Econ Test 2 pool
GDP calculations are performed by the
Bureau of Economic Analysis
Which of the following activities is considered an investment for calculating GDP?
a college builds a new lab (aka new production)
According to the Solow model, a greater investment rate leads to
an increase in steady-state output
The difference between a final good and an intermediate good is that
an intermediate good is sold for use as a component of a final good.
Conditional convergence predicts that if two countries have the same steady-state level of output, the poorer country will eventually
catch up with the richer country because it will grow faster.
The expenditure approach to calculating GDP states that GDP is equal to
consumption + investment + govn't spending+ net exports
Good regulations
ensure that markets are open and competitive.
To avoid double accounting, the value of
final goods only are included in GDP
Property rights that are not well-defined encourage
free riders
Honest government ______ economic growth.
fuels
Property rights ______ economic growth
fuels
the larger the spillovers, the stronger the argument for
government subsidies
Capital growth is the difference between
investment and depreciation.
In a steady state the level of investment
is equal to depreciation
Technological knowledge is the
knowledge about how the world works that is used to produce goods and services.
In the Solow model production function, Y = F(A, K, eL), L stands for
labor
Conditional convergence implies that there is ______ relationship between real GDP per capita and subsequent growth.
negative
In the Solow model, holding all else constant increases in physical capital
raises output only after reaching the steady state
If we want to compare GDP over time, we should always look at
real GDP
Hans Rosling claims that an entirely new converging world emerged:
since 1948
Which of the following can drive long-run economic growth in the Solow model?
technological knowledge
A production function can be used to express the relationship between ______ and GDP.
the factors of production
GDP per capita is
the market value of all final goods and services produced within a country in a year divided by population.
The production function is a mathematical function that shows
the relationship between inputs and the quantity of output produced.
With possible spillover of ideas, there will be
too little investment in R&D
When GDP per capita goes up by 10 percent
total income per person goes up by 10 percent, but the distribution may vary.
A good is not rivalrous if
two or more people can consume it at the same time.
Research and development of new ideas that lead to spillover effects tend to be
underprovided in markets.
Which of the following accounts for the largest factor payment in the U.S. GDP?
wages
Recently (as of 2010), GDP per capita in the United States was approximatelY
$46,000
If a country has 5 percent real GDP growth and 5 percent population growth, how much per capita real GDP growth does it have?
0%
According to Matt Ridley, exchange of goods between groups is _____ times as old as farming
10
If the average annual growth rate of a country increases from 2 percent to 3 percent, how much faster will GDP double?
11 2/3 years faster
Real GDP for the year 2000 (measured in 2005 dollars) is equal to
2005 prices × 2000 quantities
if the avg annual growth rate of a country increases from 1 %. to 2%, how much faster will GDP double?
35 years
If POPold= 600 and next year is POPnew= 624, what is growth rate of pop?
4% (624-600)/600
At an annual growth rate of 1.4%, how long does it take for real GDP per capita to increase from $30K to $60k in a country?
50 years
According to Cowen & Tabarrok, what institutions encourage investment and the efficient organization of the factors of production?
- competitive & open markets - dependable legal system - property rights - honest gown;t - political stability
What helps a country develop from catch-up growth to cutting-edge growth?
- encouraging education focused on creativity/problem solving -increasing population of innovators -institutions that create incentives to conduct research
At an average growth rate of 4 percent, how long would it take for an economy to double its GDP?
17.5
If U.S. per capita GDP is $50,000 and grows at 2 percent per year, what will U.S. per capita GDP be in 70 years?
200,000
according to Hans Rosling, in 2009 the world's poorest country (which he attributes to being stuck in civil war) was
Congo
in nations with large underground, illegal sectors
GDP will underestimate total production in economy
Describe growth patterns in world post-WWII
Japan & South Korea experienced rapid growth while Argentina & Nigeria experienced slow growth
Conditional convergence implies that there is ______ relationship between real GDP per capita and subsequent growth
a negative
The cost of negative externalities that harm the environment, such as pollution costs,
are not included in GDP
non market production is not counted in GDP because the activities:
are not priced
If a country's investment rate is less than its depreciation rate, then eventually
both capital stock & growth rates will fall
If gamma decreases in the Solow model, other things held constant, then capital growth
decreases
A Solow growth model features ______ returns to human capital, ceteris paribus.
decreasing
Examples of good economic institutions
dependable legal system low level of corruption competitive and open markets
according to Matt Ridley, ideas are combined and recombined to produce new innovations primarily through_______
exchange
The level of capital stock increases when investment in capital is
greater than depreciation
Marginal product of capital is ______ in China relative to marginal product of capital in developed economies.
high
______ is produced by an investment of time and other resources in education, training, and experience.
human capital
In the Solow model production function, Y = F(A, K, eL), A stands for
ideas
In the Solow model, an increase in the investment rate will _____ the amount of capital needed to achieve a steady state of output.
increase
If gamma increases in the Solow model, other things held constant, then capital growth
increases
As other countries grow wealthier, the incentive to undertake research and development projects
increases, since the potential for profits rises
Many economists are optimistic about the future of economic growth, mostly because
increasing populations worldwide mean added incentives for research and development.
The optimal private investment in R&D would likely be __________ the optimal social investment.
less than
Diminishing returns to capital implies that
marginal product of capital is decreasing
Countries with greater amounts of capital have
more depreciation
When the size of the market grows,
more resources are spent in research and development
A tractor, built in 2001 and still operated today is
part of today's national wealth but not part of today's GDP.
The following are the factors of production in the Solow growth model:
physical capital, human capital, and ideas
The three primary factors of production are
physical capital, human capital, and technological knowledge
What are factors of production in Solow:
physical capital, human capital, ideas
The formula that represents the generation of ideas (A) is
population × incentives × ideas per hour
According to the first figure in Chapter 7 in the text, per capita GDP and infant survival rates are ______ across countries.
positively related
In the Solow production function, an increase in the term "A" refers to an increase in
productivity growth
Which of the following would help a country develop from catch-up growth to cutting-edge growth?
spillovers from idea production
The factor income approach to calculating GDP states that GDP is equal to
wages + rent + interest + profit.
Long-run economic growth cannot be due to capital growth alone because econ growth is _____ at the steady state level of capital
zero