Chapter 25

Question 1

During the past decade, a nation’s average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was:

Answer 1

-3%

Question 2

When economic growth occurs, a nation’s short run and long run AS curves shift _

Answer 2

rightward

Question 3

Which of these factors will cause the long-run aggregate supply curve to shift to the right?

Answer 3

More machinery and equipment

Question 4

Which of the following is not a reason why technological innovation is influenced by economic activity?

Answer 4

Innovation leads to more profits.

Question 5

Which of these determines the supply of loanable funds?

Answer 5

The willingness of households and governments to save

Question 6

During the past decade, a nation’s average annual rate of population growth was 4 percent, and its average annual real GDP growth rate was 1 percent. Thus, the average annual rate of growth in per capita real GDP was:

Answer 6

-3.0 percent
In order for a nation to experience growth in per capita real GDP, it has to achieve a growth rate that exceeds population growth.

Question 7

According to real business cycle theory, a major source of fluctuations in economic activity is:

Answer 7

shocks to technology

Question 8

Which of these is a function that the financial system provides for savers and borrowers?

Concealing financial information
Reveal financial information
Bring decreased liquidity for savers
Providing increased liquidity for savers

Answer 8

Providing increased liquidity for savers

Question 9

An increase in the real interest rate will:

Answer 9

cause a movement along the demand curve for loanable funds

The interest rate is the price of money and any change in price is a movement up or down an existing demand curve.

Question 10

In the long run, factor prices are _ and assumed to have _ adjusted to any output gap

Answer 10

endogenous and assumed to have fully adjusted to any output gap

Question 11

According to the rule of 70, if a nation’s per capita real GDP doubled during the past 10 years, then its average annual rate of economic growth over that period was approximately:

Answer 11

7 percent70 / 10 = 7 years.

Question 12

Which of these government policies can help economic growth?

• Public ownership of all physical capital
• Tariffs on imported products to help local producers
• Central planning that can direct resources more efficiently
• Ensuring political stability and relatively little corruption

Answer 12

Ensuring political stability and relatively little corruption

Question 13

Before capital accumulation can take place:

Answer 13

household savings must be converted into business investment

Question 14

The long-run aggregate supply curve shifts to the _ as technological change occurs

Answer 14

right

Question 15

If the government begins running a budget deficit, what impact will the deficit have on the loanable funds market?

Answer 15

The supply of loanable funds will decrease.

Question 16

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

Answer 16

increasing production faster than population growth