Chapter 11.1

Question 1

Short-term growth

Answer 1

Growth that takes place over relatively short periods of time

Question 2

Long-term growth

Answer 2

Growth that needs a long time to take effect

Question 3

What is short term-growth mainly caused by and what does it correspond to in the business cycle diagram?

Answer 3

Mainly increases in aggregate demand and sometimes aggregate supply, corresponding to expansions of real GDP in the business cycle

Question 4

What is long-term growth caused by and what does it correspond to in the business cycle diagram?

Answer 4

Caused by rightwards shifts in the LRAS or Keynesian AS curve, corresponding to the long term growth trend in the business cycle

Question 5

What kind of growth is actual growth and why?

Answer 5

Short-term growth, because it can occur in short periods and is due to reductions in unemployment and or inefficiencies in production

Question 6

What kind of growth is growth in production possibilities and why?

Answer 6

Long-term growth, because it usually requires a long period of time and is due to increases in quantity or improvements in quality of factors of production

Question 7

What are usually the most important sources of long-term economic growth?

Answer 7

Increases in the quantity and improvements in the quality of capital goods

Question 8

What kind of changes to labor can be an important source of long-term economic growth?

Answer 8

Improvements in the quality of labor rather than increases in the quantity of labor

Question 9

What factors allow economic growth to have positive effects on standards of living?

Answer 9

The distribution of income
Household spending
The share of income controlled by women
Government spending on merit goods
Contributions by NGOs

Question 10

What are the factors that economic growth can affect?

Answer 10

Living standards
The environment
Distribution of income