macro: public policy and economic growth

The economy of Atlantis has experienced a sustained increase in real GDP per capita for many years. Which of the following is NOT a likely reason for this increase?

An accelerating depreciation rate of capital

Which of the following is most likely to lead to higher economic growth?

High levels of infrastructure development.

Assume that the kingdoms of Florin and Guilder have no restrictions on the flow of financial assets. A dramatic increase in military spending in Florin has lead to a large budget deficit there. What effect does this have on real interest rates and long-run economic growth in Guilder?

Higher interest rates and lower economic growth

Winterfell and Dorne have no restrictions on the flow of financial capital. An increase in business optimism in Dorne has lead to a higher real interest rate in Dorne. What effect does this have on real interest rates and long-run economic growth in Winterfell?

Higher interest rates and lower economic growth.

What combination of income taxes, real interest rates, and investment spending is associated with lower rates of economic growth?

Higher taxes, higher real interest rate, and lower investment spending

Higher taxes have reduced disposable income in Fredland. What happens to household savings and the real interest rate in the short run, and potential output in the long run?

Household saving decreases; the real interest rate increases, and potential output decreases.

The economy of Marthaland decreased tax rates on businesses and households, which has changed the savings behavior of private households. What happens to household savings and the real interest rate in the short run, and potential output in the long run?

Household saving increases; the real interest rate decreases, and potential output increases.

Which of the following policies is most likely to increase potential output in the long run?

Policies that encourage more saving for retirement

Which of the following is the most likely effect of a government policy that leads to more development of technology used by firms throughout an economy?

a positive supply shock and higher growth rate

Which of the following is most likely to lead to higher levels of economic growth?

an increase in inflows of foreign savings.

Which of the following is LEAST likely to be associated with a higher rate of economic growth?

higher consumption

Which of the following is LEAST likely to lead to higher levels of economic growth?

low levels of foreign investment