Instructions: Select the best answer and record it on both the cover sheet and the quiz.
1. If our economy uses labor N and capital K to produce output Y, we can construct a
mathematical equation (production function) that relates N and K to how much Y we produce:
Y = F(K,N). If we increase K by 10% and increase N by 10% and Y rises by 20%, then:
a. our production function is decreasing returns to scale.
b. our production function is constant returns to scale.
c. our production function is increasing returns to scale.
d. our economy is at full employment.
e. none of the above.
2. The skills, knowledge, or education of people that enables them to be more productive than
other people is called:
a. technology.
b. human capital.
c. investment.
d. social and cultural analysis.
e. entrepreneurship.
3. Personal Disposable Income is:
a. Y - C - G
b. Y + TR - T
c. C + I + G + NX
d. I + S
e. GDP + NFP
4. On our island with no government and no international trade, then savings equals:
a. C
b. I
c. G
d. NX
e. W/P
5. For an economy with a government and with international trade, private savings equals uses
of private savings. The uses of private savings are:
a. lending to business for investment, plus lending to the government, plus lending to
foreigners.
b. consumption plus taxes.
c. consumption plus investment.
d. consumption plus investment plus government expenditure.
e. none of the above.
6. Government savings is:
a. G - T - TR
b. T - G - TR
c. G + T + TR
d. G + TR - T
e. none of the above.
Extra Credit: What life-changing event motivated Zackary Karabashliev to begin working fulltime on his novel “18% Grey”?
a. he lost his job.
b. the birth of his son.
c. he got married.
d. he broke his leg.
e. he ate breakfast.