Econ exam 2
Assume that the Candyland economy produced approximately 150 candy bars, 80 bags of caramels, and 30 solid chocolate bunnies in 2017, and in 2000 it produced 100 candy bars, 50 bags of caramels, and 25 solid chocolate bunnies. The average price of candy bars is $3, the average price of caramel bags is $2, and the average price of chocolate bunnies is $10 in 2017. In 2000, the prices were $2, $1, and $7, respectively. What is nominal GDP in 2017?
$9term-9510
What would we expect to see if the basic prediction of the super simple Solow model that poor countries will grow faster than rich countries was true?
. Growth miracles
If per capita GDP is $1,000 and grows at 5 percent annual interest, approximately how long will it take before it is $4,000?
28 years
Suppose that in a certain economy, the growth rate of the population is 1.2 percent and the real GDP growth per capita is 2.1 percent. The real GDP growth rate must be equal to:
3.3 percent.
If per capita GDP is $1,000 and government officials want to increase it to $4,000 within 20 years, at what approximate rate does it have to grow?
7 percent
The rule of _____ can be used to calculate the number of years that it takes for the magnitude of a variable to _____.
70; double
As of the year 2000, about _____ percent of the world's population lived in a country with a real GDP per capita that was less than the world average of about $9,133.
80
Which statement is TRUE?
A decline in real GDP will usually also be observed with a decline in income, employment, sales, and other measures of the health of an economy.
Which statement is TRUE?
A recession is a significant, widespread decline in real income and employment.
Which equation is used in the textbook to illustrate the sources of new ideas that will be important for the future of economic growth?
A(ideas) = population × incentives × ideas per hour
What is the "flying shuttle"?
An invention that made it easier to make fabric quickly and cheaply.
Y equals:
C + I + G + NX.
Which type of growth will be the fastest, all else being equal?
Catching-up growth
Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?
GDP does not count leisure.
Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?
GDP does not count non-priced production.
Which statement is NOT given in the textbook as a problem associated with using GDP as a measure of output and welfare?
GDP does not count the purchase of corporate stock.
Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?
GDP does not count the underground economy.
Which statement is given in the textbook as a problem associated with using GDP as a measure of output and welfare?
GDP does not measure the distribution of income.
Which statement MOST accurately describes GDP?
GDP is the market value of all finished goods and services produced within a country in a given year.
Which statement is TRUE?
GDP only counts finished goods to avoid double counting.
Which statement is TRUE?
GDP per capita is GDP divided by a country's population.
Which statement is TRUE?
Growth in real GDP and growth in real GDP per capita typically give the same broad idea of how economic conditions are changing, but real GDP per capita provides a clearer one for countries with rapidly growing populations.
Which of the following statements is true?
Human capital and physical capital both eventually reach steady states.
Which statement(s) is (are) TRUE? I. The rule of 70 states that if the annual growth rate of GDP per capita is xpercent, it will take (70 ÷ x) years for it to double. II. For most of recorded human history, there was long-run growth in real per capita GDP. III. Economic growth refers to the growth rate of real per capita GDP.
I and III only
Which statement(s) is (are) TRUE? I. In India, residents who purchase land must do so two or three times, from different parties, and developers cannot get good titles to land in order to build things like supermarkets. This demonstrates the importance of a dependable legal system as an institution. II. In India, residents who purchase land must do so two or three times, from different parties, and developers cannot get good titles to land in order to build things like supermarkets. This demonstrates the importance of honest government as an institution. III. In India, residents who purchase land must do so two or three times, from different parties, and developers cannot get good titles to land in order to build things like supermarkets. This demonstrates the importance of political stability as an important institution.
I only
Which statement(s) is (are) TRUE? I. One study estimates that if India used the human and physical capital that it does have as efficiently as the United States uses its capital, it would be four times richer than it is today. This demonstrates the importance of competitive and open markets as an institution. II. One study estimates that if India used the human and physical capital that it does have as efficiently as the United States uses its capital, it would be four times richer than it is today. This demonstrates the importance of honest government as an institution. III. One study estimates that if India used the human and physical capital that it does have as efficiently as the United States uses its capital, it would be four times richer than it is today. This demonstrates the importance of political stability as an important institution.
I only
Which statement(s) is (are) TRUE? I. Technological knowledge refers to knowledge about how the world works that is used to make goods and services. II. Fewer but better tools make workers more productive. III. Physical capital refers to the tools of the mind.
I only
Which statement(s) is (are) TRUE? I. The rule of 70 states that if the annual growth rate of GDP per capita is xpercent, it will take (70 ÷ x) years for it to double. II. For most of recorded human history, there was long-run growth in real per capita GDP. III. Economic growth refers to the growth rate of nominal per capita GDP.
I only
Which statement(s) is (are) TRUE? I. For most of human history, people were poor and there was no economic growth. II. South Korea is an example of a growth miracle. III. Despite being a relatively recent phenomenon, economic growth has quickly transformed the world.
I, II, and III
Which statement(s) is (are) TRUE? I. For most of human history, people were rich and there was economic growth. II. Japan is an example of a growth miracle. III. Despite being a relatively recent phenomenon, economic growth has quickly transformed the world.
II and III only
Which statement(s) is (are) TRUE? I. In India, if GDP per capita was around $5,224, then all Indians earned that amount. II. Nigeria is an example of a growth disaster. III. Economic growth refers to the growth rate of real per capita GDP.
II and III only
Which statement(s) is (are) TRUE? I. In the United States, if GDP per capita was around $45,000, then all Americans earned that amount. II. Japan is an example of a growth miracle. III. Economic growth refers to the growth rate of real per capita GDP.
II and III only
Which statement(s) is (are) TRUE? I. Technological knowledge refers to the physical capital that is used to make goods and services. II. More and better tools make workers more productive. III. Physical capital is the stock of tools including machines, structures, and equipment.
II and III only
Which statement(s) is (are) TRUE? I. Economic growth leads to falling standards of living. II. When economists refer to economic growth, they mean the growth rate of real per capita GDP. III. Economic growth refers to the growth rate of nominal per capita GDP.
II only
Which statement(s) is (are) TRUE? I. Education decreases human capital. II. The more experience a person has, ceteris paribus, the more human capital accumulated by that person. III. Physical capital and human capital are often considered to be the same.
II only
Which statement(s) is (are) TRUE? I. Technological knowledge refers to the physical capital that is used to make goods and services. II. Human capital refers to the tools of the mind. III. Physical capital is the stock of knowledge and skills that workers acquire through education, training, and experience. Please choose the correct answer from the following choices, and then select the submit answer button.
II only
Which statement(s) is (are) TRUE? I. Technological knowledge refers to the physical capital that is used to make goods and services. II. More and better tools make workers more productive. III. Physical capital refers to the tools
II only
Which statement(s) is (are) TRUE? I. In the United States, if GDP per capita was around $45,000, then all Americans earned that amount. II. Argentina is an example of a growth miracle. III. Economic growth refers to the growth rate of real per capita GDP.
III only
Which statement(s) is (are) TRUE? I. Under communal property, effort is divorced from payment, so there is a lot of incentive to work. This demonstrates the insignificance of property rights as an institution. II. Corruption is like a subsidy that gives resources to productive entrepreneurs. This demonstrates the insignificance of honest government as an institution. III. In many nations, civil war, military dictatorship, and anarchy have destroyed the institutions necessary for economic growth. This demonstrates the significance of political stability as an institution.
III only
Which fact about growth on the cutting edge is emphasized in the chapter?
Ideas can be freely shared, but spillovers mean that ideas are underprovided.
Which statement is TRUE?
In the factor income approach to measuring GDP, money received by businesses is known as profit.
Which statement is TRUE?
In the factor income approach to measuring GDP, money received by landlords is known as rent.
Which of the following describes the relationship between capital (K) and output (Y) shown by the production function?
Increases in capital (K) lead to increases in output (Y).
Which of the following conditions is consistent with the steady-state level of capital?
Investment equals depreciation
Which statement is TRUE?
Net exports are the value of exports minus the value of imports.
Which of these institutions is NOT provided in the video as an example of an institution that creates the right incentives for growth?
Organization and technology
what does the equation "Y = F(K)" mean
Output (Y) is a function (F) of the quantity of capital (K).
Which of the following is NOT one of the factors of production?
Property rights
Which statement is TRUE?
Real GDP can grow at a negative rate.
Which statement is TRUE?
Summer work as a landscaper in your friend's business working under the table isterm-43 not included in GDP.
Which statement is TRUE?
The National Bureau of Economic Research (NBER), a research organization based in Cambridge, Massachusetts, is considered the most authoritative source on identifying U.S. recessions.
What would happen if an economy at its steady-state level of output decided to increase the rate at which it saved and invested output?
The capital stock and output would begin to grow again until it reached a new steady-state.
Which of the following is true regarding the key institutions for economic growth?
The key institutions are those that create the right incentives, and there is considerable agreement on what constitutes these institutions.
Which statement is TRUE?
The marginal product of capital is the increase in output caused by the addition of one more unit of capital.
why is L multiplied by e in the production function?
The more educated (e) people are, the more effective their labor (L)
Why do rich countries have more factors of production?
The people in those countries have an incentive to invest in the factors of production.
Which statement is NOT true about growth on the cutting edge?
The rate at which new ideas occur must eventually slow down.
Refer to the below figure. Which statement is TRUE?
The steady state level of capital stock is approximately equal to 230.
Where do new and better ideas come from?
They grow in the soil of good institutions.
Which of the following is true about American institutions?
They provide incentives to pursue great ideas.
Which statement is TRUE?
Using the national spending approach to GDP, paying college tuition is counted as consumption.
Which statement is TRUE?
Washing your own car is not included in GDP.
Which statement is TRUE?
Watching a baseball game from outside the park for free is not included in GDP.
To incorporate the effect of ideas on economic growth, holding labor constant, we can write the production function as:
Y = A√K.
Does human capital depreciate?
Yes, because people eventually retire from the labor force and die.
Are ideas important in a production function?
Yes. Better ideas mean that we can get more bang for our buck out of capital and labor.
if the most intelligent portion of the labor force leaves the country to seek opportunity elsewhere, the decrease in human capital will lead to:
a decrease in economic growth
A decrease in labor productivity will lead to:
a decrease in economic growth.
Which activity would be counted in the investment category of national spending?
a family building a new home
The market value of the output produced in the United States by a permanent U.S. resident is included in:
both U.S. GDP and U.S. GNP.
When investment is greater than depreciation, the:
capital stock grows.
The Solow model assumes that output is based on all of these except:
competitive strategies.
What is not a variable in the factor income approach to GDP calculation
consumption
capital
depreciates, which means that it breaks down or wears out
Countries on the cutting edge grow by:v
developing more and better ideas.
John Kay:
died a poor man because people were fearful that his invention would put them out of work.
A measure of a country's production is its gross:
domestic product.
The rule of 70 states that if the annual growth rate of GDP per capita is x percent, it will take (70 ÷ x) years for it to:
double
How is human capital represented in the super simple Solow model presented in the video?
eL
The advantages of large-scale production that reduce average cost as quantity increases are defined as:
economies of scale.
Who organizes the physical capital, human capital, and technological knowledge in a capitalistic society?
entreprneurs
A(n) ______ good is one that is sold to the end user and then consumed or held in personal inventories.
finished
Where does the money for capital accumulation come from?
from savings and investments
Spending on tanks, airplanes, office equipment, and roads fits into the __________ category of the national spending approach to GDP.
government purchases
To determine how rapidly a country's production is rising or falling over time, we would have to calculate the:
growth rate of GDP.c
Real variables:
have been adjusted for inflation.
a production function is a simplified description of:
how inputs are used to produce output.
John Kay and Steve Jobs are presented in the video as examples of:
important innovators from different times whose contemporaries reacted in very different ways.
What is given in the textbook as a factor leading to new ideas that will be important for future economic growth?
incentives
As the quantity of capital increases, the amount of output:
increases at a diminishing rate.
Over the past 10,000 years, growth in per capita world GDP has been:
increasing
The idea of conditional convergence introduces the importance of _______into the simple Solow model.
institution
A(n) _____ good is one that is sold to a firm and then bundled or processed with other goods for sale at a later stage.
intermediate
A farmer buying a tractor fits into the __________ category of the national spending approach to GDP.
investment
The question of why some countries are rich and others are poor:
is a complex one that is still being debated.
In regard to distribution of income, GDP:
is a poor measure.
The production function =√K:
is just one example of a production function that has the right properties.
At a macro level, the generation of new ideas:
is not random and is the result of key ingredients.
Human capital:
is subject to diminishing returns, just like physical capital.
In the Solow model, when the economy reaches the steady-state level of capital:
it also reaches the steady-state level of output.
An example of an American institution that promotes new ideas is:
its culture that idolizes innovators.
Many goods in India were produced inefficiently because prohibitions against _____ prevented Indian manufacturers from taking advantage of economies of scale.
large-scale production
as a farmer acquires more tractors, each subsequent tractor adds:
less and less to total output.
The _____ is the increase in output caused by the addition of one more unit of capital.
marginal product of capital
One study estimates that if India used the human and physical capital that it does have as efficiently as the United States uses its capital, it would be four times richer than it is today. This demonstrates the importance of competitive and open _____ as an institution.
markets
Larger markets for pharmaceuticals will lead to:
more new drugs and longer life expectancy.
Wealthy countries tend to have:
more physical and human capital, which is organized using the best technological knowledge.
The equation Y = C + I + G + NX is referred to as the:
national spending approach to GDP calculation.
The market value of the output produced in another country by a permanent resident of that country but sold and consumed in the United States would be included in:
neither GDP nor GNP
Your _____ wage is the number on your paycheck, but your _____ wage is that number adjusted for changing prices.
nominal; real
A good is _____ if two or more people can consume it at the same time.
non-rivalrous
Ideas are:
non-rivalrous
Nigeria and Argentina are presented as examples of countries with economies that are:
not catching up, despite the prediction that poor countries should grow faster than rich countries.
If John, Paul, George, and Pete play music at an illegal nightclub in Liverpool, the output is:
not included in GDP, as it is underground economic activity.
To calculate GDP, we use the market value of:
only finished goods and services.
What is given in the textbook as a factor leading to new ideas that will be important for future economic growth?
population
In the United States, 70% of research expenditures are funded by:
private sector
Despite being a relatively recent phenomenon, economic growth has:
quickly transformed the world.
Germany and Japan grew _______ after WWII because _______.
quickly; they did not have a lot of capital
Two countries with similar institutions should:
reach similar steady state levels of output.
The product (2011 prices × 2010 quantities) is equal to:
real GDP in 2010 if 2011 is the base year.
The best reflection of changing living standards is probably growth in:
real GDP per capita.
The expression (2011 prices ÷ 2010 prices) × 100 is not equivalent to the:
real growth rate between 2010 and 2011.
The Solow model is _______ and can provide us with key insights into the _______.
simple; causes of growth
Which activity BEST describes how GDP is calculated?
summing the market value of all finished goods and services
It is _______ that China is growing faster than the United States since _______
surprising; the United States has more capital and better institutions
The factors that influence economic growth are: Please choose the correct answer from the following choices, and then select the submit answer button.
technological change, improvements in the skill adjusted quantity of labor, and increases in the amount of capital.
the factors that influence economic growth are:
technological change, improvements in the skill adjusted quantity of labor, and increases in the amount of capital.
A patent is a government grant of:
temporary monopoly rights
the expression (2011 prices ÷ 2001 prices) × 100 is equal to:
the GDP deflator between 2001 and 2011.
As the quantity of capital rises:
the amount of depreciation rises at a constant rate.
The capital stock grows when:
the amount of investment exceeds the amount of depreciation
Suppose the production function for an economy is Y = √K, Γ = 0.25, and Δ = 0.05. If the present capital stock is equal to 16:
the economy is growing.
When the quantity of capital is low, such as in Germany just following WWII, growth rates are high because:
the marginal product of capital is high, and the capital stock grows quickly because there is little depreciation.
If you cook breakfast at your home on Saturday morning:
the market value of the ingredients that you purchased is included in GDP.term-86
Physical capital is defined as:
the stock of tools including machines, structures, and equipment.
A good is non-rivalrous if:
two or more people can consume it at the same time.
Wealth is:
unusual
Imitators get the benefit of new ideas:
without having to pay the costs of development.
Which prediction of the super simple Solow model is NOT confirmed by the data analyzed in the video?
zero growth for wealthier countries that have reached their steady states
Suppose the production function for an economy is Y = √K. Which equation is equivalent to the amount of output that is invested in new capital?
Γ√K
Which equation describes an economy in a steady state?
Γ√K = ΔK
The fraction of capital that wears out or depreciates is written as:
Δ.
Which statement is TRUE?
Business fluctuations, or business cycles, are the short-run movements in real GDP around its long-term trend.
If a wealthy woman marries her gardener, stops paying him, and does not hire a new firm to perform the work, then:
GDP decreases.
The market value of all finished goods and services produced by a country's permanent residents, wherever located, in a year is the definition of:
GNP
Which statement is TRUE?
Gross national product is the market value of all finished goods and services produced by a country's permanent residents, wherever located, in a year.
Refer to the below figure. Which statement is TRUE?
If the capital stock is currently at 300 units, then the capital stock will shrink.
Refer to the below figure. Which statement is TRUE?
If the capital stock is currently at 50 units, then the capital stock will grow.
Which statement is TRUE?
One reason for the difficulty involved with defining a recession is that the government often makes significant changes in GDP estimates between the original estimate and the final estimate.
The model that can help us understand why Germany and Japan grew faster after WWII than the United States is the:
Solow growth model
The investment function has:
a shape similar to the production function, since investment is a constant fraction of output.
One study estimates that if India used the human and physical capital that it does have as efficiently as the United States uses its capital, it would be four times richer than it is today. This demonstrates the importance of:
competitive and open markets as an institution.
A finished good is one that is sold to the end user and then _____ or held in personal inventories.
consumed
Private spending on health care and education fit into the __________ category of the national spending approach to GDP. Please choose the correct answer from the following choices, and then select the submit answer button.
consumption
The steady state in the super simple Solow model of growth and capital accumulation:
explains catch-up growth but not cutting-edge growth.
Gross national product (GNP) is the market value of all:
finished goods and services produced by a country's permanent residents, wherever located, in a year.
An intermediate good is one that is sold to a _____ and then bundled or processed with other goods for sale at a later stage.
firm
As the capital stock grows, the _______ is less and less.
marginal product of capital
Entertainment is:
part of GDP because it involves a market transaction.
A government grant of temporary monopoly rights is called a:
patent
Government purchases are:
spending by all levels of government on finished goods and services.
Growth in real GDP per capita is:
the best reflection of changing living standards.
Growth in real GDP per capita is: Please choose the correct answer from the following choices, and then select the submit answer button.
the best reflection of changing living standards.
All are considered human capital except:
the worker
Suppose that in a certain economy, the real GDP growth rate is 0.9 percent and the growth rate of the population is 1.2 percent. The real GDP growth per capita must be equal to:
−0.3 percent.
Assume that the Seedland economy produced approximately 100 packets of sunflower seeds and 75 packets of pumpkin seeds. If the average price of sunflower seed packets was $2 and the average price of pumpkin seed packets was $5, the market value of the production of pumpkin seed packets was $:
$5 × 75 = $375.
Consider the following table that shows hypothetical purchases made over the last year in the United States: Military tank$1,000,000College tuition$25,000Commercial harvester$90,000Copiers for State Department$20,000Donuts$1,000Samsung smartphones (from Korea)$12,000Family minivan$30,000New 4-bedroom home$400,000
1,200,000
Suppose the production function for an economy is Y = √K, and that Γ = 0.25 and Δ = 0.05. If the present capital stock is equal to 25, new investment in capital will be equal to:
1.25.
If GDP in year 1 is $11,000 and GDP in year 2 is $11,165, then the growth rate of GDP between the two years is:
1.5 percent.
If per capita GDP is $1,000 and government officials want to increase it to $8,000 within 21 years, at what approximate rate does it have to grow?
10 percent
Suppose the production function for an economy is Y = √K, Γ = 0.25, and Δ = 0.05. If the present capital stock is equal to 16, in the next period, the capital stock will equal:
16.2.
physical capital, such as factories and tools, is represented by which letter in the production function?
K
Since many ideas can be shared at low cost:
after a certain period they should be shared.
At the steady-state level of capital:
all investment is being used to repair and replace existing capital, and no new capital is being created.
in economics, a simplified framework that helps us understand a more complex reality is known as:
an economic model.
All else equal, an increase in labor productivity will lead to:
an increase in economic growth.
The two types of growth that can be better understood with the model introduced in the video are:
catching-up growth and cutting-edge growth
