ECON-002 Study Guide - Final Guide: Gdp Deflator, Nominal Interest Rate, Real Interest Rate

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greygiraffe398

5 Jun 2017

School

Georgetown University

Department

Economics

Course

ECON-002

Professor

Rogers Carol

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Document Summary

Y = c + i + g + x (x is exports-imports) Growth rate of real gdp = [(new-old)/old] x 100. Real gdp in 2014 = real gdp in 2013x(1+g2014) in 2013 = real gdp in 2012x(1+g2013) Chained growth rate = (old growth rate + new growth rate)/2. in year a is x cpi yeara/cpiyearb in year b prices. Solow model: based on circular flow, interpret flows as chained 2009 dollars, no govt, no row. R = nominal interest rate - inflation rate( ) Currency manipulation in chn (depreciation): for the us: x/y* shifts to the left, r falls. S/y* = 1 - c/y* - g/y* for china: x/y* shifts right, r rises. M1 = currency in circulation + total checkable deposits + traveller"s checks. M2 = m1 + savings deposits + small time deposits. Base = currency in circulation + total bank reserves. M1 = mm x base (m1 = money multiplier x base)

Related Questions

1. According to economists today, economic growth depends on:

1) resources.

2) technology.

3) institutions.

4) resources and technology.

5) resources, technology, and institutions.

2. Which of the following is FALSE?

1) Real-world observations shape economic theory.

2) Economic theory shapes policy decisions.

3) Policies affect real-world events.

4) Economic theory has no impact on real-world events.

5) None of these statements is false.

3. After the Great Depression, the main focus of macroeconomics was:

1) growth theory.

2) the study of business cycles.

3) the study of stock markets.

4) the study of why businesses fail.

4. The Solow Growth Model serves as a foundation of:

1) macroeconomic theory.

2) microeconomic theory.

3) growth theory.

4) all economic theory.

5. According to the Solow Growth Model, which of the following is/are the primary source(s) of economic growth?

A - Natural resources

B - Human capital

C - Physical capital

D - A and B

E - A and C

F- B and C

G- A, B, and C

6. According to the Solow Growth Model, the marginal product of capital is:

1) zero and increases as the quantity of capital increases

2) zero and decreases as the quantity of capital increases.

3) negative and increases as the quantity of capital increases.

4) negative and decreases as the quantity of capital increases.

5) positive and increases as the quantity of capital increases.

6) positive and decreases as the quantity of capital increases.

7. If building new capital is costless and the capital depreciation rate is zero, then an economy will reach a steady state in which the marginal product of capital is:

1) equal to zero.

2) greater than zero.

3) less than zero.

8. Which of the following is true for an economy before it reaches the steady-state?

1) Investment and net investment are both positive.

2) Investment is positive but net investment is zero.

3) Investment is zero but net investment is positive.

4) Investment and net investment are both zero.

9. The idea of convergence suggests that when underdeveloped nations begin to develop, they typically have _____________ growth rates as they catch up to the developed nations.

1) higher

2) lower

3) similar

4) very low

10. Which of the following is true after allowing for sustained technological advance in the Solow Growth Model?

I. The steady-state situation is avoidable.

II. The marginal product of each unit of capital will increase.

III. A diminishing marginal product is avoidable.

Only I only II

Only III

I and II

I and III

II and III

I, II, and III

11. What is the primary difference between the basic Solow model and the second Solow model?

1) The models are theoretically similar. The second Solow model is only more mathematically complex than the basic model.

2) The second Solow model allows for technological change, while the basic model doesn't.

3) The basic Solow model features diminishing returns, in contrast to the second model.

4) The marginal product eventually becomes zero in the basic model, while such a situation is avoidable in the second Solow model.

12. All of the following can result in economic growth except:

1) improved schools and colleges.

2) a boost in population growth.

3) a favorable climate.

4) an improved health care system.

13. Which of the following will result in a movement along with the aggregate production function?

I. a technological advancement

II. training of the workforce

III. an increase in the country's capital stock

I and II

I and III

II and III

I, II, and III

14. Which of the following is NOT true about technological change in the Solow model?

1) Technological change is random.

2) Technological change occurs exogenously.

3) Technological change is driven by the incentives of the innovators.

4) Technological change is not due to any inherent characteristics of the economy.

15. What is the key difference between the new growth theory and the growth theory as envisioned by Solow?

1) There is no difference; technological change is endogenous in both these theories.

2) There is no difference; technological change is exogenous in both these theories.

3) Technological change is endogenous in the new growth theory and exogenous in the Solow theory.

4) Technological change is exogenous in the new growth theory and endogenous in the Solow theory.

16. Which of the following was proposed by the new growth theory?

I. Capital resources cannot grow indefinitely.

II. Technological change is caused by factors inside the economy.

III. Technological changes are entirely unpredictable events.

IV. Institutions matter.

I and II

I and IV

II and IV

III and IV

I, II, III, and IV

17. All of the following except _____________ are barriers to natural growth.

1) corruption

2) political instability

3) high tax rates

4) free markets

5) All of these are barriers to natural growth.

18. Which of the following is supported by the modern growth theory?

A - Population growth is an obstacle to economic growth.

B - Competition encourages the discovery of new goods and services, which leads to economic growth.

C - A country can grow faster if it disengages itself from international trade with foreign nations.

D - Taxes should be abolished, as they hurt incentives necessary for economic growth.

All of these. A and B

A, B, and D

19. According to the new growth theory, the low living standards in many developing countries can be explained by a lack of:

A - natural resources.

B - free markets.

C - sound institutions.

D - strong military resources.

all of these.

B and C.

A and D.

erinbuffalo510

Question 1

The law of demand states that there is a direct relationship between supply and demand.

True

False

4 points

Question 2

Equilibrium is a state of balance between supply and demand.

True

False

4 points

Question 3

Goods are scarce for both rich and poor.

True

False

4 points

Question 4

"The big corporations in this country, like ExxonMobil and GM, have deep pockets and need to be hiring more people." This is a positive statement about economic policy.

True

False

4 points

Question 5

The law of supply states that there is a direct relationship between price and quantity demanded.

True

False

4 points

Question 6

In the circular flow model, firms own economic resources, and householdsbuy the manufactured products and services.

True

False

4 points

Question 7

Households play a dual role of providing the factors of production whilepurchasing the goods and services of firms.

True

False

4 points

Question 8

Opportunity cost is the lowest valued benefit that must be sacrificed asthe result of choosing an alternative.

True

False

4 points

Question 9

Scarcity denotes that our desire for a good exceeds the amount that isfreely available from nature.

True

False

4 points

Question 10

Economics is a social science concerned with satisfying man's unlimitedwants with limited resources.

True

False

4 points

Question 11

Joint output of individuals or nations will be maximized when goods areexchanged between parties in accordance with the law of"comparative advantage".

True

False

4 points

Question 12

The production possibilities frontier assumes that the level of technologyvaries when applying the model.

True

False

4 points

Question 13

Excess demand in the market will cause the price of a product to decline.

True

False

4 points

Question 14

Demand is measured on the vertical axis and supply on the horizontalaxis.

True

False

4 points

Question 15

A change in quantity demanded is a movement along the same demandcurve.

True

False

4 points

Question 16

As globalization and world trade proliferates, individual markets withincountries' economies become more competitive.

True

False

4 points

Question 17

Which growth theory compares a subsistence real wage rate to the actual real wage rate?

		Classical growth theory
		Inflation growth theory
		Neoclassical growth theory
		New growth theory

4 points

Question 18

Suppose the working age population in Tiny Town is 100 people. If 25 of these people are NOT in the labor force, the ________ equals ________.

		unemployment rate; 25/100 Ã 100
		employment rate; 25/75 Ã 100
		labor force; 75
		labor force; 25/100 Ã 100

4 points

Question 19

Suppose there is a rise in the real wage rate. As a result, the quantity of labor demanded:

		increases.
		decreases.
		does not change because there is no change in the money wage rate.
		increases only if the price level also decreases.

4 points

Question 20

GDP can be computed as the sum of:

		all sales that have taken place in an economy over a period of time.
		the total expenditures of consumers and business over a period of time.
		the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time.
		the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.

4 points

Question 21

The real wage rate equals:

		(100 x (money wage rate/price level)
		(100 x (price level/money wage rate)
		(money wage rate x (price level)
		(money wage + (number of hours worked/(price level)

4 points

Question 22

If the CPI was 121.5 at the end of 2007 and 138.3 at the end of 2008, the inflation rate over these two years was:

		10.2 percent.
		13.8 percent.
		12.2 percent.
		16.8 percent.

4 points

Question 23

A movement along the production function is the result of a change in:

		the quantity of labor.
		technology.
		capital.
		interest rates.

4 points

Question 24

All of the following are part of fiscal policy EXCEPT:

		setting tax rates.
		setting government spending.
		choosing the size of the government deficit.
		controlling the money supply.

4 points

Question 25

Along a production possibilities frontier for real GDP and the quantity of leisure time, as leisure time increases, real GDP:

		decreases.
		increases.
		stays the same.
		could increase, decrease or stay the same.

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ECON-002 Study Guide - Final Guide: Gdp Deflator, Nominal Interest Rate, Real Interest Rate

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