Chapter 6

Question 1

Real GDP per capita:

Answer 1

the amount of production in the economy per person, adjusted for changes in price level

Question 2

Growth rate of real GDP and Real GDP per capita

Answer 2

is equal to the % change from the previous yeAR

Question 3

RULE of 70 formula:

Answer 3

number of years to double(growth rate)= 70/ Growth rate

Question 4

Growth Rate over long periods formula:

Answer 4

previous real gdp x (1+g)^t= current real GDP

Question 5

Labour productivity

Answer 5

the quantity of goods and services that can be produced by one worker or by one hour of work

Question 6

Factors affecting labour productivity Growth

Answer 6

• increases in capital per hour worked
• Technological change

Question 7

Potential GDP

Answer 7

refers to the level of real GDP attained when all firms are operating at capacity(work hours)

Question 8

Financial system:

Answer 8

system of financial markets an financial intermediaries through which firms acquire funds from the households

Question 9

Financial markets:

Answer 9

are markets where financial securities (bonds, stocks) are bought

Question 10

Financial intermediaries:

Answer 10

are firms such as banks, mutual funds, and insurance companies, that borrow funds from savers and lend them to borrowers

Question 11

Sprivate (saving households)

Answer 11

= Y(incomes for factors of productions)+TR(transfer payments) - C(consumption)- T(taxes)

Question 12

Spublic

Answer 12

=T-G-TR

Question 13

Total savings

Answer 13

Sprivate+Spublic

Question 14

Market For Loanable Funds

Answer 14

Firms borrow loanable funds from households, the lower the real interest rate the more money they borrow