All of the following qualifies as capital in economics except what?
A. bonds and stocks.
B. factories.
C. machines used by Ford.
D. roads and infrastructure.
A. Bonds and Stocks
Which of the following are key sources of economic growth?
A. capital
B. technology
C. institutions
D. land
E. labor
All of them are
What will most accurately explain the impact of corruption on economic growth.?
Political stability and rule of law
What is economic growth determined by today?
-Resources, technology and institutions
Suppose the people in the United States increase their savings rate. How will the rate of U.S. economic growth be affected?
There will be a long-run increase in economic growth
One implication of the rule of 70 is that
Small, sustained growth rates can greatly improve living standards over the course of time.
What is an example of physical capital?
A. knowledge acquired in culinary school
B. wheat used in bread production
C. a method that improves bread production
D. an oven used to bake bread
D. an oven used to bake bread
Regarding the marginal product of capital in the Solow growth model what is true about it?
Marginal product of capital is positive and decreases as the quantity of capital increases.
Which of the following will result in a movement along the aggregate production function?
A. a technological advance
B. training of the workforce
C. an increase in the country's capital stock
C. an increase in a country's capital stock
What is economic growth?
Growth rate of real per capita GDP, positive correlation between income per person and life expectancy
Rule of 70
# of years for variable to double = 70/ annual growth rate of variable
What is physical capital?
machinery, equipment, factory or infrastructure
What is human capital?
quality of labor
What is productivity?
-output per worker, depends on physical captial, human captial, technology
When more physical capital is added______________________
Real GDP increases, however incremental increases in Real GDP will be smaller at the economy has more physical captial given everything else stays the same
-more technology to produce stuff output goes down because the machines have more help
Law of diminishing marginal returns
As additional increments of resources are added to produce a good or service, the marginal benefit from those additional increments will decline
Technology shifts the aggregate production function how?
Better technology helps the economy to produce more GDP with same level of physical capital and human capital
What are savers?
Households and governments
What are borrowers?
Investors, those who want to borrow funds from the bank to start a business or expand their buisness for greater returns
Buisnesses need __________________ to save and the _____________ to channel funds from savers to businesses
households & governments, bank
True or False savings helps economic growth so that the economy can accumulate physical capital, when the savings rate increases the economy can reach a higher level of physical capital faster
True
What is total factor productivity?
Growth in economy comes from physical capital, human capital, and technology
Growth rate of GDP per capita =
contribution from physical capital and contribution from human capital, and contribution from technology
What is an institution?
Stable government, democracy, judicial system, civic mind, without these economic growth is difficult
Convergence hypothesis
low income economies would catch up to high income economies due to diminishing marginal returns and eventually converge together, only true if economies are exactly the same except for initial level of physical capital
Conditional convergence hypothesis
If two economies are similar in other ways and only differ in the level of physical level then two economies would converge
If rate of technological innovation equals population growth THEN ________________________
there will be a slow economic growth
What is economic growth equation?
-percentage change in nominal GDP-percentage change in price level-percentage change in population
What is an example of human capital?
one's time and knowledge
What is an example of physical capital?
what one makes or actually produces
According to modern growth theory, policy makers in the economy would focus on each of the following to encourage positive economic growth except
cutting income tax
An example of physical capital is____________
...Paved Roads
What is human capital?
the quantity, knowledge, and skills of the workers in an economy
Long run economic growth is mostly dependent on ___.
rising productivity
Diminishing returns to capital suggests that _________
when the amount of human capital per worker and the state of technology are fixed, successive increases in the amount of physical capital per worker leads to a smaller increase in productivity
The convergence hypothesis ____
seems to hold only when other things such as education and infrastructure are held equal
If the economy experiences an improvement of its educational system such that a greater percentage of workers become college educated. It is reasonable to expect ____. (assuming all else equal)
The production function will shift upward
When a major earthquake hit Japan and destroyed significant amount of physical capital, you would expect that ____.
There would be a downward movement along the production function?
Suppose the people in the United States increase their savings rate. How will this affect the rate of economic growth in the United States? (assuming all else equal)
It will lead to a long run increase in economic growth
Which best explains the relationship between physical capital and the level of wealth in a country?
As countries acquire more physical capital, their labor productivity increases, assuming all else equal
Investment spending_____________
comes from either domestic savings or foreign savings
Between 2013 and 2014, the economy experienced a growth rate of 1.8% in real GDP per capita. If nominal GDP had increased by 3% and the population growth rate was 1%, then the annual inflation rate would be ____.
0.2%
According to modern growth theory, policy makers in the economy would focus on each of the following to encourage positive economic growth except ____.
a) low corruption levels
b) cutting income taxes
c) sound institutions
d) encouraging savings
cutting income taxes
Diminishing returns to capital suggests that ____.
when the amount of human capital per worker and the state of technology are fixed, successive increases in the amount of physical capital per worker leads to a smaller increase in productivity.
Long run economic growth is mostly dependent on ___
rising productivity
Economic growth is usually measured in real GDP or real GDP per capita. A shortcoming of using real GDP (or real GDP per capita) as a measure of economic well-being is that is does not measure changes in ____.
environmental quality
All of the following can lead to economic growth except ___.
a) an increase in the level of skills of the labor force.
b) an increase in the quantity of capital
c) instability in the money supply
d) protection of private property rights
instability in the money supply
What is the approximate annual growth rate of a country whose living standard can double in 80 years?
0.875%