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Stack #479004
| Question | Answer |
|---|---|
| Financial markets are a key institution of growth because? | they move funds from those who save to those who invest |
| Say's Law allows growth theorists to | ignore aggregate demand and focus only on aggregate supply. |
| The study of economic growth focuses on the factors that cause an: | economy’s production possibility curve to shift out |
| If output increases by 2 percent and population growth is 3 percent, per capita output: | falls by 1 percent. |
| New growth theory emphasizes the importance of all of the following except: | diminishing marginal productivity. |
| The production function is best represented in the following form: | Output = A•f(Labor, Capital, Land). |
| To an economist, a production function is: | an equation showing how much output can be produced from various combinations of inputs. |
| Small differences in growth rates can create large differences in income levels because of: | compounding. |
| According to the convergence hypothesis, which country will grow faster: the United States or Bangladesh? Why? | Bangladesh because it has a higher marginal product of capital, which attracts capital investment flows out of the US. |
| As a result of the Great Depression, economic thought placed greater emphasis on: | short-run fluctuations. |
| What are network externalities and how do they lead to growth? | Network externalities are when the use of a good by one individual makes that technology more useful to other people. Because of these spillover effects, the effect of the technological change is magnified and thus they lead to growth. |
| The law of diminishing marginal productivity implies that increasing only one input will: | lead to smaller and smaller increases in output. |
| Over the last three decades, the Chinese government has adopted a series of market-oriented reforms that have shifted control of many parts of the Chinese economy from government officials to private individuals. | They have provided individuals with a greater incentive to be efficient. |
| The Classical economists argued that: | if unemployment occurs, it will cure itself because wages and prices will fall. |
| A fiscal policy that increases government spending or cuts taxes is most appropriate when the economy is in: | a recessionary gap. |
| The interest rate effect helps to explain why: | an increase in the price level reduces the quantity of aggregate demand. |
| As prices fall, people become richer and buy more. | This occurs as a result of: the money wealth effect |
| Which of the following would shift the aggregate demand curve to the right? | an increase in foreign income. |
| At the intersection of the short-run aggregate supply curve, the aggregate demand curve, and the long-run aggregate supply curve, the economy is in: | both a short-run and long-run equilibrium. |
| A recessionary gap exists when: | potential output exceeds actual output. |
| A fall in the value of the dollar relative to other currencies will: | increase demand for U.S. goods, shifting the U.S. aggregate demand curve to the right. |
| Keynesian economists believe: | government can implement policy proposals that can positively impact the economy. |
| With an upward-sloping short-run aggregate supply curve, firms respond to a change in aggregate demand by adjusting: | both prices and quantities in the short run. |
| If businesses expect future demand to increase, this will cause a: | rightward shift of the aggregate demand curve. |
| Why is the LAS curve vertical? | Because output is independent of the price level. |
| A price index in its base year: | is always equal to 100 |
| Nominal output is best defined as a measure of the value of output at prices in the current year. | |
| Which of the following statements best characterizes the Keynesian view of business cycles? | Expansions and contractions of the business cycle are symptoms of underlying problems and should be dealt with through activist government policies. |
| With respect to the unemployment problem, Classical economists generally take the position that: | individuals should be responsible for finding their own jobs. |
| What type of unemployment is best studied within the long-run framework? | Structural unemployment. |
| The top of the business cycle is called: | a peak. |
| What type of unemployment is best studied under the short-run framework? | Cyclical unemployment. |
| The number of people looking for a job, divided by the labor force, is known as the: | unemployment rate. |
| The secular trend growth rate is the: | average rate of growth in real output over many years. |
| The business cycle is: | the term used to describe fluctuations in output around its long-term trend. |
| The lowest sustainable rate of unemployment that policy makers believe is achievable under existing conditions is: | called the target rate of unemployment. |
| Inflation is undesirable because it: | distorts the information value of prices. |
| What are the two ways in which long-term economic growth is measured? | Increases in total output and per capita total output. |
| What is the difference between inflation and deflation? | Inflation is a rise in the general price level over time while deflation is a fall in the general price level over time. |
| What is the difference between real output and potential output? | Real output is a measure of the total goods and services an economy produces stated in constant prices whereas potential output is a measure of the total goods and services an economy is capable of producing given its resources and institutions. |
| One reason expectations of inflation are important from a macroeconomic point of view is that people: | tend to raise prices and wages more when they expect inflation. |
| Suppose you sell surfboards for a living and expect the price of surfboards to increase at the same rate as inflation. If this does not occur, then it must be true that: | the relative price of surfboards is changing. |
| The unemployment that occurs when people first enter the labor force or are in the process of changing jobs, is called: | frictional unemployment. |
| The price index that includes the widest number of goods and services is the: | GDP deflator. |
| What does secular growth trend represent? | the long term performance of an economy after smoothing out year to year fluctuations |
| What is secular growth trend? | The average rate of growth in real output over many years |
| Business cycles are: | The numerous fluctuations around the secular growth trend & the alternating periods of econ growth & contraction experienced by the economy |
| Business cycles are: | the upward and downward movement of economic activity that occurs around the growth trend |
| Discouraged/ underemployed? | people who would like a job but have given up |
| What effect does a trade deficit have on GDP? | a negative effect |
| What is GDP? | the total market value of all final goods and services produced in an economy in a one year period |
| Growth compatible institutions: | have incentives built into them that lead people to put forth effort. |
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sxjasminek