If there are diminishing returns to capital

• Increases in the capital stock increase output by ever smaller amounts

When opening a construction company, you might need to buy trucks, tools, and a storage shed. Economists call these expenditures

• capital investment

When a country saves a larger portion of its GDP, it will have

• more investment, and so have more capital and higher productivity

Savers

• supply money to the financial system; borrowers demand money from the financial system

The bond market, the stock market, banks, and mutual funds are all part of the U.S

• financial system

Financial markets are

• the financial institutions through which savers can directly provide funds to borrowers

The two most important financial markets in our economy are the

• bond market and stock market.

Which of the following is correct?

• A bond buyer can sell the bond before it matures

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

On which bond is default most likely?

• a junk bond

Municipal bonds pay a

• 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

Stock represents

• All of the above are correct

Compared to bonds, stocks offer the holder

• All of the above are correct

The single most important piece of information about a stock is the

• price.

Profits not paid out to stockholders are

• retained earnings.

Financial intermediaries are

• financial institutions through which savers can indirectly provide funds to borrowers

Which of the following is a financial intermediary?

• a mutual fund

The identity that shows that GDP is both total income and total expenditure is represented by

• Y = C + I + G + NX

A closed economy does not

• trade with other economies

The source of the supply of loanable funds

• Is saving and the source of demand for loanable funds is investment

The supply of loanable funds

• slopes upward because an increase in the interest rate induces people to save more

If the government currently has a budget deficit

• All of the above are correct

An increase in the budget deficit

• changes the supply of loanable funds

An increase in the budget deficit

• drives investment spending down

The fall in investment due to government borrowing is called

• crowding out

The ratio of debt to GDP tended to fall

• during the late 1990s

Which of the following is incorrect?

• The ratio of debt to GDP in the U.S. has always been less than one

Which of the following beliefs would make someone less likely to oppose government deficits?

• The demand for loanable funds curve is very steep.

The natural rate of unemployment is

• the amount of unemployment that the economy normally experiences

Cyclical unemployment refers to

• year-to-year fluctuations of unemployment around its natural rate

Cyclical unemployment is closely associated with

• short-run ups and downs of the economy.

The BLS produces data on

• All of the above are correct

Which list includes all the categories into which the BLS divides the adult population?

• employed, unemployed, or not in the labor force

Which of the following would be counted as unemployed according to official statistics?

• Mary, who is waiting for her new job to start

Who would be included in the labor force?

• Dave, who does not have a job, but is looking for work

To be counted as unemployed, a person must

All of the above are correct

A college student who is not working or looking for a job is counted as

• neither employed nor part of the labor force

The BLS defines the unemployment rate as

• the percentage of the labor force that is unemployed

Which of the following equations is correct?

• Unemployment Rate = (number of unemployed  labor force) x 100.

Which of the following is correct for people ages 20 and over?

• Women have lower rates of labor-force participation and higher rates of unemployment compared to those of men

The labor-force participation rate of the U.S. adult population (ages 16 and over) is about