ECON2105 Midterm #2 UGA

Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, each successive increase in physical capital leads to _____ real GDP per worker (or productivity). negative a smaller increase in a decrease in a larger increase in

a smaller increase in

In 1945, the United States recorded real GDP growth of -1% and nominal GDP growth of 1.6%. What was the inflation rate in 1945? -2.6% 0.6% 2.6% -0.6%

2.6%

The president of the World Bank is on his way to a meeting with the president of Colombia. He bumps into you in the hallway and wants to know how long it will take for Colombian per capita GDP to double. All he knows is that the average annual growth rate has been about 10 percent. You quickly tell him that, assuming Colombian per capita GDP keeps growing at the same pace into the future, it will take about ________ years because you understand the Rule of 70.

7

Suppose there are only two countries, country A and country B. Country A imports $200 million worth of goods and services from country B. Country B imports $100 million worth of goods and services from country A. Net exports for country _____ equal _____. A; $200 million B; −$100 million B; $200 million A; −$100 million

A; −$100 million

Total spending in the economy is calculated as: C + I + G + (M - X). Y - I - G - NX. C + I + G + (X - M). Y - C - I.

C + I + G + (X - M).

You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions? GDP rises by $31,500. GDP rises by $69,500. GDP rises by $6,500. GDP rises by $38,000.

GDP rises by $38,000.

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP? They are counted at market value. They are counted by subtracting Dale's opportunity cost in terms of lost income. They are counted by assigning a value that is equivalent to what it would have taken to pay a housekeeper to perform the same tasks. They are not counted.

They are not counted.

As expected, the growth rates of Real GDP using 2021 or 2022 as the base year... a) ... are different because relative prices change between 2021 and 2022 (i.e., price of peanut butter relative to price of jelly). b) ... are the same because they both measure the change in quantity. c) ... are different because both prices (i.e., price of peanut butter and price of jelly) increase. d) ... are the same because the base year does not matter for the implied growth rate.

a) ... are different because relative prices change between 2021 and 2022 (i.e., price of peanut butter relative to price of jelly).

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that [select ALL that apply]: a) all inputs are provided by households. b) all flows of resources are matched by flows of money. c) the market value of total output must be equal to total spending. d) total spending must equal total income.

a,b,c,d

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if [select ALL that apply]: a) human capital increases. b) the capital stock in the country depreciates. c) labor productivity increases. d) the depreciation rate increases. e) physical capital increases. f) labor productivity falls.

a,c,e

A rise in population in a country: leads to a downward shift of the aggregate production function. boosts real GDP but not necessarily real GDP per person. always raises the standard of living in a country. leads to an increase in the level of technology in an economy.

boosts real GDP but not necessarily real GDP per person.

The moral of the story of the Solow growth model is that: capital accumulation alone cannot lead to sustainable economic growth. human capital growth does not lead to economic growth. technological advance cannot sustain continuous economic growth. capital accumulation is the key to sustained economic growth.

capital accumulation alone cannot lead to sustainable economic growth.

Which of the following is (are) included in investment? [Select ALL that apply.] a) military spending b) the purchase of $32,000 worth of stock c) the construction of a highway by the federal government d) the purchase of an aircraft by a domestic airline e) the purchase of $45,000 worth of bonds f) social security payments

d

Gross domestic product is the value of all _____ produced in an economy over a given period. goods and services final goods and services intermediate goods and services consumer goods and services

final goods and services

In the market for inputs: households sell goods and services. firms sell goods and services. firms buy goods and services. households sell resources.

households sell resources.

The capital stock in an economy stops growing when: capital accumulation begins. savings increases in the economy. investment equals depreciation. depreciation reaches zero.

investment equals depreciation.

To acquire human capital, a person would: learn to use a printing press. sell books produced using a printing press. save to buy a printing press. purchase a printing press rather than a very large television.

learn to use a printing press.

Technological progress is advanced through: research and development. government regulation. infrastructure. consumption.

research and development.

Which of the following explains the shape of the aggregate production function? the development of human capital the profit maximization rule the law of diminishing returns the impact of technological change

the law of diminishing returns

If technology advances: human capital becomes less useful. GDP per capita declines. workers can produce more with fixed amounts of physical and human capital. physical capital becomes less productive.

workers can produce more with fixed amounts of physical and human capital.