Final (wrong from practice) Flashcards
Country A has twice as many workers as country B. Country A also has twice as much physical capital, twice as much human capital, and access to twice as many natural resources as Country B. Assuming constant returns to scale, which of the following is higher in country A?
a. Both output per worker and productivity.
b. Output per worker but not productivity.
c. Productivity but not output per worker.
d. Neither output per worker nor productivity.
D.
Output per worker in this situation would be 2Y/2L, so that wouldn’t change.
Productivity is measured as output per unit of input, so we could use the same equation for that as well. That means productivity doesn’t change.
Suppose econ. is in long-run EQ. If there is an increase in gov. purchases at the sam time there is a large increase in the price of oil, then in the short run what happens to real GDP and price level?
The price level will rise and Real GDP might rise, fall, or stay the same.
Gov. purchases is purchasing goods in the market, so AD shifts right. At the same time the large increase in price of oil leads to a decrease in aggregate supply. Price level will rise for sure but without some numbers we can’t tell what happens to output (real GDP).
How to calculate inflation rate.
Percentage change in price level from one period to the other. Inflation is NOMINAL, you can’t calculate it with REAL GDP (classical dichotomy)
Assume there is a multiplier effect, some crowding out, and no accelerator effect. An increase in gov. expenditures changes aggregate demand more…
The smaller/larger the MPC and the stronger/weaker the influence of income on money demand.
The larger the MPC and the weaker the influence of income on money demand.
EQ is Y = 1/(1-MPC), so a bigger MPC leads to a smaller denominator which leads to a bigger change in Y.
The stronger the influence of income on MD, the more crowding out there will be!
What happens to a teacher’s union when it’s disbanded?
The quantity demanded of teachers will increase (bc colleges can hire more). And they have to be coming from somewhere, so supply of workers in other similar professions will fall.
A movement to the left along a given short-run Phillips curve could be caused by…
A reduction in the natural rate of unemployment (yes or no) or an expansionary/contractionary monetary policy.
An expansionary monetary policy (because that will increase inflation!) but not a reduction in the u-rate. Remember, a change in value of one of the axes will just move ALONG the curve.
Positive statements
Offer descriptions of the way things are.
Normative statements
Offer opinions on how things ought to be.
On the quantity of loanable funds graph, where can inflation be found?
FISHER EQUATION!!!! Real = nominal - inflation.
Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?
NX falls, NCO rises, domestic investment rises, dollar appreciates
NCO rises! NCO = outflow - inflow, and if foreigners withdraw their investments there’s an increase in outflow which leads to a higher NCO.
If people increase their expected price level, where does the AS shift?
To the left because businesses are now basing wages a higher price level.
What does savings equal in terms of investment and NCO
S = I + NCO
