Macroeconomics - Ch 8

Question 1

Economic Growth

Answer 1

an increase in real GDP occurring over some time period OR an increase in real GDP per capita occurring over some time period; % rate of growth per quarter or per year

Question 2

Real GDP per capita

Answer 2

Per capita output; amount of real output per person in a country; real GDP divided by population

Question 3

Growth lessens the burden of ______

Answer 3

scarcity

Question 4

Rule of 70

Answer 4

quantitative grasp of the effect of economic growth; we can find the number of years it will take from some measure to double, given its annual percentage increase, by dividing that percentage increase into the number 70

Question 5

Modern economic growth

Answer 5

characterized by sustained and ongoing increases in living standards that can cause dramatic increases in the standard of living within less than a single human lifetime; started with Industrial Revolution (1776)

Question 6

Leader countries

Answer 6

real GDP per capita grows by an average annual rate of 2-3 percent per year (b/c inventing and implementing new technology is slow and costly)

Question 7

Follower countries

Answer 7

poorer countries can grow much faster because they can simply adopt existing technologies from rich leader countries

Question 8

Institutional structures that promote growth

Answer 8

strong property rights, patents/copyrights, efficient financial institutions, literacy & widespread education, free trade, and a competitive market system

Question 9

Determinants of growth

Answer 9

supply factors, demand factor, efficiency factor

Question 10

Supply factors

Answer 10

changes in the physical and technical agents of production; enable an economy to expand its potential GDP; increases in qty/quality of natural resources, human resources, increases in supply/stock of capital goods; improvements in technology

Question 11

Demand factor

Answer 11

To achieve the higher production potential created by the supply factors, households, businesses, and gov’t must purchase the economy’s expanding output of goods/services

Question 12

Efficiency factor

Answer 12

to reach its full production potential, an economy must achieve economic efficiency (productive - least costly way, & allocative - specific mix that maximizes well-being) as well as full employment

Question 13

Labor productivity

Answer 13

real output per hour of work; real GDP = hours of work times labor productivity

Question 14

Labor-Force Participation Rate

Answer 14

percentage of the working-age population actually in the labor force

Question 15

Growth Accounting

Answer 15

system used to assess the relative importance of the supply-side elements that contribute to changes in real GDP; 2 categories - increase in hours of work; increases in labor productivity

Question 16

Infrastructure

Answer 16

publicly owned capital: highway and bridges, public transit systems, wastewater treatment facilities, water systems, airports, educational facilities…

Question 17

Human capital

Answer 17

the knowledge and skills that make a worker productive (including formal education and OJT)

Question 18

Economies of scale

Answer 18

reductions in per-unit production costs that result from increases in output levels

Question 19

Information technology

Answer 19

combination of the computer, fiber-optic cable, wireless technology, and the internet

Question 20

Start-up firms

Answer 20

advanced various aspects of the new information technology; a new firm focused on creating an introducing a particular new product or employing a specific new production or distribution method

Question 21

Increasing returns

Answer 21

situation in which a given percentage increase in the amount of inputs a firm uses leads to an even larger percentage increase in the amount of output the firm produces

Question 22

Network effects

Answer 22

interconnectivity advantages that increases the value of a product to each user, including existing users, as the total number of users rises

Question 23

Learning by doing

Answer 23

way of increasing returns; tasks that initially may have taken firms hours may take them only minutes once the methods are perfected