ECON 1100 final study guide

What is the rate of growth that occurred if a country's GDP grew from $1.43 trillion in 2012 to $1.51 trillion in 2013?

5.59%

Suppose total GDP in an economy is $5.6 trillion. If total savings in this economy is $321 billion, then the saving rate is equal to

5.7%

Which of these will cause the quantity of goods and services that can be produced by one worker, or in one hour of work, to increase?

A technological change

Consider the following aggregate production function: Y = A x F(K, H). Technological progress will lead to

An increase in the level of output in the economy

The saving rate in an economy is critical since aggregate saving translates into;

Business Investment

Which of these statements about the benefits of economic growth is true?

Economic growth can help people at all income levels.

Which of these government policies can help economic growth?

Establish well-enforced private property rights

Which of these will ensure that an economy experiences sustained economic growth?

Technological change

The ability to produce more output without using any more inputs is due to __________.

Technological progress

Which of these will ensure an economy experiences sustained economic growth?

Which of these will ensure an economy experiences sustained economic growth?

When societies transition from an agriculture-based economy to an industry-based economy you will typically see;

a decline in family size.

To an economist, land refers to;

all natural resources.

During exponential growth, real GDP increases at a(n) ___________growth rate

almost constant

The formation of institutions have a major influence on economic growth since they

are essentially a set of rules governing economic interactions.

Lower fertility rates enabled the global economy to;

break away from the Malthusian cycle.

When relatively poor nations adopt knowledge and technologies developed by advanced nations to stimulate economic growth it is known as;

catch-up growth.

The process of new technologies replacing old technologies and new firms driving old firms out of business or absorbing them is known as;

creative destruction.

Greater income inequality leads to ______ poverty levels

debatable

In measuring changes in the standard of living of a country, economists rely heavily on comparisons over time of real GDP per capita because:

despite its well-known flaws, it is the best means we have of comparing the performance of an economy over time

Economists believe the best long-term solution to poverty is to;

develop institutions that encourage economic development.

According to the culture hypothesis, societies respond differently to incentives because of

different values and beliefs

There is a natural limit to economic growth from capital deepening (i.e. increases in the capital per worker ratio) due to:

diminishing returns

Countries that desire to increase output and overall standards of living can provide incentives by;

encouraging R&D through tax credits.

The underlying causes of economic prosperity that drive investment in physical capital, human capital and technology are known as causes of prosperity.

fundamental

The ____________ hypothesis postulates that major differences observed in economic prosperity across countries can be due to differences in climate and other locational factors.

geography

History provides several examples that illustrate that of productive assets typically leads to low rates of growth and economic stagnation.

government ownership

Economic growth will often result in;

greater income inequality.

Higher levels of income inequality can lead to;

higher crime rates.

In general, higher interest rates will lead to;

higher savings rates.

Labor productivity can be increased through investments in __________.

human capital

Knowledge encompasses improvements in capital stock and also additions to;

human capital.

A(n) __________ encourages business formation through business friendly rules and regulations.

inclusive economic institution

Most economists would argue that the best way to reduce poverty is to;

increase economic growth.

The only way that the standard of living of the average person in a country can increase is by:

increasing production faster than population growth

The evidence shows that foreign aid has been at reducing poverty levels in many countries.

ineffective

The period before 1800 is characterized economically as a period;

lacking in sustained growth.

When production begins to increase at a decreasing rate after the addition of one more worker, holding all else constant, it illustrates the;

law of diminishing marginal product.

The Human Development Index measures the standard of living across countries by combining

Income per capita, life expectancy, average years of schooling for those above age 25 and the enrollment of children in school

Which of these statements concerning the relationship between human freedom and economic growth is correct?

Increased economic freedom does more than greater political freedom to boost a typical nation's economic growth.

Which of these is most likely to increase productivity?

Investments in research and development

The preindustrial cycle of increasing aggregate incomes and population followed by decreasing aggregate income and reductions in population is known as the;

Malthusian cycle.

__________ predicts that computing power will double approximately every two years due to advances in technology.

Moore's Law

Income per worker is defined as GDP divided by the;

number of people employed.

One approach that helps reduce poverty is for a country to;

participate in international trade.

Economists refer to any machinery, buildings, or tools used in the production process as;

physical capital.

When economic growth destabilizes political regimes and shifts political power it is known as;

political creative destruction.

The total number of workers in an economy is a ____indicator of how much total output can be produced, because____

poor; there are big differences in human capital across workers

Efficiency of production is a component of technology that refers to the ability of an economy to;

produce the highest level of output at a given cost given existing resources and knowledge.

The value of goods and services produced by one worker in one hour is known as______

productivity

Patents incentivize economic development because they;

protect the property rights of inventors for a period of time.

Private property rights aid in economic development since their existence;

provides incentives for business development.

Higher levels of physical capital, human capital and technology are considered causes of economic performance since they are linked to higher output, yet fail to explain why these input levels are high.

proximate

One way to make accurate country comparisons about per capita GDP is to compare relative costs using;

purchasing power parity.

Because the focus of long-run economic growth is on the standard of living of the average person, we measure the standard of living in terms of:

real GDP per capita

The defining characteristic of long-run economic growth is:

rising productivity

The fraction of income that is not used for consumption is known as the;

savings rate.

The per capita level of income below which an individual cannot easily survive is called the;

subsistence level.

Political institutions determine who holds political power and;

the constraints that exist on that power.

The belief espoused by German sociologist Max Weber that industrialization could be attributed to Protestantism is an example of;

the culture hypothesis.

One example of a technological advancement that has improved lives globally is

the drastic improvement in wireless communications.

Fertility is defined as

the number of children per adult or per woman of childbearing age

Economists compare the extent of poverty across countries by using a measure called

the one dollar a day per person poverty line

One factor that may help explain why some countries are more productively efficient than others is;

the presence of more entrepreneurs in efficient economies.

A farmer in a country with extractive economic institutions has;

very little incentive to work.

If a country's GDP was $200 million and the country had 75,000 workers the country's income per worker is;

$2,667

The Industrial Revolution was a ___________ process

Gradual and systematic

When it comes to raising the standard of living in a country, how important is the growth rate of real GDP?

Growth rates in real GDP are very important because a small difference in growth can have a large impact in the standard of living over a period of time.

Which equation correctly describes how total efficiency units of labor are calculated?

H = L × h

Which of these terms refers to the accumulated knowledge and skills workers acquire from education, training and life experiences?

Human capital

Private proverty rights mean that individuals have the right to own businesses and assets. Is this definition complete?

No, because private property rights also mean that individuals are secure in their ownership of businesses and assets and the income they generate.

The role of technological progress in determining economic growth can be described by which statement?

Per capita output will rise when we discover new and more effective uses of capital and labor.

Which of these government policies encourages economic growth?

Promoting the existence of an efficient financial system.

What concept is fundamental to the principle that inclusive economic institutions aid economic growth and prosperity, while extractive economic institutions generally fail to do so?

Property rights