1. The presence of diminishing returns to capital, doubling the amount of physical capital available for one worker to use will _______. 
decrease output by less than a factor of two
increase output by less than a factor of two
increase output by exactly a factor of two
increase output by more than a factor of two

2. From the standpoint of economic growth, banks are important to ______. 
fight inflation
keep interest rates low
channel savings into investment
channel investment into savings

3. Economies with higher growth rates tend to be those that _______. 
have large amounts of natural resources
have a stable government that protects property rights
have high levels of government regulation
have all of the above

4. The convergence hypothesis helps explain why ______. 
highly educated people converge in high-income countries
high-income individuals marry other high-income individuals
high-income countries continue their high growth rates
high-income countries tend to have slower growth rates compared to lower-income countries

5. The budget balance is equal to _______. 
taxes minus government transfers minus government spending
taxes minus government spending
government spending minus taxes
taxes plus government spending minus government transfers

6. If there is an increase in the government budget deficit _______. 
the demand for loanable funds will increase, interest rates will increase, and the amount of borrowing will increase
the demand for loanable funds will decrease, interest rates will decrease, and the amount of borrowing will decrease
the supply of loanable funds will increase, interest rates will decrease, and the amount of borrowing will increase
the supply of loanable funds will decrease, interest rates will increase, and the amount of borrowing will decrease

7. If the interest rate in the market for loanable funds is above the equilibrium interest rate, we know that _______. 
there is a shortage of loanable funds
savings exceed investment spending
the quantity demanded of loanable funds exceeds the quantity supplied of loanable funds
consumption is smaller than savings

8. Crowding out means _______. 
private savings decreases when the government borrows
private investment decreases when the government borrows
there are too many players in the financial markets
some bond holders will be squeezed out of the market

9. One way to reduce financial risk is _______. 
to only buy stock in a major company
to only buy bonds in a major company
to diversify in a variety of assets, both financial and physical
to diversify in a number of banks

10. The most important driver for economic growth appears to be _______. 
more physical capital
more human capital
all of the above