Exam 2 chapter 9 Flashcards
According to the classical growth theory of Thomas Malthus
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technological advances lead to permanent increases in real GDP per person.
the population growth rate is fixed.
increases in real GDP per person are only temporary.
labor productivity increases continuously.
increases in real GDP per person are only temporary.
When cyclical unemployment is zero,
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the unemployment rate equals the natural unemployment rate.
cyclical and frictional unemployment are zero.
frictional unemployment is zero.
structural unemployment is zero.
the unemployment rate equals the natural unemployment rate.
Workers who pursue an education directly increase their Answers: human capital. physical capital. saving. financial capital.
human capital.
If a rich country grows at a faster rate than a poor one, then
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whether or not the living standards gap widens or closes over time depends on the absolute size of the relative growth rates.
the gap in their standard of living will close over time.
the gap in their standard of living will widen over time.
the difference in their living standards will not change over time.
the gap in their standard of living will widen over time.
Which of the following is consistent with classical growth theory?
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Competition destroys innovation and decreases profit.
Real GDP per person will never permanently increase.
As real GDP increases, there will be a decrease in the rate of population growth.
Real GDP per person will increase because technological change induces investment.
Real GDP per person will never permanently increase.
Using the Rule of 70, if the country of Flowerdom’s current growth rate of real GDP per person was 7 percent a year, how long would it take the country’s real GDP per person to double?
10 years
Technological change nswers: has no effect on employment. lowers the real wage rate. increases potential GDP. decreases labor productivity.
increases potential GDP.
The term “capital,” as used in macroeconomics, refers to
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financial wealth.
the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.
investment.
the sum of investment and government purchases of goods.
the plant, equipment, buildings, and inventories of raw materials and semi-finished goods.
Labor growth depends mainly on ________ and labor productivity growth depends mainly on ________.
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growth in real GDP per person; technological advances
growth in real GDP per person; growth rate of capital
population growth; technological advances
population growth; increases in real GDP
population growth; technological advances
Which theory emphasizes the significance of new discoveries that can be used by many people at the same time? Answers: new growth theory neoclassical growth theory classical growth theory None of the above answers are correct.
new growth theory
An assumption of classical growth theory is that when ________ the population growth rate ________.
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people become more skilled; decreases
the real wage rate falls; increases
real GDP per person exceeds the subsistence level; increases
saving declines; decreases
real GDP per person exceeds the subsistence level; increases
Other things remaining the same, the greater the expected profit,
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the steeper is the investment demand curve.
the less the amount of investment.
the flatter is the investment demand curve.
the greater the amount of investment.
the greater the amount of investment.
The three types of unemployment are Answers: frictional, structural, and cyclical. voluntary, part-time, and cyclical. voluntary, involuntary, and structural. frictional, part-time, and involuntary.
frictional, structural, and cyclical.
According to new growth theory, technological change is driven by
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government policies.
random chance.
firms’ attempts to increase their profit.
foreign firms’ attempts to increase their sales in the domestic market.
firms’ attempts to increase their profit.
If the population increases in our growth model, then potential GDP \_\_\_\_\_\_\_\_ and employment \_\_\_\_\_\_\_\_. Answers: decreases; decreases decreases; increases increases; increases increases; decreases
increases; increases
Activities that encourage faster growth are
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investment in new capital and human capital.
taxes on saving that serve to encourage more spending and less saving.
developing trade barriers to protect national industries.
high levels of consumption and low levels of savings.
investment in new capital and human capital.
The neoclassical growth theory says, in part, that
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the differences in nation’s growth rates will persist indefinitely.
technological change leads to economic growth.
technology does not play a role in economic growth.
a population explosion driven by economic growth will end economic growth.
technological change leads to economic growth.
The decreasing slope of a production function reflects Answers: rising unemployment. diminishing returns. increasing aggregate demand. decreasing costs.
diminishing returns.
Neoclassical growth theory
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predicts that the faster growing underdeveloped nations will overtake and then surpass the industrial nations.
predicts that growth rates and incomes per person throughout the world will converge.
makes no predictions about the relative growth or incomes among countries.
predicts that nations that enjoy a technological advantage will maintain that advantage.
predicts that growth rates and incomes per person throughout the world will converge.
If the nominal interest rate is 8 percent and the current inflation rate is 3 percent, approximately what is the real interest rate?
5%
U6 measure of unemployment is approximately \_\_\_\_\_\_\_ the U3 measure of unemployment. Answers: triple 150% 75% double
double
Human capital is
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the saving done by human beings.
the investment made in industries that make capital goods.
a measure of the labor productivity of workers.
people’s knowledge and skills.
people’s knowledge and skills.
Which growth theory models growth as a perpetual motion machine?
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neoclassical growth theory
new growth theory
classical growth theory
all growth theories model growth as a perpetual motion machine
new growth theory
According to the new growth theory
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the rate of technological progress is determined by chance.
the concept of a labor market is not necessary.
the labor demand curve does not shift rightward over time.
knowledge is not subject to diminishing returns.
knowledge is not subject to diminishing returns.
Labor productivity, real GDP per labor hour, increases if
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new technologies are continuously discovered.
there is an increase in the accumulation of human capital.
saving and investment cause an increase in the quantity of capital per worker.
All of the answers are correct.
All of the answers are correct.
We are interested in long-term growth primarily because it brings Answers: higher standards of living. higher price levels. lower price levels. trade wars with our trading partners.
higher standards of living.
If new capital or technology increases labor productivity, the supply of labor \_\_\_\_\_\_\_\_ and the demand for labor \_\_\_\_\_\_\_\_. Answers: increases; decreases increases; increases decreases; stays the same stays the same; increases
stays the same; increases
Which of the following policy actions could speed productivity growth? I. Tax incentives to encourage saving II. Encouraging international trade III. Directing public funds toward financing basic research Answers: II only I and III I only I, II, and III
I, II, and III
Neoclassical growth theory attributes economic growth to Answers: increasing population growth. fiscal policy. technological change. the law of diminishing returns.
technological change.
Factors that influence labor productivity include ________.
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the inflation rate, the real wage rate, and the exchange rate
the labor demand curve
physical capital, human capital, and technology
physical capital, the real wage rate, and technology
physical capital, human capital, and technology
Over the last 100 years, the average U.S. growth rate in real GDP per person was about Answers: 1 percent per year. 2 percent per year. 6 percent per year. 12.5 percent per year.
2 percent per year.
Which of the following ideas apply to the neoclassical growth theory?
I. The rate of technological change influences the rate of economic growth.
II. Technological change promotes saving and investment.
III. Convergence of economic growth rates across countries
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I only
III only
I and II
I, II and III
I, II and III
The view that population growth occurs when real GDP per person exceeds the amount necessary to sustain life is part of the \_\_\_\_\_\_\_\_. Answers: new growth theory neoclassical growth theory classical growth theory modern theory of population growth
classical growth theory
The gap between real GDP per person in Africa and real GDP per person in the United States has been
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remaining fairly constant.
decreasing.
there is no gap in real GDP per person between Africa and the United States.
increasing.
increasing.
The wage rate will fall if the
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labor supply curve shifts rightward and the labor demand curve does not shift.
labor demand curve shifts rightward more than the labor supply curve shifts rightward.
labor demand curve shifts rightward and the labor supply curve does not shift.
labor supply curve shifts leftward and the labor demand curve does not shift.
labor supply curve shifts rightward and the labor
In the labor market, an increase in labor productivity \_\_\_\_\_\_\_\_ the real wage rate and \_\_\_\_\_\_\_\_ the level of employment. Answers: lowers; decreases raises; decreases raises; increases lowers; increases
raises; increases
According to the law of diminishing returns, an additional unit of
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capital produces more output than an additional unit of labor.
labor produces less output than the previous unit.
labor produces more output than the previous unit.
labor decreases output.
labor produces less output than the previous unit.
According to the law of diminishing returns, an additional unit of
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capital produces more output than an additional unit of labor.
labor produces less output than the previous unit.
labor produces more output than the previous unit.
labor decreases output.
labor produces less output than the previous unit.
According to the new growth theory, competition
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reduces profit.
has no impact on real profit, only nominal profit.
increases profit.
is only theoretical because all firms are growing at some rate.
reduces profit.
An increase in the working-age population results in a
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rightward shift of demand for labor curve and an increase in potential GDP.
leftward shift of the supply of labor curve and a decrease in potential GDP.
rightward shift of the supply of labor curve and an increase in potential GDP.
rightward shift of the demand for labor curve and no change in potential GDP.
rightward shift of the supply of labor curve and an increase in potential GDP.
U.S. investment is financed from
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private saving and borrowing from the rest of the world only.
private borrowing, government budget deficits, and lending to the rest of the world.
private saving, government budget deficits, and borrowing from the rest of the world.
private saving, government budget surpluses, and borrowing from the rest of the world.
private saving, government budget surpluses, and borrowing from the rest of the world.
Which theory of economic growth concludes that growth can continue indefinitely? Answers: the classical theory the new theory the neoclassical theory all of the theories
the new theory
All of the following contribute to labor productivity growth EXCEPT: Answers: population growth. human capital growth. technological advancements. physical capital growth.
population growth.
Labor growth depends mainly on ________ and labor productivity growth depends on ________.
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population growth; increases in real GDP
growth in real GDP per person; technological advances
growth in real GDP per person; growth rate of capital
population growth; technological advances
population growth; technological advances
Labor productivity is
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real GDP per hour of labor times the number of people.
real GDP per hour of labor times the hours of work.
the rate of change in real GDP per hour of labor.
real GDP per hour of labor or real GDP per worker.
real GDP per hour of labor or real GDP per worker.
