Rate} = \frac{\ln(\frac{	ext{GDP}_{2024}}{	ext{GDP}_{2014}})}{10} 	imes 100.$$

Accepted Answer

7\%

Question 6

Suppose real GDP for 2023 was $$10,000$$ billion and for 2024 was $$9,500$$ billion. What is the rate of growth of real GDP between 2023 and 2024? Use $$	ext{Growth Rate} = \frac{9,500 - 10,000}{10,000} 	imes 100.$$

Accepted Answer

-5\%

Question 7

Under which of the following circumstances would the government be running a deficit? (Let $$G = $$government purchases, $$T = $$taxes, $$TR = $$transfer payments)

Accepted Answer

$$G = 5$$ trillion, $$T = 5$$ trillion, $$TR = 1$$ trillion

Question 8

Given $$Y = 10$$ trillion, $$C = 5$$ trillion, $$TR = 2$$ trillion, $$G = 2$$ trillion$$, $$	ext{public saving} = 1$ trillion, under which circumstance is private saving positive in a closed economy?

Accepted Answer

$$Y = 10$$ trillion, $$C = 5$$ trillion, $$TR = 2$$ trillion, $$G = 2$$ trillion, 	ext{public saving} = 1$ trillion

Question 9

Given $$Y = 10$$ trillion, $$C = 5$$ trillion, $$TR = 2$$ trillion, $$G = 2$$ trillion$$, what is the value of investment in a closed economy? Use I = Y - C - G - TR$.

Accepted Answer

$$3$$ trillion

Question 10

Why is the demand for loanable funds downward sloping?

Accepted Answer

The lower the interest rate, the greater the number of profitable investment projects a firm can undertake, and the greater the quantity demanded of loanable funds.

Question 11

Refer to the first image (Figure 10-2). Which scenario is consistent with the graph depicted, where the demand for loanable funds shifts left?

Accepted Answer

New government regulations decrease the profitability of new investment.

Question 12

If, in a closed economy, real GDP is $$30$$ billion, consumption is $$20$$ billion, and government purchases are $$5$$ billion, what is total saving in the economy? Use $$	ext{Saving} = Y - C - G.$$

Accepted Answer

$$5$$ billion

Question 13

Refer to the third image (Figure 10-6). If the supply of loanable funds increases, which combination of real interest rate and quantity of loanable funds is most likely at the new equilibrium?

Accepted Answer

The real interest rate is 3 percent, and the quantity of loanable funds is $$150$$ million.

Question 14

Refer to the third image (Figure 10-6). If the current real interest rate is 5 percent, what is true about the loanable funds market?

Accepted Answer

There is a surplus of loanable funds in the market.

Question 15

Last week, 13 Mexican pesos could purchase one U.S. dollar. This week, it takes 11 Mexican pesos to purchase one U.S. dollar. How will this change affect U.S. exports to Mexico and U.S. aggregate demand?

Accepted Answer

Increase exports; increase aggregate demand

Question 16

Workers and firms both expect that prices will be 2.5\% higher next year than they are this year. What is the likely effect?

Accepted Answer

The short-run aggregate supply curve will shift to the left as wages increase.

Question 17

Refer to the fourth image (Figure 13-3). Suppose the economy is at point C. If government spending decreases, where will the eventual long-run equilibrium be?

Accepted Answer

A

Question 18

Refer to the fifth image (Figure 15-2). Which of the following statements is correct regarding monetary policy?

Accepted Answer

Panel A represents the Fed engaging in monetary policy in an ample-reserves regime and Panel B represents the Fed engaging in monetary policy in a scarce-reserves regime.

Federal Funds Market and Monetary Policy: Panel A and Panel B Analysis

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