Chapter 11: Economic Growth and the Wealth of the Nation Flashcards

1
Q

Wealth is a ________ focus.

A

Long term

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2
Q

Income is a _________ focus.

A

Short term

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3
Q

Sources of Growth:

A

(1) Resources
(2) Technology
(3) Institutions (Political and Economic)
(4) Economic Freedom

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4
Q

Wealthier societies provide human beings with better living standards, which includes better:

A

(1) Nutrition
(2) Educational Opportunities
(3) Economic Freedom
(4) Health Care
(5) Sources of Entertainment

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5
Q

Basic measure of a nation’s income

A

GDP

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6
Q

Basic, foundational measure of “average living standards”

A

GDP Per Capita

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7
Q

Tendency to overestimate the severity of economic problems and underestimate the past, present, and future performance of the economy. We fail to understand the speed and scope of human progress.

A

Pessimistic Bias

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8
Q

People make a grave mistake when they idealize conditions in the past.

A

The “Good Ole Days” Fallacy

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9
Q

Measured as the growth of real GDP per capita.

A

Economic Growth

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10
Q

Real Per Capita GDP Over 200 Years

A

Two centuries ago, everyone was poor and while some countries have experienced growth, many others have left behind.

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11
Q

% Change in Per Capita Real GDP =

A

% Change in Nominal GDP - % Change in Prices - % Change in Population

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12
Q

If the annual growth rate is X%, the size of that variable doubles every (70/X) years

A

Rule of 70

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13
Q

Causes of Economic Growth:

A

(1) Resources (Inputs, Factors of Production)
(2) Technology
(3) Institutions (Economics, Political, Cultural)

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14
Q

The inputs used to produce goods and services

A

Resources

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15
Q

Factors of Production

A

Resources

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16
Q

Resources Comprise of:

A

(1) Natural Resources
(2) Human Capital
(3) Physical Capital

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17
Q

Include physical land and the input naturally occurring in or on the land.

A

Natural Resources

18
Q

The resource represented by the quantity, knowledge, and skills of the workers in an economy.

A

Human Capital

19
Q

It is possible to expand human capital by ______ the number of workers and ______ the existing labor force.

A

(1) Increasing

(2) Educating

20
Q

Comprises the tools and equipment used in the production of goods and services

A

Physical Capital

21
Q

The purpose of physical capital?

A

Aid in the production of future output

22
Q

The knowledge available for use in production

A

Technology

23
Q

Introduces new techniques or methods so that firm can produce more valuable outputs per unit of input.

A

Technological Advancements

24
Q

T or F: Economic growth occurs when the resources and technology work together.

25
Significant practices, relationships, or organizations in a society. They are the official and unofficial conditions that shape the environment in which decisions are made.
Institutions
26
Types of Institutions:
(1) Laws (2) Regulations (3) Government (4) Work Habits (5) Expectations (6) Political Behaviors
27
Important Institutions:
(1) Political stability and rule of law (2) Private property rights (3) Stable money and prices (4) Competitive and open markets (5) Efficient taxes
28
The rights of individuals to own property to use it in production, and to own the resulting output.
Private Property Rights
29
Farmers split commune into family-owned plots and agreed to keep surplus agricultural output beyond government quota.
Xiaogang Agreement
30
Property Rights Must Be:
(1) Defined (2) Defendable (3) Divestible
31
Without property rights...
- There can be no exchange - Without exchange there is no specialization - Without specialization in exchange productivity plummets - If productivity plummets, so does your standard of living
32
Three Market Institutions Essential for Economic Growth:
(1) Competitive Markets (2) International Trade (3) Flow of Funds Across Borders
33
Ensures that consumers get the lowest prices and promote competition and innovation
Competitive Market
34
Allows nations to reap the benefits from specialization and trade
International Trade
35
Helps firms access funds so they can invest and increase future production
Flow of Funds Across Borders
36
Taxes sufficient to fund the activities of government while impeding production and consumption decisions as little as possible
Efficient Taxes
37
Taxes have to be ____ enough to support an effective government but ____ enough as to not reduce incentives for production.
(1) High | (2) Low
38
Designed to reduce incentives for politically motivated monetary policy, which typically leads to highly variable inflation rates.
Federal Reserve
39
____________ allows us to produce more output while using fewer resources.
Technological Advancement
40
Resources:
(1) Land (2) Labor (3) Capital