Assignment 1

Question 1

GDP is the value of all ____ produced in a given period

Answer 1

Final goods and services

Question 2

A firm’s value added equals ___

Answer 2

Its revenue minus its cost of intermediate goods

Question 3

Deflation generally occurs when ___ occurs

Answer 3

The costumer price index decreases

Question 4

According to convention, a recession is referred to if an economy goes through ___ consecutive ____ of ____ growth

Answer 4

Two, Quarters, Negative

Question 5

The most often used measure of changing living standard is ____

Answer 5

The growth rate of real GDP per capita

Question 6

Suppose individuals wish to obtain the most accurate comparison of living standard between Canada and Saudi Arabia. To do so, one would convert Saudi Arabian output into dollars using ____

Answer 6

Purchasing power parity methods

Question 7

“Convergence” has been occurring among OECD countries because ____

Answer 7

The poorer countries have had higher growth rate than the richer ones

Question 8

Assume that there are decreasing returns to capital, decreasing returns to labor and constant return to scale. Now both capital and labor decrease by 5%. We know that output (Y) will _____

Answer 8

Decrease by 5%

Question 9

Given the broadest interpretation of technology, technology will include?

Answer 9

How well the firms are run
The political environment
The organization and sophistication of markets
The list of blueprints defining the types of products and techniques available to produce them

Question 10

Given the narrow interpretation of technology, technology will include?

Answer 10

The list of blueprints defining the types of products and techniques available to produce them

Question 11

Assume that constant return to scale exist and that N and K both increase by 2%. We know that output (Y) will increase by ___

Answer 11

2%

Question 12

Assume that the saving rate increases. We know that this increase in the saving rate will cause _____

Answer 12

A temporary increase in the rate of growth of output per capita

Question 13

Assume that employment increase by 3%. Holding all other factors constant, we know that output will _____

Answer 13

increase less than 3%

Question 14

Decreasing return to kapital (K) implies that a 4% increase in K will cause output (Y) to _____

Answer 14

increase by less than 4%

Question 15

What will cause an increase in output per worker (Y/N)?

Answer 15

An increase in K/N
An increase in capital stock (K)
An increase in the saving rate