Unit 6/7

Question 1

Rule of 70

Answer 1

A mathematical formula that tells us the time it takes a variable that grows gradually over time to double is approximately 70 divided by that variable’s annual growth rate.

Question 2

Real GDP

Answer 2

The total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year in order to remove the effects of price changes.

Question 3

Labor Productivity

Answer 3

Productivity- output per worker

Question 4

Physical Capital

Answer 4

(Capital)- consist of manufactured productive resources such as equipment, buildings, tools, and machines.

Question 5

Human Capital

Answer 5

The improvement in labor created by the education and knowledge of members of the workforce.

Question 6

Technology

Answer 6

The technical means for producing goods and services

Question 7

Aggregate Production

Function

Answer 7

A hypothetical function that shows how productivity depends on the quantities of physical capital per workers and human capital per worker as well as the state of technology.

Question 8

Growth Accounting

Answer 8

Estimates the contribution of each major factor in the aggregate production function to economic growth.

Question 9

Convergence Hypothesis

Answer 9

General principle stating that international differences in real GDP per capita tend to narrow over time.

Question 10

Infrastructure

Answer 10

Roads, power lines, ports, information, networks, and other underpinnings for economic activity

Question 11

Sustainability

Answer 11

Describes long-run economic growth if it can continue in the face of the limited supply of natural resources and the impact of growth on the environment.

Question 12

Balance of Payment Accounts

Answer 12

A summary of a country’s transactions with other countries.

Question 13

Foreign Exchange Markets

Answer 13

The market in which currencies are traded

Question 14

Exchange Rates

Answer 14

The prices at which currencies trade

Question 15

Appreciation

Answer 15

Occurs when a currency becomes more valuable in terms of other currencies

Question 16

Depreciation

Answer 16

Occur when the value of an asset is reduced by wear, age, or obsolescence or when a currency becomes less valuable in terms of other currencies.

Question 17

Purchasing Power Parity

Answer 17

(between 2 countries’ currencies) the nominal exchange rate at which a given basket of goods and services would cost the same amount in each country

Question 18

Fixed Exchange Rate

Answer 18

An exchange rate regime in which the government keeps the exchange rate against some other currency at or near a particular target.

Question 19

Devaluation

Answer 19

A reduction in the value of a currency that is set under a fixed rate regime

Question 20

Revaluation

Answer 20

An increase in the value of a currency that is set under a fixed exchange rate regime

Question 21

Protectionism

Answer 21

Protectionism is like a mother limiting her child from consuming too much sugar. Although sugar may make the hold happy and be serve as a treat- it can also hurt the child’s health is over consumed.

Question 22

Tariffs

Answer 22

Taxes on imports

Question 23

Import Quota

Answer 23

A limit on the quantity of a good that can be imported within a given period