Question 1

If a country's GDP grows at an annual rate of 7%, approximately how many years will it take for the GDP to double, according to the Rule of 70?

Accepted Answer

10 years

Question 2

Which of the following best describes the two components of National Saving?

Accepted Answer

Private Saving and Public Saving

Question 3

In the Market for Loanable Funds, what variable is measured on the vertical axis?

Accepted Answer

Real Interest Rate

Question 4

Suppose the government moves from a budget surplus to a budget deficit. What happens to the supply curve for loanable funds?

Accepted Answer

It shifts to the left

Question 5

A change in the interest rate causes which of the following in the market for loanable funds?

Accepted Answer

A movement along the demand curve

Question 6

Which economic metric is considered the best measure of a country's standard of living?

Accepted Answer

Real GDP per capita

Question 7

On a per-worker production function graph, what happens to the curve if there is a significant advancement in technology?

Accepted Answer

The curve shifts upward

Question 8

According to the 'Catch-up Effect,' which group of countries typically grows at a faster rate?

Accepted Answer

Poor countries

Question 9

Increasing the amount of capital per hour worked results in a movement along the production function. What is the term for the slowing rate of this benefit?

Accepted Answer

Diminishing returns to capital

Question 10

Which of the following is NOT a government policy to promote long-run economic growth?

Accepted Answer

Imposing trade barriers

Question 11

Which curve is vertical in the long run, representing potential GDP?

Accepted Answer

Long-Run Aggregate Supply (LRAS)

Question 12

What economic term describes a situation where the Short-Run Aggregate Supply (SRAS) shifts left, causing both high inflation and high unemployment?

Accepted Answer

Stagflation

Question 13

Why is the Short-Run Aggregate Supply (SRAS) curve upward sloping?

Accepted Answer

Because of 'sticky' wages and 'sticky' prices

Question 14

If household wealth increases due to a booming stock market, which curve shifts and in what direction?

Accepted Answer

Aggregate Demand (AD) shifts to the right

Question 15

A $20 bill is an example of which type of money?

Accepted Answer

Fiat money

Question 16

In which money supply category do Money Market Mutual Funds belong?

Accepted Answer

M2

Question 17

If a bank has $1,000,000 in deposits and the required reserve ratio is 10%, how much must the bank keep as required reserves?

Accepted Answer

$100,000

Question 18

What is the formula for the Simple Money Multiplier?

Accepted Answer

$$1 / RRR$$

Question 19

When the Federal Reserve buys bonds on the open market, what happens to the money supply?

Accepted Answer

It increases

Question 20

If Congress votes to increase government spending to stimulate the economy, is this an example of discretionary or automatic fiscal policy?

Accepted Answer

Discretionary

Macroeconomics Midterm 2 Review – Step-by-Step Study Guidance

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