Week 7

Question 1

Malthusian trap

Answer 1

limits to growth: population grows exponentially but food production increases linearly

Question 2

Investment growth formula

Answer 2

[ (It - It-1) / It-1 ] × 100

Question 3

Net investment definition

Answer 3

Increase in capital stock employed in the economy

Question 4

Meaning depreciation being a “flow variable”

Answer 4

The more one produces, the faster things wear out

Question 5

Gross investment takes into account

Answer 5

1. the investment to increase capital (net investment)

2. the investment to replace depreciated capital

Question 6

Two general types of investment

Answer 6

1. capital-widening investment: This type adds to the capital stock the same type of capital already employed
   (same technology).
2. capital-deepening investment
   This type adds more productive capital (improved technology) to the preexisting stock.

Question 7

Formula Cobb-Douglas production function

Answer 7

Yt= ßt × Kt^δ × Lt^

1-δ-μ)× Grt^(μ

Question 8

Government’s budget definition

Answer 8

Annual statement of projected outlays and receipts during the next financial year together with laws and regulations that will support those outlays and receipts

Question 9

Three purposes of the government budget

Answer 9

1. plan and finance government’s activities
2. stabilise the economy
3. encourage the economy’s long-term growth & balance regional development

Question 10

Budget balance options

Answer 10

Budget balance = receipts+ outlays
receipts> outlays = surplus
receipts< outlays = deficit
receipts= outlays= balanced budget