chapter 6

Question 1

when you want to find the real gdp per capita ANNUAL growth rate, what is the first step?

Answer 1

identify how many years of a difference there is

Question 2

what is the rule of 70 used for?

Answer 2

estimating the number of years it takes for an investment or your money to double.

Question 3

what is the formula for finding how long it will take to double a countries income?

Answer 3

70/growth rate%

Question 4

if you want to know how long it will take for a country to double it’s income, what do you do?

Answer 4

rule of 70

Question 5

is a one shot increase in GDP = economic growth?

Answer 5

nope

Question 6

economic growth is the sustained year to year increase in __ GDP

Answer 6

potential GDP

Question 7

Economic growth occurs when __ increases

Answer 7

real GDP

Question 8

in order to have an increase in Real GDP we need an increase in ___

Answer 8

potential GDP

Question 9

if we have a higher Real GDP than our potential GDP this can lead to what and why

Answer 9

burn out because we are doing more than we are capable of

Question 10

if our potential GDP is not growing, what will this lead to

Answer 10

leads to our real gdp not growing

Question 11

potential GDP is defined as

Answer 11

the capability of production

Question 12

potential gdp depends on

Answer 12

how much resources/inputs we can use

Question 13

our standard of living depends on

Answer 13

how much we consume

Question 14

output depends on

Answer 14

our inputs

Question 15

what does Capital mean?

Answer 15

goods used in the production process

Question 16

give an example of capital

Answer 16

computers (for coding a biz) or tractors (for using corn to sell)

Question 17

when goods are used to produce other goods, this is known as

Answer 17

capital

Question 18

what are the 4 productive resources of an economy?

Answer 18

1. labour 2. capital 3. land 4. entrepreneurship

Question 19

the aggregate production function shows the amount of ___ that could be produced by various quantities of __

Answer 19

output/production; labour

Question 20

the aggregate production function exhibits __

Answer 20

diminishing returns to labour

Question 21

as the labour increases in the aggregate production function

Answer 21

as labour increases, production produces less and less compared to previous units (diminishing returns)

Question 22

in regards to the aggregate production function: a graph is concave rather than straight line because of

Answer 22

diminishing returns to labour

Question 23

aggregate production function: “moving along the line” refers to what?

Answer 23

a change in the size of labour

Question 24

to find the labour productivity:

Answer 24

you divide real GDP (Y) by Labour (L)

Question 25

as more labour is used, Aggregate output ___ but output per unit of labour \_\_\_

Answer 25

increase; decrease

Question 26

an increase in human capital means?

Answer 26

you have a more educated team/humans have more skills

Question 27

what happens when capital stock, human capital, and technology improves?

Answer 27

increase in labour productivity

Question 28

what are the three questions you ask when looking at the aggregate labour market? and what are the answers

Answer 28

who are the demanders for labour?: firms who are the suppliers?: households what is the price?: real wage rate

Question 29

what is the formula for real wage?

Answer 29

nominal wage/price level

Question 30

what does price level mean?

Answer 30

average of current prices across the entire spectrum of goods and services produced in an economy.

Question 31

what are the two things that suppliers of labour are thinking about?

Answer 31

1. what is the wage, and 2. what can I buy with it

Question 32

price in the labour market is the

Answer 32

real wage rate

Question 33

when there is a change in real wage, what does it effect and what does it not effect

Answer 33

it affects the nominal wage, but does not effect the price level

Question 34

what is a basic behaviour of demanders for labour?

Answer 34

the lower the wage the more hours of labour demanded

Question 35

what do you put on the x and y axis of the demand for labour curve

Answer 35

on the x axis is L for labour, on the y axis, it is real wage

Question 36

the curve for the demand for labour is

Answer 36

downward sloping

Question 37

demand for labour curve: the points on the line represent the

Answer 37

real wage rate

Question 38

for an improvement in production, what will happen to the demand curve

Answer 38

it will shift to the right

Question 39

if buyers require less labour, what happen to the demand curve?

Answer 39

it will shift to the left

Question 40

what are the factors the increase the demand for labour

Answer 40

capital human capital better tech

Question 41

anything that affects your production function will also affect your

Answer 41

demand for labour

Question 42

if there is an earthquake, and capital stock goes down, what will happen to the demand for labour and why

Answer 42

shift the curve to the left because there is less capital to work with

Question 43

an increase in productivity increases demand by 10 units, how would this affect the demand schedule and the graph

Answer 43

at every unit of hours of labour demanded, it increases by 10

Question 44

why is the most people supplied for the highest wage?

Answer 44

because the higher the wage the more it is as a incentive to attract more people

Question 45

do you draw a new supply curve if there is a change in the real wage rate?

Answer 45

no, just move along the line

Question 46

a change in the real wage causes a ___ the supply curve

Answer 46

movement

Question 47

a movement along the supply curve is indicative of what

Answer 47

a change in the real wage

Question 48

what are the factors the effect the supply of labour?

Answer 48

population # of hours worked on average

Question 49

real wage above the equilibrium creates a surplus in the labour market, the real wage will fall/rise?

Answer 49

falls

Question 50

real wage below the equilibrium creates a

Answer 50

shortage

Question 51

a shortage in the aggregate market leads to a __ in real wage

Answer 51

rise

Question 52

equilibrium level of employment is also called \_\_

Answer 52

full employment

Question 53

one way to find the potential GDP is to find the

Answer 53

equilibrium of the aggregate economy

Question 54

if aggregate employment goes up, what will happen to potential gdp

Answer 54

its gonna go up

Question 55

increase in labour =

Answer 55

increase economic growth

Question 56

an increase in population has two noticeable things related to the production function curve

Answer 56

1. it increases the production output 2. output per hour falls (diminishing returns)

Question 57

when there is an increase in the population, does this increase economic growth? explain

Answer 57

no, because even though potential GDP has gone up, output per hour has fallen

Question 58

in order to have economic growth, there must be

Answer 58

an increase in technology, a increase in human capital, and capital

Question 59

what is the premise of economic growth?

Answer 59

every unit of labour is more productive

Question 60

I have better computers/ more human skill/ better tractors, this means I have

Answer 60

better output per hour / economic growth

Question 61

how is an increase in economic growth represented on the production function curve?

Answer 61

shifts to the left

Question 62

this is due to:

Answer 62

increase in output per person. Ie: better tech, better human capital, better capital

Question 65

if the labour is more productive, firms will

Answer 65

hire more at every wage rate

Question 66

if the demand for labour goes up, what happens to the wage rate (try and draw this in your head)

Answer 66

the average wage rate goes up