Econ 320, Chapters 1-4 Homework SDSU

Long run economic growth is:

The process by which productivity raises the average standard of living

long run growth is measured by increases in:

Real GDP per capita

What is a business cycle?

a cycle or series of cycles of economic expansion and contraction.

What has happened to the severity of the business cycle since 1950?

Greater economic stability
smaller fluctuation in GDP
longer expansions
few recessions

The average inflation rate in the last 25 years has been:

5%

Are inflation rates roughly the same in different countries around the world? Briefly explain.

No, the inflation rate varies significantly across countries because of monetary and financial policies.

The income gap between the U.S. and China is __________ and the income gap between the U.S. and certain African countries is _________

Narrowing, Increasing

In general, for lower income countries to "catch up" to higher-income countries in terms of growth rates, the growth rate of lower income countries must be ____________ the growth rate of higher income countries.

Greater than

T/F? A country like the United State is more open than a country like Belgium because it is larger and has a higher total value of imports and exports.

Uncertain, the problem does not give data on the volume of imports and exports relative to GDP

An exogenous variable is _____________ and an endogenous variable is ________________

taken as given, explained by the model.

Which is exogenous and which is endogenous? The effect of investment growth on the growth rate of GDP?

Exogenous: Investment
Endogenous: GDP

T/F? models use many simplifying assumptions. Therefore, they do not not apply to more complex events in the real world.

Uncertain, if the assumptions in the model are representative of reality, they can be used to explain complex events.

Which of the following arguments would you make to explain how the debt crises in Europe can affect the U.S.? economy?

A. While exports may be a small share of U.S.? GDP, they can still be a meaningful driver of economic growth.
B. As holders of significant euro area? debt, U.S. banks could be exposed to significant risk by the crisis.
C. The supply chains of many U.S. pr

What is GDP?

The market value of all final goods and services produced in a country in a period of time.

How is GDP both a measure of production and a measure of income.

The production of every output requires payment to the inputs that produced it.

The BEA (Bureau of Economic Analysis) calculates GDP and GDI differently. In case of GDP, the BEA uses data sources on ___________, while for GDI, it uses data sources on ___________.

expenditure, income

Because both GDP and GDI measure the value of total production in the economy, does it matter which measure we use to measure the level of economic activity?

Yes, it matters because recent searches indicates that GDI may more accurately reflect the state of the economy.

If we define "actual GDP" as GDP measured with the inclusion of such things as household productions, illegal goods and services, and other excluded variables, how would actual GDP have changed to due more women entering the labor force.

Actual GDP would have increased by less than measured GDP.

T/F: The growth rate of NOMINAL GDP shown as a percentage does show the changes in the quantity of goods produced from one year to the next because both prices and output are changing

False. It does not show the changes of JUST the quantity because both prices and quantity are changing in nominal gdp, so the percentage includes both.