econ test3 chp810
Explain why, other things remaining the same, a country with a well-educated population has a faster economic growth rate than a country that has a poorly educated population
A country with a well-educated population has more human resources to invest in expanding human capital, which can develop new and more productive technologies. A well-educated population has more skills and greater labor productivity than a poorly educated population. A well-educated population can contribute to the research and development that create new technology.
The standard of living in Asian economies has increased in the last decade by so much more than the increase in the standard of living in the United States because ______.
Asian economies have higher saving rates than the United States Saving finances investment, which brings capital accumulation and stimulates economic growth and a higher standard of living. The Asian economies have higher saving rates than the United States, which increases their economic growth and their standard of living at a faster rate than in the United States.
Classical growth theory ______
Classical growth theory is the theory that the clash between an exploding population and limited resources will eventually bring economic growth to an end.
What does classical growth theory say will eventually end economic growth?
Classical growth theory predicts that a population explosion that leads to a fall in labor productivity and the return of real GDP per person to the subsistence level will eventually end economic growth.
Classical macroeconomics predicted that the Great Depression _______.
Classical macroeconomics predicted that the Great Depression would eventually end but offered no method for ending it more quickly.
As a result of minimum wage rate raise, _______.
Firms will be more likely to retain employees with job experience, so part-time workers, low-skilled workers, and youth workers with job experience may gain. But teenagers with no experience will find it difficult to get jobs.
______ is an example of a place where there is economic freedom and rapid economic growth but not democracy.
Hong Kong is a good example of a place with little democracy but a lot of economic freedom long dash —and a lot of economic growth
When the labor force participation rate of Athabasca increases, employment ____________
Increases. If the labor force participation rate of Athabasca increases, the supply of labor also inc which inc employment
_______ published The General Theory of Employment, Interest, and Money in _______.
John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936.
John Maynard Keynes theory was that _____
Keynes' theory was that depression and high unemployment occur when households don't spend enough on consumption goods and services and businesses don't spend enough investing in new capital. So too little private spending is the cause of depression (and recession)
Loanable funds are used to finance ______.
Loanable funds are used to finance business investment, a government budget deficit, and international investment or lending.
Loanable funds come from ______.
Loanable funds come from private saving, a government budget surplus, and international borrowing.
According to Malthusians, _______.
Malthus is one of the economists closely associated with classical growth theory. Malthusians following the teaching of Malthus. Malthusians believe that if today's global population reaches 11 billion by 2200, we will return to a primitive standard of living
Which of the following plays a role in new growth theory?
New growth theory is the theory that our unlimited wants will lead us to ever greater productivity and perpetual economic growth. Two facts that play a key role in the new growth theory are: 1. Many people can use discoveries at the same time 2. Physical activities can be replicated.
Is economic freedom the same as democracy?
No. Economic freedom does not have to occur in a democracy Economic freedom is a condition in which people are able to make personal choices, their private property is protected, and they are free to buy and sell in markets.
Consider potential GDP, and then choose the statement that is correct.
Real GDP fluctuates around potential GDP, and on the average over the business cycle, real GDP equals potential GDP.
Much of Africa experiences slow economic growth because it lacks ______.
Some African countries experience slow economic growth because they lack the preconditions for economic growth: economic freedom, property rights, and markets. People in these countries have little incentive to specialize and trade or to accumulate physical or human capital.
Consider household saving, and then choose the correct statement.
The greater a household's wealth, other things remaining the same, the less it saves today.
The ______ growth theory best corresponds to the explanation given by Mr. Greenspan because Mr. Greenspan's explanation shows ______.
The new growth theory best corresponds to the explanation given by Mr. Greenspan. New growth theory sees the economy as a perpetual motion machine.
The preconditions for economic growth are ______.
The preconditions for economic growth are economic freedom, private property rights, and markets.
According to Keynes, _______.
Too little private spending is the cause of depression and recession. Keynes' theory was that depression and high unemployment occur when households don't spend enough on consumption goods and services and businesses don't spend enough investing in new capital.
Classical Macroeconomics
______ macroeconomics is the view that the market economy works well, that aggregate fluctuations are a natural consequence of an expanding economy, and that government intervention cannot improve the efficiency of the market economy
The interest rate on a financial asset ______.
a fall as the price of the asset rises Because the interest rate is a percentage of the price of an asset, if the asset price rises, other things remaining the same, the interest rate falls.
The amount of job-search unemployment increases when ______.
a prolonged structural slump occurs. Job search is the activity of looking for an acceptable job. A structural slump is a condition in which some industries and even regions contract while other industries and regions flourish. When these events occur, labor turnover is high and job search increases
Growth in physical capital depends most directly upon the
amount of saving and investment.
All of the following increase labor productivity except ______.
an increase in consumption. An increase in consumption decreases saving and decreases investment in physical capital. The amount of capital per worker decreases, which decreases labor productivity
A reason for an increase in labor productivity growth is
an increase in peoples human capitol
Which of the following events increases the amount of job-rationing unemployment?
an increase in the efficiency wage rate. An increase in the efficiency wage rate increases job-rationing unemployment. Job rationing is a situation that arises when the real wage rate is above the full-employment equilibrium level. And an efficient wage is a real wage rate that is set above the full-employment equilibrium wage rate to induce greater work effor
Over time, ______.
both the demand for loanable funds and the supply of loanable funds trend upward, but the real interest rate has no trend
The U.S. saving rate increased from minus −0.1 percent in 2011 to 2.0 percent in 2012 to 2.4 percent in 2013, to 2.9 percent in 2014, and to 3.0 percent in 2015. A negative saving rate occurs if ______
consumption expenditure exceeds disposable income
Comparing the 1960s to the more recent decades, labor productivity growth _______ than in subsequent decades.
due to physical capital and human capital growth was greater in the 1960s
a negative saving rate might be something to worry about because ______. U.S. saving might be increased by ______
eventually households must repay their borrowing; decreasing taxes on interest income
According to classical growth theory, when real GDP per person ______, the population grows.
exceeds the subsistence level According to classical growth theory, when labor productivity rises and lifts real GDP per person above the subsistence level, which is the minimum real income needed to maintain life, a population explosion occurs.
Other things remaining the same, a country or region that adopts free international trade (for example, Hong Kong) has a faster economic growth rate than a country that restricts international trade (for example, Myanmar) because free international trade ______.
extracts all the available gains from specialization and trade
Classical macroeconomics _______.
fell into disrepute during the Great Depression, when many people believed the capitalism, the political system of private ownership, free markets, and democratic political institutions, could not survive and began to advocate socialism, a political system based on state ownership of capital and central economic planning.
Increases in human capital can come
from formal education and on-the-job learning
Canada can achieve faster economic growth by ______.
having labor markets that send messages to workers that create incentives to train in fields that are experiencing growth. Canada can achieve faster growth by having flexible labor markets. Flexible labor markets create incentives to workers that encourage them to train in fields that are experiencing growth
With low unemployment benefits, the opportunity cost of job search is ______, so a person is likely to ______.
high; accept a job that is found quickly The opportunity cost of job search influences the length of time that an unemployed person spends searching for a job. With low unemployment benefits, the opportunity cost of job search is high, and a person is likely to accept a job that is found quickly
U.S. labor market openings and hirings are _______ in August 2010 than in August 2009. Everything else remaining the same, if hiring picks up, employment _______.
higher; increase The news clip tells us that job openings increased 33 percent in the year ended August 2010 and that hirings increased 4 percent during the same period. When other things remain the same, the hiring of employees increases employment.
When the minimum wage rate is raised, firms will ______.
hire only those workers who can produce output is worth the value of the new minimum wage they will earn. Firms want to hire only those workers who can produce output that is worth the value of the new minimum wage. These workers will include workers with job experience but other might also be hired.
First Call, Inc. is a wireless service provider. First Call expects its profit to double next year. If other things remain the same, explain how this increase in expected profit influences First Call's demand for loanable funds. This increase increase in expected profit ______ the demand for loanable funds and brings ______ the demand for loanable funds curve.
increase; a rightward shift of
When the labor force participation rate of Athabasca increases, potential GDP ______, and the real wage rate ______.
increase; decrease
Close to 100 percent of Canada's unemployed receive generous benefits compared to 38 percent in the United States. If the United States adopted the level of unemployment benefits that Canada has, we would expect the U.S. natural unemployment rate to ______ and U.S. potential GDP to ______.
increase; decrease Canadian unemployment benefits are available to all the unemployed. In the United States only 38 percent of the unemployed receive benefits. If the United States adopted the level of unemployment benefits that Canada has, we would expect U.S. job search to increase and the U.S. natural unemployment rate to increase. When the natural unemployment rate increases, the quantity of labor at full employment decreases, and potential GDP
The supply of loanable funds increases when disposable income______ or wealth ______.
increase; decreases
If hiring picks up, real GDP ________ and potential GDP ________.
increase; does not change When more people are working, real GDP increases. But potential GDP is the quantity of real GDP that the economy can produce when the labor market is at full employment. In 2010, the labor market was below full employment, so the real GDP produced was less than potential GDP. The increased employment changed real GDP but not potential GDP.
The natural unemployment rate _______.
increases if unemployment benefits become more generous. If unemployment benefits become more generous, people are likely to spend more time searching for the ideal job. Unemployment as a result of job search increases, and the natural unemployment rate rises
Sustained increases in real GDP per person depend on
increases in labor productivity
A government budget surplus _______.
increases the supply of loanable funds The government enters the loanable funds market when it has a budget surplus. A government budget surplus increases the supply of loanable funds
An increasing number of Chinese citizens who are educated in the United States are returning to China to work. This development ______ economic growth in China because ______.
increases; it increases human capital When Chinese citizens are educated in the United States, it increases their human capital. So human capital in China increases when the student returns to China. And an increase in the growth rate of human capital increases economic growth.
Economic freedom is crucial for achieving economic growth because ______.
it allows people to make choices and gives the incentive to save, invest, expand human capital, and discover and apply new technologies Economic freedom encourages saving, encourages research and development, encourages international trade, and encourages the improvement of the quality of education. Economic freedom allows people to make choices and gives them the incentives to pursue growth-producing activities.
If the stock of physical capital (that is machinery, equipment, etc.) and human capital remain the same and the population increases, then
labor productivity will decrease
An increase in disposable income, other things remaining the same, ______ the equilibrium real interest rate and ______ the equilibrium quantity of loanable funds.
lower; increaes
A government budget surplus ______ the real interest rate and ______ investment.
lowers; increases
Keynesian
macroeconomics is the view that the market economy is inherently unstable and needs active government intervention to achieve full employment and sustained economic growth
According to classical macroeconomics, ______.
no remedy by government can improve on the performance of the market. Classical macroeconomics is the view that the market economy works well, that aggregate fluctuations are a natural consequence of an expanding economy, and that government intervention cannot improve the efficiency of the market economy.
According to new growth theory, ______.
our unlimited wants will lead us to ever greater productivity and perpetual economic growth. Real GDP per person grows because of the choices people make in the pursuit of profit.
If governments in Africa _______ they will encourage economic growth and raise the standard of living.
protect private property Economic freedom is a fundamental precondition for creating the incentives that lead to economic growth.
An increase in expected profit, other things remaining the same, ______ the equilibrium real interest rate and ______ the equilibrium quantity of loanable funds.
raises; increases An increase in expected profit, other things remaining the same, increases the demand for loanable funds. The demand curve for loanable funds shifts rightward. The equilibrium real interest rate rises and the equilibrium quantity of loanable funds increases.
Government controls that if removed might spur India's growth rate to a sustained 10 percent a year include ______.
regulation that decreases foreign investment
Labor productivity growth depends on
saving and investment increases in human capital technological growth
in the year to April 2016, the U.S. budget deficit increased to $511 billion, up from $460 billion a year earlier. Source: The Wall Street Journal, May 11, 2016 Explain the effect of a large federal deficit and debt on economic growth. A large federal deficit _______.
slows the growth of capital stock and labor productivity, and slows real GDP growth
The three types of financial markets are ______.
stock markets, bond markets, and loans markets
Property rights encourage economic growth by ______.
strengthening the incentive to work, save, invest, and accumulate human capital Property rights encourage economic growth because when clearly established and enforced, they provide people with the incentive to work, save, invest, and accumulate human capital. Property rights are the social arrangements that govern the protection of private property.
When unemployment benefits increase, the ______.
supply of labor decreases, and potential GDP decreases as a movement occurs down along the production function. Unemployment benefits lower the cost of searching for a job and encourage unemployed workers to take longer to find the best job available. The result is a decrease in the supply of labor. When the supply of labor decreases, the full-employment quantity of labor decreases and a movement occurs down along the production function. Potential GDP decreases.
Job rationing creates a ______.
surplus of labor. Job rationing is a situation that arises when the real wage rate is above the full-employment equilibrium level. When the real wage rate is above the full-employment equilibrium level, the quantity of labor supplied exceeds the quantity of labor demanded.
Financial capital is _______.
the funds used to buy physical capital
Crowding out occurs when _______.
the government budget is in deficit and the real interest rate rises. The increase in the real interest rate crowds out investment.
The U.S. saving rate increased from minus −0.1 percent in 2011 to 2.0 percent in 2012 to 2.4 percent in 2013, to 2.9 percent in 2014, and to 3.0 percent in 2015. The U.S. saving rate might have increased because ______. The increase in the saving rate will ______ the supply of loanable funds
the stock market crash and financial market turmoil decreased wealth and expected future income; increase
Markets are a necessary precondition for economic growth because ______.
they create incentive to save and invest Economic freedom requires free markets. Buyers and sellers get information and do business with each other in markets. And market prices send signals to buyers and sellers that create incentives to increase or decrease the quantities demanded and supplied.
High taxes might hold back economic growth because ______. U.S. tax laws that ______ would encourage faster economic growth.
they discourage saving; lower tax rates on firms' profits Taxes on saving discourage saving. Saving finances investment, which brings capital accumulation and economic growth. So a high tax on saving can hold back economic growth. A lower tax rate on firms' profits would give firms incentives to invest in new capital and develop new technology, both of which would spur economic growth
The time spent on job search falls when ______
unemployment benefits decreases. The time spent on job search falls when unemployment benefits decrease because the opportunity cost of job search influences the length of time that an unemployed person spends searching for a job. With low unemployment benefits, the opportunity cost of job search is high and a person is likely to accept a job that is found quickly
U.S. potential GDP is the value of the goods and services produced in the United States _______.
when the U.S economy is a full employment Potential GDP is the value of real GDP produced when all the economy's factors of production long dash —labor, capital, land, and entrepreneurial ability long dash —are fully employed
The Chinese government ______ be wise to adopt policies that encourage more Chinese students to return to China when they have completed their studies because ______.
would; China would benefit from the increase in human capital, which could lead to more research and development and greater economic growth The Chinese government would be wise to adopt policies that encourage more Chinese students to return to China when they have completed their studies because these students will bring with them human capital, which can be used in research and development. And an increase in human capital, research, and development leads to economic growth.
A decrease in wealth will ______ the supply of loanable funds and ______.
increase; and shift the supply of loanable funds curve rightward in wealth will increase the supply of loanable funds. When the supply of loanable funds increases, the supply of loanable funds curve shifts rightwar
An increase in disposable income will ______ the supply of loanable funds and the adoption of new technology will ______ the demand for loanable funds. The equilibrium real interest rate ______
increase; increase; might rise, fall, or stay the same
What were the sources of labor productivity growth in the U.S. economy during the fifty years since 1960? How did the 1960s differ from the more recent decades? During the fifty years since 1960, the sources of labor productivity growth include ______
plastics, the laser, and the computer during the 1960s During the 1960s, plastics, the laser, and the computer were among the technological advances that brought extraordinary labor productivity growth.
A government budget deficit ______ the real interest rate and ______ investment.
raises; crowds out A government budget deficit increases the demand for loanable funds. The demand for loanable funds curve shifts rightward. The real interest rate rises and investment decreases.