Macro Chapter 7 – Flashcards
33 test answers
Unlock all answers in this set
Unlock answers 33question
Real GDP per capita
answer
provides estimate of standard of living When it increases the average output per person is increasing = higher standard of living
Unlock the answer
question
Short run growth
answer
Economy makes use of existing but underutilized resources Common during recovery and recession (inside PPF)
Unlock the answer
question
Long run growth
answer
Economy finds New Resources or finds ways to use existing resources better (shift in PPF) [
Unlock the answer
question
Production Function
answer
Converts imports to exports Various combinations of inputs and fixed level of technology Incorporates all factors of production
Unlock the answer
question
Factors of Production
answer
Land (N) Labor (L) - mental and physical talents of people Human Capital (H) - training and education Physical Capital (K) -used to produce other goods Entreprenuership (A) - technology and ideas
Unlock the answer
question
Production Function Formula
answer
OUTPUT = A * f( L, K, H, N)
Unlock the answer
question
Productivity
answer
Extent to which inputs are converted into outputs. Key driver for economic growth When productivity rises so does standard of living worker productivity increases = worker making more per hour
Unlock the answer
question
Ways to increase productivity
answer
increase access to natural resources improve quality of life increase capital-to- labor ratio Promote innovation and technology (all increase economic growth)
Unlock the answer
question
Investment in human capital
answer
Skills, knowledge, and quality of workers. The overall quality of worker and their productivity improved quality of workers = higher productivity
Unlock the answer
question
Capital - to - labor ratio
answer
The capital employed per worker, A high ratio means higher labor productivity and as a result higher wages
Unlock the answer
question
Diminishing returns to capital
answer
Each additional unit of capital provides a smaller increase in output then previous units of capital
Unlock the answer
question
Catch up effect
answer
Developing countries are able to achieve greater productivity for each unit of capital invested because advantage of using technologies already developed
Unlock the answer
question
Total factor productivity
answer
The portion of output produced that is not explained by the number of inputs used in production Factors such as: new discoveries change in countries institution
Unlock the answer
question
Infrastructure
answer
The public capital of a nation transportation networks, power-genreating plants, transmittion facilities, public education institutions, protection of property rights and dams, and roads
Unlock the answer
question
The Role of government
answer
Promoting economic growth with an effective legal system Contributes to physical and human capital and technology (infrastructure) Enforcement of contracts Protection of property rights stable financial system Maintaing competitive and free trade markets
Unlock the answer
question
When the government enforces contracts between two parties, it is acting in its role to promote economic growth by:
answer
ensuring a stable legal system.
Unlock the answer
question
Rocky Gap Furniture employs 10 workers working eight hours each to produce 100 rocking chairs. What is the productivity of these workers?
answer
1.25 chairs per hour
Unlock the answer
question
If the growth rate in an economy is 2%, its GDP will double in about
answer
35 years.
Unlock the answer
question
Which of the following resources is an example of infrastructure?
answer
elementary school
Unlock the answer
question
According to Joseph Schumpeter, what is the driving force behind business cycles
answer
waves of innovations
Unlock the answer
question
In the absence of copyright and patent laws
answer
it is difficult for innovators to profit from their efforts.
Unlock the answer
question
Investment in human capital is important because:
answer
it increases labor productivity.
Unlock the answer
question
If output equals A*(5K + 2L), what is output if A equals 2,000, capital equals 10, and labor equals 100?
answer
500,000
Unlock the answer
question
Which of the following occurrences is the key explanation for the high economic growth in the United States in the past century?
answer
technology improvements
Unlock the answer
question
The recent global financial instability:
answer
slowed down economic growth. harmed standards of living. caused severe credit crunches.
Unlock the answer
question
The higher the productivity the...
answer
the higher standard of living
Unlock the answer
question
Economic growth is most commonly measured in
answer
Real GDP per capita
Unlock the answer
question
More demand
answer
prices increase = demand pull graph shifts right
Unlock the answer
question
Push
answer
shift lefts when decreasing supply
Unlock the answer
