CAS EC 102 Lecture Notes - Lecture 3: Potential Output, Infant Mortality, Physical Capital

79 views5 pages

whiteleopard487

18 Jan 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

crimsonantelope381 and 36670 others unlocked

CAS EC 102 Full Course Notes

Verified Note

6 documents

Document Summary

Introduction to economic growth: economic growth focuses on real gdp, not nominal gdp, growth theory explains changes in real gdp per capita = change in real gdp over time, growth rate = annual percentage change in real gdp. Introduction to growth in two dimensions: growth in one country over time, growth differences across countries. Slow growth rate may vary and country rankings based on growth rate can change over time. Poor countries are not necessarily doomed to poverty forever eg: singapore"s income was low in 1960 but is quite high now. Rich countries can"t take their status for granted. They may be overtaken by poorer but faster growing countries. Physical capital is the stock of equipment and structures used to produce goods and services and is denoted by k. Productivity is higher when the average worker has more capital. An increase in k/l causes an increase in y/l.

Related Questions

Question 3

According to Joseph Schumpeter, the theory of creative destruction describes a process by which

	A	some new products unleash a gale of destruction that drive other new products out of the market.
B		new products unleash a gale of destruction that drives old products out of the market.
C		new products are created by the destruction of capital.
D		the creation of new products never involves the destruction of old products.

Question 4

Which of the following countries had the highest GDP per capita in 2012?

		A Qatar
B		United States
C		Japan
D		Norway

Question 5

________ save a ________ of their income. This ________ capital in their economy and raises economic growth.

	A	Developing countries; large proportion; decreases
B		Developing countries; small proportion; increases
C		High-income countries; large proportion; increases
D		High-income countries; small proportion; increases

Question 6

The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.

A		government
B		households
C		banks
D		firms

Question 7

The U.S. economy has been more stable since 1950.

True

False

Question 8

When the economy reaches a trough in a business cycle, which of the following will occur?

A		Income, production, and employment will continue to fall.
B		Income, production, and employment will begin to rise.
C		Income and production will rise, but employment will continue to fall.
D		Employment rises, but income and production will continue to fall.

Question 9

In a closed economy, what is the relationship between saving and investment?

A		Saving is greater than investment.
B		Investment is greater than saving.
C		Investment is equal to saving.
D		Investment may be greater or smaller than saving.

Question 10

The per-worker production function shows the relationship between ________ per hour worked and ________ per hour worked, holding ________ constant.

A		labor; real GDP; technology
B		capital; real GDP; technology
C		labor; capital; real GDP
D		capital; labor; real GDP

Question 11

New growth theory states that increases in ________ capital will result in ________ at the ________ level.

	A	knowledge; increasing returns to scale; firm
	B	physical; decreasing returns to scale; firm
	C	knowledge; decreasing returns to scale; economy
D		knowledge; increasing returns to scale; economy

Question 12

Which of the following is not a reason why the Industrial Revolution occurred when and where it did?

A		The British government was committed to upholding private property rights.
B		The British government was able to eliminate arbitrary increases in taxes.
C		The British government was able to more easily seize wealth.
D		Institutional changes by the British government helped protect wealth.

Question 13

Growth in real GDP per capita for the world economy was greatest during

A		the seventeenth century.
B		the eighteenth century.
C		the nineteenth century.
D		the twentieth century.

Question 14

Which of the following is a normative statement about economic growth?

A		Economic growth is associated with higher labor productivity growth.
B		Economic growth increases GDP per capita.
C		Economic growth hurts developing countries.
D		Foreign direct investment stimulates economic growth.

Question 15

The effect of a recession on a company like Whirlpool Corporation is such that

A		sales decline more sharply for Whirlpool as compared to firms that do not produce durable goods.
B		profits fall less sharply as compared to firms that do not produce durable goods.
C		the decline in sales is more short-lived as compared to firms that do not produce durable goods.
D		there is no difference in the impact of the recession on its profits as compared to firms that do not produce durable goods.

Question 16

For the recessions in the United States since the 1950s,

A		cyclical unemployment has been non-existent.
B		unemployment rises on average by about 1.2 percentage points 12 months after a recession begins.
C		unemployment falls on average by 2 percentage points 12 months after a recession begins.
D		unemployment rises on average about 5 percentage points 12 months after a recession begins.

Question 17

You are an economic advisor to the president. You are asked to recommend a policy to promote long-term economic growth in the economy. Which of the following policies would you choose?

A		a reduction in sales taxes
B		an investment tax credit
C		a reduction in taxes on luxury yachts
D		All of these

Question 18

In comparison to a government that runs a balanced budget, when the government runs a budget deficit,

	A	the equilibrium interest rate will fall.
	B	business investment will fall.
	C	household savings will fall.
	D	None of these

Question 19

If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.

A		labor force participation
B		the quantity of goods or services that can be produced by one hour of work
C		the working-age population
D		nominal GDP

Question 20

Policies to promote growth by increasing saving and investment work through

A		decreasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital.
B		increasing the supply of loanable funds, increasing the interest rate, raising the level of investment in physical capital.
C		increasing the supply of loanable funds, lowering the interest rate, lowering the level of investment in physical capital.
D		increasing the supply of loanable funds, lowering the interest rate, raising the level of investment in physical capital.

Question 32

Tim, a citizen of the United States living in Virginia, buys a computer that was made in South Korea by a Japanese firm. This transaction would affect the GDP of the United States in which way?

		Net exports would decrease and GDP would decrease.
		Net exports would decrease and GDP would be unaffected.
		Net exports would increase and GDP would increase.
		Net exports would increase and consumption would increase.

1 points

Question 33

An increase in U.S. government spending tends to

		increase U.S. interest rates and increase the U.S. capital account surplus.
		increase U.S. interest rates and decrease the U.S. capital account surplus.
		decrease U.S. interest rates and increase the U.S. capital account surplus.
		decrease U.S. interest rates and decrease the U.S. capital account surplus.

1 points

Question 34

A _______ is a system in which the government intervenes extensively in the foreign exchange market to keep the exchange rate within certain bounds.

dirty float

floating exchange rate

fixed exchange rate

dollarization

1 points

Question 35

Suppose the exchange rate between the euro and the dollar is E0.5 to $1. If a Big Mac costs $3 in the United States and E1.5 in Germany, then the real exchange rate is

1:1.

2:1.

1:2.

It cannot be determined from this information.

1 points

Question 36

Which of the following prevent the purchasing power parity theorem from holding perfectly?

transportation costs

goods that cannot be shipped

tariffs and quotas

Each of these answers is correct.

1 points

Question 37

Fiscal policy is more effective in affecting economic activity if

		many resources are unemployed.
		there is a real shock instead of an aggregate demand shock.
		the economy returns to the long-run condition almost immediately.
		there is a long implementation lag.

1 points

Question 38

In a typical year, changes in government spending compared to overall spending are relatively

small.

large.

unpredictable.

well-timed.

1 points

Question 39

Which statement is TRUE about the difference between monetary and fiscal policy?

		Fiscal policy can quickly adjust to changes in aggregate demand.
		Fiscal policy can have a more direct impact.
		Monetary policy is subject to many long lags.
		Monetary policy can affect the economy regardless of the actions banks take.

1 points

Question 40

Fiscal policies that help an economy in a recession without additional actions by policy makers are called

consumption smoothers.

Ricardian equalizers.

automatic stabilizers.

Each of these answers is correct.

1 points

Question 41

The U.S. individual income tax system can best be described as a

regressive tax system.

flat tax system.

zero tax system.

progressive tax system.

1 points

Question 42

What demographic change in the United States will cause government spending to increase in the next 50 years?

The population over 65 will grow.

The population will be younger.

Women will have fewer children.

Immigration will increase.

1 points

Question 43

What kind of rising costs will mostly cause U.S. government spending to skyrocket in the future?

defense

environmental protection

education

health care

1 points

Question 47

The Fed could have popped the bubble of the housing boom in the 2000s by

lending directly to homeowners.

regulating the stock markets more.

reducing the growth rate of the money supply.

doing nothing.

1 points

Question 48

Which of the following would be an example of running monetary policy by rules?

A 5 percent increase in money supply automatically leads to a 2 percent increase in real GDP.

An increase in money supply automatically leads to an increase in inflation.

The Fed will increase money growth to different levels, depending on the severity of the recession.

A 1 percent drop in real GDP will automatically elicit a 2 percent increase in money supply.

Question 50

Moral hazard occurs when

		the failure of one financial institution can bring down other institutions as well.
		financial institutions take on too much risk because they are insured.
		financial institutions become insolvent because they issued too many loans.
		there are more short-term liabilities than short-term assets.

Which of the following is NOT a transmission mechanism?

reductions in the money supply

intertemporal substitution

uncertainty

sticky wages and prices

Question 56

For a given increase in government spending growth, intertemporal substitution is more widespread when

		the impact of AD growth on both inflation and real GDP growth is stronger.
		the impact of AD growth on both inflation and real GDP growth is weaker.
		the impact of AD growth on inflation is stronger and the impact of the AD growth on real GDP growth is weaker.
		the impact of AD growth on inflation is weaker and the impact of AD growth on real GDP growth is stronger.

Stalin:

		instituted democratic reforms, leading to widespread prosperity.
		took government control of the farms in Ukraine, leading to the starvation of millions of people.
		increased the provision of public goods, which had a positive effect on lowering the unemployment rate.
		tried unsuccessfully to expand voting rights in 1924 Russia.

1 points

Question 60

1 points

Question 59

If voters care about two issues such as taxes and war, then politicians:

		will form a stable policy on these issues.
		can pose a policy that will never lose against another policy.
		must assume that there is no median voter.
		may never converge on a stable outcome.

1 points

Question 58

Policy A adversely affects 50 million people at a cost of $1 per person. But Policy A also benefits 1,000 people at $30,000 per person. Which of the following statements is true?

		Policy A will not become law because it hurts more people than it helps.
		Policy A concentrates all the costs among a small group of people and all the benefits among a large group of people.
		Policy A is likely to be supported by politicians even though it makes society worse off.
		Since Policy A negatively affects many people, and so rational ignorance will not be a problem.

1 points

Question 57

Data for the United States show that the incumbent party tends to win the election if:
I. personal disposable income is growing.
II. the inflation rate is low.
III. the political party has not been in power for too many continuous terms.

		I only
		I and II only
		I and III only
		I, II, and III

1 points

Question 53

1 points

Question 52

What is the purpose of the Fed's structure?

		to give the President of the United States as many tools as possible to regulate the economy
		to make sure all states are given equal access to monetary policy decisions
		to keep the private sector out of the monetary policy making arena
		to keep the power of the Fed dispersed

1 points

Question 51

An increase in money growth will cause inflation to increase in

		the short run only.
		the long run only.
		both the short run and the long run.
		neither the short run nor the long run.

Annual Growth Rates of Real GDP Per Capita (in percents)
Ending Year
1929
1933	-8.2
1939	0.2
1940	0.9
1945	3.7	10.3
1950	2.4	4.1	-1.8
1955	2.4	3.6	0.4	2.7
1960	2.2	2.9	0.6	1.7	0.8
1965	2.4	3.0	1.3	2.3	2.1	3.5
1970	2.3	2.9	1.5	2.3	2.2	2.9	2.3
1975	2.3	2.7	1.5	2.2	2.0	2.4	2.0	1.6
1980	2.3	2.7	1.7	2.2	2.1	2.5	2.2	2.1	2.6
1985	2.3	2.6	1.7	2.2	2.2	2.4	2.2	2.1	2.4	2.2
1990	2.3	2.6	1.8	2.2	2.2	2.4	2.2	2.2	2.4	2.2	2.3
1995	2.2	2.5	1.7	2.1	2.1	2.3	2.1	2.0	2.1	1.9	1.8	1.3
2001	2.3	2.5	1.9	2.2	2.2	2.3	2.2	2.2	2.3	2.2	2.2	2.1	2.8
	1929	1940	1945	1950	1955	1960	1965	1970	1975	1980	1985	1990	1995
Starting Year

Source: Economic Report of the President, various years.

This table keeps changes in real GDP from being overstated by adjusting for

Select one:

a. productivity.

b. inflation.

c. standard of living.

d. population growth.

Question 2

Not yet answered

Marked out of 1.00

Flag question

Question text

Per Capita GDP
Luxembourg	$33,609
United States	$33,586
Switzerland	$27,126
Japan	$23,311
Iceland	$23,230

Economists use numbers such as those in the table as a measure of

Select one:

a. net exports.

b. total dollar value of all final goods and services.

c. national income.

d. standard of living.

Question 3

Not yet answered

Marked out of 1.00

Flag question

Question text

Per Capita GDP
Luxembourg	$33,609
United States	$33,586
Switzerland	$27,126
Japan	$23,311
Iceland	$23,230

The numbers in this table were calculated by

Select one:

a. multiplying GDP by total population.

b. dividing GDP by total population.

c. adding the dollar value of all final goods and services produced in the nation.

d. subtracting net exports from GDP.

Question 4

Not yet answered

Marked out of 1.00

Flag question

Question text

A key gauge of future U.S. economic activity declined 0.5% last month, as the Sept. 11 terrorist attacks in New York and Washington weakened an already troubled economy.

The Conference Board said Monday its index of leading economic indicators fell to 109.2 in September,...the largest one-month decline since January 1996.... The index indicates where the overall U.S. economy is headed in the next three to six months....

The economy had been struggling for several months before the Sept. 11 attacks. Many economists have said they believe that a recession is unavoidable with the new uncertainties raised by the disaster.

Source: âLeading Indicators Decline,â USAToday.com, October 22, 2001.

The passage discusses a business fluctuation influenced by

Select one:

a. external shock.

b. monetary factors.

c. innovation.

d. capital expenditures.

Question 5

Not yet answered

Marked out of 1.00

Flag question

Question text

For all the recent talk of cutting taxes, Congress rarely cuts them when the economy is growing robustly, as it is now, and unemployment is low. The worry among economists is that the extra money in peopleâs pockets may make an already strong economy too strong, finally stoking inflation after a long period of relatively stable prices.

Source: The New York Times, July 14, 1999.

The passage describes rising inflation as a possible result of

Select one:

a. a booming economy.

b. rising unemployment.

c. tax cuts.

d. a prolonged period of stable prices.

CAS EC 102 Lecture Notes - Lecture 3: Potential Output, Infant Mortality, Physical Capital

CAS EC 102 Full Course Notes

Document Summary

Get access

Related Documents

CAS EC 102 Lecture Notes - Lecture 7: Technological Change, Physical Capital, Production Function

CAS EC 102 Lecture Notes - Lecture 6: Diminishing Returns, Human Capital, Production Function

CAS EC 102 Lecture Notes - Lecture 1: Savings Account, Business Cycle, Gdp Deflator

Related Questions

		dirty float
		floating exchange rate
		fixed exchange rate
		dollarization

		transportation costs
		goods that cannot be shipped
		tariffs and quotas
		Each of these answers is correct.

		consumption smoothers.
		Ricardian equalizers.
		automatic stabilizers.
		Each of these answers is correct.

		regressive tax system.
		flat tax system.
		zero tax system.
		progressive tax system.

		The population over 65 will grow.
		The population will be younger.
		Women will have fewer children.
		Immigration will increase.

		lending directly to homeowners.
		regulating the stock markets more.
		reducing the growth rate of the money supply.
		doing nothing.

		1:1.
		2:1.
		1:2.
		It cannot be determined from this information.

		small.
		large.
		unpredictable.
		well-timed.

		defense
		environmental protection
		education
		health care