Exam 2

Question 1

Purchasing Power Parity

Answer 1

$10,000 = 9,000 Yen

(10,000/9,000) = PPP [1.1111]

Question 2

Rule of 70

Answer 2

70/Growth Rate = # of Years to Double

Question 3

Why does GDP per-capita differ from countries and over time?

Answer 3

Because of Productivity

Question 4

What determines labor productivity?

Answer 4

1. Physical Capital
2. Human Capital
3. Natural Resource

Question 5

Production Function

Answer 5

As you add more capital, the Production Function increases slower and slower

Question 6

Foreign Direct Investment

Answer 6

When another country invests in US stocks or builds a factory or etc

Question 7

Catch Up Growth

Answer 7

Poor countries can catch up to rich ones, but this only happens sometimes because of things like: war, weak government, poor education, etc.

Question 8

National Savings Equation

Answer 8

Y-C-G

Question 9

Private Savings

Answer 9

Y-C-T

Question 10

Public Saving

Answer 10

T-G

Question 11

Saving is Supply or Demand

Answer 11

Supply

Question 12

Borrowing is Supply or Demand

Answer 12

Demand

Question 13

Sales of Bonds by Fed

Answer 13

Reduce money supply

Question 14

Purchases of Bonds by Fed

Answer 14

Increases the money supply and reserves