Chapter 6 - Economic Growth, the Financial System, and Business Cycles

Question 1

Market for loanable funds

Answer 1

The interaction of borrowers and lenders that determines the market interest rate and the quantity of loanable funds exchanged.

Question 2

Potential GDP

Answer 2

The level of real GDP attained when all firms are producing at capacity.

Question 3

Financial markets

Answer 3

Markets where financial securities, such as stocks and bonds, are bought and sold.

Question 4

Financial intermediaries

Answer 4

Firms, suck as banks, mutual funds, pension funds, and insurance companies, that borrow funds from savers and lend them to borrowers.

Question 5

Financial system

Answer 5

The system of financial markets and financial intermediaries through which firms acquire funds from household.

Question 6

Capital

Answer 6

Manufactured goods that are used to produce other goods and services.

Question 7

Labour productivity

Answer 7

The quantity of goods and services that can be produced by one worker or by one hour of work.

Question 8

Long-run economic growth

Answer 8

The process by which rising productivity increases the average standard of living.

Question 9

Crowding out

Answer 9

A decline in private investment expenditures as a result of an increase in government purchases.