Question

QUESTION 1

During the past century the average growth rate of U.S. real GDP per person is 2% per year. It implies that it doubled, on average, about every

Select one:

a. 100 years

b. 70 years

c. 35 years

d. 25 years

e. 50 years

QUESTION 2

In the loanable funds market, if the government is running a budget surplus

Select one:

a. it is a supplier of funds as it is taking in more than it is spending

b. it is a demander of funds as it is taking in more than it is spending

c. it is a supplier of funds as it is spending more than it is taking in

d. it is neither be a supplier or demander

e. it is a demander of funds as it is spending more than it is taking in

QUESTION3

What is the effect of diminishing returns to labor on the slope of the aggregate production function (where output is measured on the vertical axis and employment is measured on the horizontal axis)?

Select one:

a. It implies that the slope of the curve increases as the number of workers employed increases

b. It implies that the slope of the curve becomes negative as the number of workers employed increases

c. It implies that the slope of the curve decreases (or becomes flatter) as the number of workers employed increases

d. It keeps the slope the same throughout

e. It has nothing to do with the slope of the aggregate production function

QUESTION4

The supply of loanable funds curve is upward-sloping because a rise in the interest rate

Select one:

a. decreases the opportunity cost of firms' investment spending

b. stimulates the economy

c. decreases the opportunity cost to households’ current consumption

d. increases the opportunity cost to households’ current consumption

e. increases the government's desire to run a budget deficit

Answer 1

1) 35 years

(The rule of 70 can be applied here.Doubling time=70/annual growth rate.ln our case,70/2=35)

2 lts a supplier of funds as it's taking more than its spending

(Since the government has a surplus it no longer needs to borrow or demand from the market as there is no need to finance deficit .lt can act as a supplier of funds now )

3) lt means that slope of the curve decreases as the number of workers employed increases

(When there is diminishing returns to a factor (in our case, labour), total product marginal, marginal product declines,as more of that Factor is produced in production.There for the slope of production function will represent it .)

4)lncreases the opportunity cost to household's current consumption.

(As interest rate rises, people will like to save more.The supply of loanable funds takes place through saving.consumption is the next best alternative to saving Therefore people increase in savings of a house hold implies an increase in opportunity cost to current consumption.)